Governance

Trustees and personal liability

You may be concerned about the solvency of your organisation, and about the possibility of personal financial liability if you continue to operate. The risks will be different depending on the legal structure of your organisation and if you are a charity.

New legislation was introduced in June 2020 to help organisations at risk of insolvency (being unable to pay their debts).  The Corporate Insolvency and Governance Act 2020 applies to:

• companies (including charitable companies and CICs)
• SCIOs
• mutual organisations

It has relaxed corporate governance requirements and introduced certain changes to help organisations in financial difficulty to continue trading and explore their options. See further guidance from English law firm Bates Wells.

For trustees of unincorporated associations and trusts there is a risk of personal liability if the organisation becomes insolvent and there are debts or liabilities outstanding.

The Coronavirus Scotland Act aims to support trustees in this situation by increasing the moratorium period from six weeks to six months- this is a period of time when creditors cannot try to reclaim money they are owed. If you are a trustee of an organisation in this situation find out more information on the Accountant in Bankruptcy website.

You should take professional advice if you think your organisation may become insolvent. SCVO member organisations are entitled to up to two hours free legal advice from our Pro Bono Service.

OSCR have guidance on trading subsidiaries in financial difficulties, use of reserves and restricted funds, and Notifiable Events.

Managing risk

As restrictions change, managing risk is vital. With all risks the key is to identify, evaluate, manage, record and review. Key operational risks to consider include

• safeguarding beneficiaries
• changes to service provision
• staff and volunteers returning to premises
• finance and funding
• legal and regulatory

Your organisation should already have a risk register and a proactive approach to risk management. There is much uncertainty, risks can be linked and have a ‘domino’ effect, so you need to monitor and review your risk register and watch out for key indicators of change.

Trustees should meet regularly and be provided with up to date information to inform their decision making. Inevitably there will be differing trustee attitudes to both risk and opportunity, so it is vital that you tease out the possible implications of any actions your board collectively decides to take. Think carefully of the implications of different scenarios, and factor these into your future planning.

Meetings

Scottish Government legislation and the Corporate Insolvency and Governance Act 2020 introduced provisions allowing more flexibility for holding virtual meetings for corporate bodies, even if the organisation’s constitution did not explicitly cover this. This included SCIOs, charitable companies, co-operatives, community benefit societies and friendly societies.

The legal provisions relaxing the rules around virtual meetings ended on 30 March 2021. This means that you need to look now at amending your governing document to make it ‘future proof’ and explicitly allow virtual meetings.

SCVO have updated our model constitutions to specifically allow virtual meetings. If you need help changing your governing document and are a member of SCVO you can access our free legal advice service

OSCR has guidance for charities on meetings and a form to complete if you make a change to your constitution.

Insurance

After completing your risk assessment consider whether your insurance cover needs to be reviewed. Pay particular attention to business premises, employers’ and public liability insurance policies. Check out the Association of British Insurers guidance. Keegan and Pennykidd provide professional and independent insurance advice to the voluntary sector in Scotland.

Data Protection and GDPR

The Information Commissioner’s Office has a Data Protection and coronavirus information hub. They have also produced guidance: Community groups and COVID-19 which gives clarification on the basics of data protection. It emphasises that data protection rules will not stop you from helping those in need and gives guidance on how to take account of the law when handling sensitive personal information and sharing it with others. There’s also information about what you need to know.

Test and protect

The Test and Protect scheme asks certain types of business to record personal information of customers to help with contact tracing. The media have focused on this being mainly applicable for bars and restaurants, but it could impact on voluntary organisations, for example if you run a community café.   

The Information Commissioners Office (ICO) has published simple and user friendly guidance, which outlines the five key principles that should be followed:

• Ask for only what’s needed – refer to the government trace and testing rules and only collect what is strictly required.
• Be transparent with customers – let customers know what you are doing and why you are doing it.
• Carefully store the data – ensure the data is stored in a safe and secure manner, with access being granted to staff on a need-to-know basis.
• Don’t use it for other purposes – as tempting as it may be, the data cannot be used to bolster your email mailing lists or for social media marketing.
• Erase it in line with government guidance – only keep the data for as long as the government rules require. When disposing of the data, again, make sure this is done in a safe and secure manner.

Edinburgh based legal experts, Brodies LLP have shared this blog from their data protection specialists which talks about the requirements for recording this personal data and how to ensure you do it in a manner compliant with the Data Protection 2018 regulations.   

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