Charity legacies: Delegated authority and execution of deeds and documents for charitable companies and CIOs

When looking at powers of delegation, the first port of call will always be a charity’s governing document, i.e. its Articles of Association or Constitution. Most modern governing documents will contain express powers of delegation and set out the way in which the delegation of a power must be documented. Trustees may have the power to delegate, for example, to a committee, to individual trustees or to employees of the charity.

An example of such a provision from the Charity Commission’s model Articles of Association is that “The directors may delegate any of their powers or functions to a committee of two or more directors but the terms of any delegation must be recorded in the minute book.”

Similarly, the Charity Commission’s model constitution for a CIO provides for the delegation of any of the trustees’ powers or functions to a committee or committees consisting of two or more persons, but at least one member of each committee must be a charity trustee.

These provisions in the Charity Commission’s model governing documents highlight the importance of checking a charity’s governing document before delegating the exercise of a power, as these model provisions would not permit the delegation of power to an individual trustee or employee.

1. Power to take actions or make applications necessary to facilitate the charity, or any other person/s or organisation on behalf of the charity, being granted letters of administration.

2. Where a grant of letters of administration is not necessary, the power to carry out other procedures or actions necessary to collect and/or liquidate assets.

3. Power to sign relevant documents for and on behalf of the charity, where permitted, including documents required by a court, asset holder or tax authority.

4. Power to appoint legal, tax and/or investment advisors to advise (and, if appropriate, to act on behalf of) the charity and to administer the estate to which the charity is entitled, either in whole or in part.

5. Power to do anything and execute any documentation save for documentation which must be executed by the trustees that may be required in connection with the administration of an estate in which the charity is executor, administrator or beneficiary, including: 

• declining the office of administrator or executor, renouncing the right to apply for letters of administration, or reserving its right and title to act either jointly or solely in any such estate; 

• assuming the office of administrator or executor and, if appropriate, resigning;

• taking any action or signing any documentation in connection with the disposal of movable and/or immovable property left to the charity;

• signing tax forms and tax returns; and

• making appropriations, distributions, advancing capital or income and generally exercising the powers, discretions and authorities of an administrator or executor, including those of a beneficiary, in relation to the estate.

It is crucial that the decision to delegate is documented correctly, in accordance with the charity’s governing document. It is likely that a resolution will need to be passed and specific limits as to the authority others have personally to bind the charity can be put in place. The resolution could provide that the relevant committee or individual should refer to the chair of trustees any decisions about legacy litigation, decisions where the maximum value of the legacy is at risk, or decisions where the total value of the assets is over a certain amount.

To demonstrate a chain of authority, the charity’s governing document should be produced along with any resolution/s confirming the relevant committee or individual responsible for legacy matters. In the case of a committee, it is also sensible to have a resolution to confirm that any member who is granted the authority by their committee can sign any legacy paperwork on its behalf. A separate nomination (usually drafted for each individual matter) may be made by the chairperson of the committee, confirming that a nominated trustee, who is also a member of the committee, is the person authorised to execute legacy documents on behalf of the charity.

In addition to documenting the delegation, where employees are involved in delegated activities, it would be prudent to develop an employment policy recording the extent of employee authority. This might include guidance as to what decisions need to be escalated to senior managers and/or trustees. Any limits of authority should be clearly set out. If staff are employed to work specifically in legacies, their employment contact and/or job description can also provide this information. 

Trustees have legal responsibility for the management and administration of their charity. It is important to remember that, even where a power is delegated, it remains the trustees who have ultimate responsibility for the exercise of that power.

From time to time, charity trustees should review the arrangements they have made for the delegation of their powers and ensure that proper reporting arrangements are in place. Delegations may, of course, be revoked or altered by the trustees at any point, if necessary.

The formal execution of deeds and documents in a legacy administration is likely to be only a small part of the work. However, if, as part of a legacy administration, it was necessary to execute a power of attorney or a deed confirming the formal acceptance of a legacy, this could only be done in accordance with the formalities set out below.

Where trustees do effectively delegate authority to committees or to individual trustees or employees, it is important that they do not fall into the trap of thinking such individuals may automatically execute relevant deeds or documents on behalf of the charity. Deeds and documents must be executed correctly so as not to invalidate such documents. We have set out below the requirements for both charitable companies and CIOs.

Section 44 of the Companies Act 2006 states that documents can only be executed on behalf of a private company by:

• affixing the company’s seal (if any);

• two directors (trustees) or a director (trustee) and the company secretary signing; or

• one director (trustee) signing in the presence of a witness who attests the director’s signature.

The rules on how a CIO executes deeds and documents are set out in regulations 19 to 25 of the CIO General Regulations 2012. To effectively execute a deed or document:

• a CIO with more than one trustee can execute with the signatures of two trustees;

• a CIO with only one trustee (which is unlikely to be common in practice) can execute a document with the signature of its sole trustee. Unlike the rules that apply to the execution of a deed by a single director of a company, the CIO General Regulations do not require the signature of a sole charity trustee to be witnessed, however, it is recommended that a sole charity trustee's signature is witnessed as a safeguard against the validity of execution being challenged; or

• a CIO may affix its seal (if any). 

Please note that requirements for the delegation of powers and the execution of deeds and documents will vary depending on the legal structure of the charity in question. This article only deals with charitable companies and CIOs, however, the Legacy Team will soon be publishing articles on these subjects with regard to Royal Charter charities and unincorporated charities (charitable trusts, unincorporated associations). In the meantime, if you have any further questions, please do get in touch with the Legacy Team.