Our charitable trust clients often ask what powers Trustees have. It is a great question to be asking. While Trustees tend to have quite wide powers, sometimes the powers are restricted by the wording of the Trust Deed. Knowing what is permitted is important so that Trustees do not accidentally exercise powers they do not have.
This article is part of a series on “demystifying the role of Trustees of charitable trusts”, where we answer some of the questions we often hear from Trustees. In our other articles we explore Trustee Delegations, Trustee Duties and Trustee Liabilities.
How to find out what powers Trustees have
Trustees can refer to two places to check what powers apply to their particular charitable trust – the Trusts Act 2019 (“Act”) and the charitable trust’s Trust Deed.
Trusts Act 2019
The Act says Trustees have all the powers necessary to manage the trust property including, all the powers of an absolute owner of the property, and all the powers necessary to carry out the trust. It also sets out other specific powers including those applicable to investment, how to deal with returns and accounts, and the apportionment of receipts and outcomings between income and capital.
Trust Deed
A Trust Deed typically gives more detail about the powers of Trustees, and in some cases, limits the powers available to Trustees.
Some of the typical powers found in Trust Deeds include the power:
- To use the Trust Fund as the Board thinks necessary or proper in payment of the costs and expenses of the Trust, including the employment of professional advisers, agents, officers and staff (which may include a Trustee or Trustees);
- To purchase, take on a lease or licence or exchange or hire or otherwise acquire, develop, improve or otherwise deal with any land or personal property and any rights or privileges or sell, exchange, lease or dispose of any land or personal property which the Board thinks necessary or expedient for the purpose of attaining the objects of the Trust;
- To invest surplus funds in any way permitted by law for the investment of trust funds and upon such terms as the Board thinks fit;
- To borrow or raise money (including borrowing for investment purposes or lending to someone else) with or without security and upon such terms as the Board thinks fit;
- To make payment or contribute to any charitable organisation which has purposes similar to the Trust; and
- To do all things which are incidental to or conducive to or desirable to enable the Trustees to give effect to and to attain the Charitable Purposes of the Trust.
When a Trust Deed is drafted, the initial Trustees may choose to restrict powers for particular reasons. For example, a Board might choose to put a limit on the amount of money a Trust may borrow, or limit the manner in which a Board is allowed to invest the Trust Fund. If a power is restricted, Trustees must adhere to the restrictions. If Trustees make a decision without the legal power to do so, the decision may be questioned and found to be invalid, resulting in the unwinding of the decision and any other consequences.
Keeping Trustee duties in mind
We recommend also keeping Trustee Duties in mind when considering the powers of Trustees.
For example, section 30 of the Act sets out the Trustee duty to invest prudently, which is a default duty. Default duties can be modified by the wording in a Trust Deed. Our Parry Field charitable trust deed includes the following clause which modifies that default duty:
“Section 30 of the Trusts Act 2019 and other legal provisions and rules of law which constrain Trustees’ investment duties do not apply and are excluded by this Deed. Instead the Trustees must invest in the manner they believe in good faith to be in the best interest of the purposes of the Trust.”
Our modified clause is a slightly lower threshold than the unmodified duty to “invest prudently”, which is arguably beneficial for Trustees.
What can Trustees do to change their powers?
If Trustees wish to widen or restrict the power of Trustees, they will generally be able to do so by amending the Trust Deed, which can typically be done by signing a Deed of Variation. Note that this ability will depend on the wording in the Trust Deed on how to amend the document. Check out our other resources for more information on how to change a Trust Deed.
In summary
Trustees of charitable trusts typically have quite wide powers, however, these may be limited by what is stated in the Trust Deed. Trustee powers can also be affected by the Trustee duties set out in the Trusts Act, although the default duties can be modified by the Trust Deed.
If you have any questions about the powers of Trustees for your particular charitable trust, please do not hesitate to get in touch. We would be pleased to help clarify what is permitted, to help Trustees make sound decisions within their permitted powers.
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The information contained in this outline is of a general nature, should only be used as a guide and does not amount to legal advice. It should not be used or relied upon as a substitute for detailed advice or as a basis for formulating decisions. Special considerations apply to individual fact situations. Before acting, clients should consult their Parry Field Lawyer.
