Trustees have a general duty to act in the best interests of their charity. They have a duty to protect, and where necessary, to recover, assets belonging to the charity. The decision whether or not to initiate or defend a legal action must only be made in the best interests of the charity and be balanced against the risks and consequences that any legal action could bring.

The commission expects trustees to consider legal action only after they have explored and, where appropriate, ruled out any other ways of resolving the issue in dispute.

Trustees need to bear in mind that taking or defending legal action must be in their charity’s best interests. They must be able to demonstrate that their decisions were made accordingly. However, in some cases the commission’s consent is necessary

The legal structure of the charity means there are differences in how legal action may be taken or defended:

• Incorporated charitiesIncorporated charities such as charitable companies, corporations or CIOs take or defend legal action in the name of the charity as a legal entity in its own right. If an action is brought by or against an incorporated charity, the incorporated charity will be named as a party to the action in its corporate name. In most situations, if the charity is incorporated, it is the charity itself, rather than the members or the trustees, which is responsible for the charity’s debts or for any other liabilities which might arise.However, if there has been any breach of duty or the decision to bring or defend the legal action has not been taken reasonably, the trustees may be personally liable for any costs arising from the proceedings.
• Unincorporated charitiesUnincorporated charities such as associations and trusts usually take or defend legal action in the names of their charity trustees. If such a charity has insufficient funds to meet any claim, its trustees may be personally liable irrespective of whether there has been any fault or breach of duty on their part.

Some types of legal action, whatever the legal structure of the charity, need the consent of the commission. These are a specific category of legal action, concerning the constitution or administration of a charity and are called charity proceedings.

You can find further information on charity proceedings and how to apply for the commission’s consent here

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