How to Handle Disputes Among Trustees Without Creating CAC Record Problems - A Comprehensive Guide for 2026

Understanding Trustee Disputes and Their Impact on Your Organisation

For any organisation registered under Part C of the Companies and Allied Matters Act (CAMA) – whether it’s a church, mosque, NGO, club, or association – trustees play a crucial role. They are the custodians of the organisation's assets, vision, and mission. However, just like in any group of people working together, disagreements can arise among trustees. When these disputes are not handled properly, they can quickly escalate and create significant problems, especially with your records at the Corporate Affairs Commission (CAC).

At BusinessHelp CONSULT, we understand that managing an organisation comes with its unique challenges. Our aim with this guide is to provide you with clear, practical steps on how to navigate trustee disputes effectively, ensuring your organisation remains compliant with CAC regulations and continues to thrive.

The Pivotal Role of Trustees and Why Disputes Occur

Before diving into dispute resolution, it is important to revisit the fundamental role of trustees and understand why conflicts are sometimes inevitable.

Who Exactly Are Trustees?

Trustees are individuals appointed to manage the affairs of an incorporated trustee (often called a 'Non-Governmental Organisation' or 'NGO' in common parlance, though it encompasses much more). They hold the assets of the organisation in trust for its members or for the public good, depending on the organisation's objectives. They are not owners in the traditional sense but fiduciaries – meaning they have a legal and ethical duty to act in the best interests of the organisation.

Core Responsibilities of Trustees

Trustees carry significant responsibilities, which typically include:

• Fiduciary Duty: Acting honestly, in good faith, and always in the best interest of the organisation, not for personal gain.
• Legal Compliance: Ensuring the organisation complies with all relevant laws and regulations, including filing annual returns with the CAC.
• Financial Oversight: Managing the organisation's finances responsibly, ensuring proper accounting and accountability.
• Strategic Direction: Setting the vision, mission, and strategic goals for the organisation.
• Asset Management: Protecting and preserving the organisation's assets (money, property, intellectual property).
• Governance: Ensuring the organisation operates effectively and ethically, adhering to its constitution or trust deed.

Common Sources of Conflict Among Trustees

Given the weight of their responsibilities and the varied backgrounds of individuals, disputes can arise from several areas:

• Differences in Vision and Strategy: Trustees might have differing ideas on the best direction for the organisation, how to achieve its goals, or which projects to prioritise.
• Financial Management: Disagreements over budgeting, expenditure, fundraising methods, or accountability for funds are very common.
• Power Dynamics and Control: Struggles for influence, leadership roles, or decision-making authority can lead to friction.
• Personality Clashes: Incompatible personalities, lack of respect, or poor communication styles can breed conflict.
• Misunderstanding of Roles: Trustees may overstep boundaries or fail to understand their specific duties, leading to turf wars.
• Breach of Trust or Fiduciary Duty: Suspicions of mismanagement, self-dealing, or actions contrary to the organisation's best interests can cause severe disputes.
• Lack of Transparency: When information is not shared openly, or decisions are made without proper consultation, distrust can grow.

The Dangers of Unresolved Trustee Disputes for CAC Records

Ignoring or improperly managing disputes among trustees can have serious, long-lasting negative consequences for your organisation, particularly concerning its legal standing with the Corporate Affairs Commission (CAC).

How Disputes Can Jeopardise Your CAC Compliance

1. Inability to File Annual Returns

   Annual returns are mandatory for all incorporated trustees. If trustees are in disagreement, particularly over financial reports, who should sign documents, or the overall state of the organisation, they may be unable to agree on the information to be submitted to CAC. This leads to:

   • Late Filing Penalties: CAC imposes penalties for late submission.
   • Risk of Delisting: Persistent failure to file can lead to the organisation being struck off the register.
   • Loss of Good Standing: This can affect the organisation's ability to operate bank accounts, receive grants, or engage in legal transactions.

2. Problems with Change of Trustees

   If a trustee needs to be removed, replaced, or new ones appointed, CAC requires specific documentation, often signed by existing trustees or requiring proof of proper internal resolution. Disputes can:

   • Halt the Process: Disagreeing trustees might refuse to sign necessary forms or provide required consents.
   • Lead to Invalid Appointments: If proper procedures are not followed due to internal conflict, CAC might reject the change, leaving the organisation with an incorrect or incomplete trustee board on record.
   • Require Court Intervention: In severe cases, a court order might be the only way to effect a change, which is costly and time-consuming.

3. Challenges with Bank Accounts and Financial Transactions

   Banks often require CAC registration documents and proof of trustee appointments to operate accounts. If your CAC records are not up-to-date or reflect an unresolved dispute:

   • Account Freezes: Banks may freeze accounts if they receive conflicting instructions from trustees or if the legitimacy of signatories is questioned.
   • Inability to Access Funds: This can cripple the organisation's operations, making it impossible to pay staff, fund projects, or meet obligations.

4. Reputational Damage and Loss of Credibility

   Public or prolonged disputes can damage the organisation's reputation among donors, partners, beneficiaries, and the general public. This can lead to:

   • Reduced Funding: Donors are less likely to support organisations perceived as unstable or poorly governed.
   • Loss of Trust: Beneficiaries and partners may lose faith in the organisation's ability to deliver on its mission.

5. Legal Actions and Potential Deregistration

   Unresolved disputes can escalate to legal battles, which are expensive and divert resources. In extreme cases, if the organisation becomes dysfunctional due to trustee disputes and fails to comply with CAMA, CAC has the power to:

   • Investigate the Organisation: CAC can intervene if there are complaints or sustained non-compliance.
   • Deregister the Organisation: This is the ultimate consequence, leading to the dissolution of the entity.

Step-by-Step Guide to Resolving Trustee Disputes Internally

The first and often most effective approach to resolving disputes is to handle them internally, following established protocols. This minimises external interference and maintains confidentiality.

1. Step 1: Refer to Your Governing Document (Constitution/Trust Deed)

   This is the most critical first step. Your organisation's constitution (sometimes called a trust deed or articles of association for incorporated trustees) is your primary rulebook. It should contain provisions for:

   • Decision-Making Processes: How decisions are made (simple majority, two-thirds majority, consensus).
   • Roles and Responsibilities: Clear definitions of each trustee's duties.
   • Dispute Resolution Clauses: Specific procedures for handling disagreements, which might include internal mediation or arbitration.
   • Meetings and Quorum: Rules for calling meetings, attendance, and valid decision-making.
   • Removal of Trustees: Procedures for removing a trustee who is not performing their duties or is causing harm.

   Action: Circulate the relevant sections of the governing document to all trustees involved in the dispute. Highlight the agreed-upon rules.

2. Step 2: Foster Open and Honest Communication

   Many disputes stem from misunderstandings or a lack of effective communication. Create a structured environment for discussion.

   • Convene a Special Meeting: Call a formal meeting specifically to address the dispute. Ensure all parties are present.
   • Set Ground Rules: Establish rules for respectful dialogue (e.g., no interruptions, focus on issues not personalities, no personal attacks).
   • Active Listening: Encourage each trustee to fully express their perspective without interruption, and for others to listen actively to understand, not just to respond.
   • Focus on the Organisation's Mission: Remind everyone that the primary goal is the well-being and success of the organisation, not individual agendas.
   • Identify Core Issues: Work together to pinpoint the root cause of the disagreement.

3. Step 3: Seek Internal Mediation or Facilitation (If Appropriate)

   If direct communication is difficult, an impartial third party can help facilitate a discussion.

   • Appoint a Neutral Internal Party: This could be a respected senior member of the organisation (if not a trustee and seen as impartial) or another trusted individual who understands the organisation's values.
   • Role of the Facilitator: The facilitator does not take sides but helps manage the discussion, ensures rules are followed, and guides the trustees towards common ground.
   • Benefits: This can de-escalate tensions and help trustees find mutually acceptable solutions.

4. Step 4: Document Everything

   Proper record-keeping is crucial, especially when disputes arise. This helps in tracking progress, holding parties accountable, and providing evidence if external intervention becomes necessary.

   • Meeting Minutes: Keep detailed minutes of all discussions, decisions, and action points. Note who was present and any dissenting opinions.
   • Agreements Reached: Clearly document any resolutions, compromises, or agreements made. Ensure all parties sign off on these agreements.
   • Correspondence: Keep records of all relevant emails, letters, and communications related to the dispute.

When Internal Resolution Fails: External Dispute Resolution Mechanisms

If internal efforts do not yield a resolution, it is time to consider external, impartial assistance. This is preferable to letting the dispute fester or escalate into costly litigation.

1. Option 1: Professional Mediation

   Mediation involves a neutral third party (a professional mediator) who helps the disputing trustees communicate and negotiate to reach a voluntary agreement.

   • Benefits: Confidential, less adversarial, cost-effective compared to court, preserves relationships, and allows parties to control the outcome.
   • Process: The mediator facilitates dialogue, helps identify interests, explores options, and guides parties towards a mutually acceptable solution. The mediator does not impose a decision.
   • Choosing a Mediator: Select a mediator with experience in organisational governance or non-profit sectors, and who is respected for their impartiality.

2. Option 2: Arbitration

   Arbitration is a more formal process where disputing parties present their case to an arbitrator (or panel of arbitrators) who then makes a decision. This decision is often binding.

   • Benefits: Faster and less formal than court, decisions are usually final and binding, and it can be confidential.
   • When Appropriate: Suitable when parties need a definitive decision and are willing to abide by it, especially if the organisation's constitution specifies arbitration for dispute resolution.
   • Process: Parties present evidence and arguments; the arbitrator acts like a private judge and issues an award.

3. Option 3: Legal Consultation (Advisory, Not Litigation)

   Before considering court action, it can be invaluable to seek legal advice from a solicitor specialising in corporate law or non-profit governance.

   • Purpose: To understand the legal rights, obligations, and liabilities of each trustee, and the organisation itself, under CAMA and the organisation's governing document.
   • Benefits: Provides clarity on legal positions, helps assess the strength of each party's case, and can guide trustees towards a legally sound resolution. It's about getting advice, not suing.

4. Option 4: Litigation (Court Action) - The Last Resort

   Taking a dispute to court should always be the absolute last resort due to its significant drawbacks.

   • High Costs: Legal fees, court costs, and potential damages can drain the organisation's resources.
   • Time-Consuming: Litigation can drag on for months or even years, diverting focus and energy from the organisation's mission.
   • Public Nature: Court proceedings are generally public, leading to negative publicity and further reputational damage.
   • Damages Relationships: Litigation almost always destroys any hope of future collaboration among trustees.
   • Impact on CAC: Court orders might be necessary to effect changes in trustees or resolve specific issues with CAC, but this is a reactive, not proactive, solution.

Preventive Measures: Building a Strong and Harmonious Trustee Board

Prevention is always better than cure. Proactive steps can significantly reduce the likelihood and intensity of trustee disputes.

• Clear Onboarding and Training: Ensure all new trustees receive comprehensive training on their roles, responsibilities, the organisation's mission, and its governing documents.
• Regular Review of Governing Documents: Periodically review and update the constitution or trust deed to ensure it remains relevant and addresses potential areas of conflict.
• Defined Roles and Responsibilities: Clearly delineate the duties of each trustee and any sub-committees to avoid overlap and confusion.
• Promote Transparency and Open Communication: Foster an environment where trustees feel comfortable sharing ideas, concerns, and feedback without fear of reprisal.
• Regular Performance Reviews: Periodically assess the board's effectiveness and individual trustee contributions.
• Conflict of Interest Policy: Implement a clear policy on managing conflicts of interest to prevent personal gain from influencing decisions.
• Team Building Activities: Organise activities that build camaraderie and mutual understanding among trustees.

Comparison of Dispute Resolution Methods

Here is a quick overview to help you decide which method might be best for your situation:

Specific CAC-Related Considerations During Disputes

Even while managing disputes, it's vital to keep your CAC obligations in mind.

• Continue Filing Annual Returns: Do not let disputes stop you from filing annual returns. If there are disagreements on financials, note them, but aim to file what is agreed upon or seek temporary arrangements. Non-filing creates more problems.
• Changes in Trustees: If a dispute involves removing or appointing trustees, ensure all procedures outlined in your constitution and CAMA are strictly followed. CAC will scrutinise such applications. A lack of consensus or proper documentation will lead to rejection.
• Responding to CAC Queries: If CAC becomes aware of internal disputes (e.g., through complaints or conflicting submissions), respond professionally and factually. Avoid airing internal grievances directly to CAC; focus on compliance.
• Court Orders for CAC: If litigation becomes unavoidable and results in court orders for trustee changes or other organisational restructuring, ensure these orders are properly certified and submitted to CAC for record updates.

Conclusion

Disputes among trustees are a reality for many organisations. However, how these disputes are managed can determine the long-term health and legal standing of your entity. By understanding the common causes of conflict, adhering strictly to your organisation's governing documents, embracing open communication, and exploring external resolution mechanisms when necessary, you can navigate these challenges without creating unnecessary problems with the Corporate Affairs Commission.

At BusinessHelp CONSULT, we encourage all incorporated trustees to be proactive in governance. A well-structured board, clear communication channels, and a robust dispute resolution framework are your best assets in ensuring your organisation remains compliant, credible, and focused on its noble mission.