What Is the Difference Between Director & Trustee?

Directors and trustees are members of governing boards for various profit or non-profit companies (or charities).

In addition, directors are bound to act in any manner that is specifically stated in the Companies’ constitution, usually in regards to quorum, directors’ rotation, tenure and retirement, minimium and maximum number of directors in a board etc.
Whilst directors (or BOD) is more prevalent in commercial companies or in CLG, trustees are more common in non-profits entities*.
The duty of the trustees#:
Duty of Compliance:
  • Ensure that the charity complies with charity law, and with the requirements of the Charity Commission as regulator; in particular ensure that the charity prepares reports on what it has achieved and Annual Returns and accounts as required by law.
  • Ensure that the charity does not breach any of the requirements or rules set out in its governing document and that it remains true to the charitable purpose and objects set out there.
  • Comply with the requirements of other legislation and other regulators (if any) which govern the activities of the charity.
  • Act with integrity and avoid any personal conflicts of interest or misuse of charity funds or assets.

Duty of prudence

  • Ensure that the charity is and will remain solvent.
  • Use charitable funds and assets reasonably, and only in furtherance of the charity’s objects.
  • Avoid undertaking activities that might place the charity’s endowment, funds, assets or reputation at undue risk.
  • Take special care when investing the funds of the charity, or borrowing funds for the charity to use.

Duty of care

  • Use reasonable care and skill in their work as trustees, using their personal skills and experience as needed to ensure that the charity is well-run and efficient.
  • Consider getting external professional advice on all matters where there may be material risk to the charity, or where the trustees may be in breach of their duties.
Charitable trust is not a separate legal entity and as such, all full legal liabilities will be borne by the trustees. A CLG by its legal formation of limited liabilities and corporate veil, separates the company entity and its officers.
However, under the CA, directors are defined as officers of the company and is acting in a fiduciary duty no different from a standard of duty care, good faith and due diligence as a trustee which is in essence acting as a fiduciary for the trust assets that he/she is entrusted upon.
Although in certain jurisdiction, ie US, the trustee being a fiduciary is held at a higher (or the highest) state of due care and diligence, there is no significant distinction in the standard of duty of a director vs a trustee**.
* Trustees are also common is statutory trusts, private trusts (trusts formed by HNWI or family office), real estate investment trusts and collective investment scheme trusts. These are not discussed in this article.
 ** Burnden Holdings (UK) Ltd v Fielding & Anor [2018] UKSC14, UK Supreme Court holds directors are trustees of company property.
#ICAEW Charity trustee roles and responsibilities