Reviewed by Sep 30, 2020| Updated on
A board of trustees refers to a set of individuals usually formed as a governing body or governing board of an organisation. The board of trustees exercise supervisory authority and function as part of the management. They protect the interests of the organisation or company, and all the investors, stakeholders, and shareholders/members of the organisation.
A board of trustees functions similar to the board of directors of a company. They may also act as directors managing the affairs of a company. The individuals on the board may consist of individuals already a part of the organisation or may include external individuals from a reputed background and relevant experience. A board may have a mix of both individuals internal and external to an organisation.
A board of trustees is generally constituted in public or private charitable organisations, educational institutions, universities, sports associations, museums, places of religious worship, and so on.
In the case of financial institutions, mutual funds, and other collective investment schemes are often constituted as trusts managed by a board of trustees. Also, pension funds or provident funds are constituted and managed as trusts.
While each of the above institutions is governed by its own internal rules and regulations, public institutions like mutual funds or pension funds are bound by law and regulations framed by the Parliament. They also need to comply with the regulatory requirements and file financial statements and other required documents under the respective law.
In certain cases, a board of trustees may be managing a corporate investment company which heads the investment structure in a business conglomerate. The investment company may act as a holding company for the entire group.
A board of trustees thus has obligations of ensuring compliance with the objectives of the organisation in the business dealings. The board also is responsible for ensuring compliance with the applicable laws and regulations, and the statutory filings. In many organisations, a board may have sub-divisions to manage a particular segment of the organisation.