Trustees in an incorporated body are not normally liable for debts incurred or negligence, because the organisation is a legal entity in its own right. In the event of a problem, the organisation would be pursued, rather than individual trustees.
Whilst this incorporation provides a much needed degree of protection for charity trustees, it does not totally protect them from negligence or wrongdoing. The main risk to trustees in a funding crisis is that they continue to trade when they know (or ought to have known) that there was no reasonable prospect of avoiding insolvent liquidation.
There are some liabilities that all charity trustees face, whether incorporated or unincorporated:
• Breach of trust under charity law (carrying out unpermitted political activity, or receiving personal benefit from the charity)
• Criminal offences such as fraud
• Major civil wrongs such as serious negligence
• Acting as a charity trustee or company director when disqualified
• Failure to comply with statutory requirements, such as health and safety breaches or failure to deduct employees’ PAYE