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Recent court case confirms charitable duties of members of a charity

22 August 2018

Lehtimaki v The Children’s Investment Fund Foundation (UK) and others [2018] EWCA Civ 1605

The Court of Appeal has upheld the High Court’s ruling that members of a charitable company (such as an academy trust) have fiduciary duties to act in the best interests of the charity.

Reinforcing the Charity Commission’s guidance on membership charities (RS7), the court agreed that when exercising their powers members of a charitable company should only act to further the charitable objects of the charity and not in their own personal interests.

The judgment raises interesting questions about whether, if they have fiduciary duties, members could be considered to be in breach of them and whether academy trust should have policies about avoiding potential breaches of duty by members.

The Academies Financial Handbook 2018 already requires academy trusts to maintain registers of interest for members and publish them on to academy trust’s website but little further information is given specifically for members; most of the guidance in the handbook focusses on trustees/directors (not members) avoiding and managing conflicts. Few academy trusts have specific policies for how to deal with conflicts of interest for members.

Until the DfE address the issue and amend the Academies Financial Handbook I would suggest that academy trusts extend their existing policies on managing and avoiding trustee conflicts of interest to also cover members. It also isn’t clear whether the risk protection arrangement (RPA) covers breaches of fiduciary duties by members which could leave academy trusts open to unrecoverable potential losses. Adria Shardlow is raising this with the DfE.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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