As pension lawyers, our trustee clients commonly look to us to advise them on their risk exposure.

As Suzanne Padmore posted in her recent blog  Pension Trustee Indemnity Insurance - Risky Business?, Suzanne Padmore (, many trustees look to obtain indemnity insurance. Another form of protection may be to form a trustee company with limited liability. Such trustee company, being a separate legal entity, is capable of being sued and thus the directors may be protected from personal liability.

However, this protection is only to a certain extent and in some circumstances the ‘corporate veil’ can be pierced. For example, the trustee directors may still be liable if they dishonestly assist in breach of trust. The trustee directors will also owe duties to the trustee company itself and , in theory, director and officer liabilities could arise if these duties are breached (D&O liabilities, can depending on the circumstances, be covered by indemnity or insurance). Pensions legislation is also extended to directors of corporate trustees. There are also provisions of the Companies Act 2006 to consider; if the Trustee is a subsidiary of the employer, then any indemnity provided by the employer will need to be a “qualifying pension scheme indemnity provision”. Trustees looking to incorporate will need to consider that will they need to comply with the company administration regime and failure to do so may result in criminal charges for the director and potential fines.

So should we incorporate our trustee board? There may indeed be good reasons for doing so. Beyond trustee protection considerations, there may be practical benefits of incorporation. For example, changes to the trustee board will not require deeds of appointment and removal and there may be benefits in terms of procedures for signing documentation. Trustee boards who are considering incorporation should consider all the implications of being a trustee company. Ultimately, it may offer a degree of protection but is not a complete shield.

Written by Susannah Young and Kate Granville Smith