Charity insurance

Insurance for charity trading subsidiaries

Reviewed by the Apex broking team · Last reviewed 2026-11-10

Charity trading subsidiary insurance is the cover a charity's trading company needs as a separate legal entity, for its activities, staff, contracts and directors. It matters because the subsidiary exists to keep trading risk away from charity assets.

Part of: Charity insurance

In short

A charity trading subsidiary is a separate company, so the charity's policies only cover it if it is named on them. It can join a group programme or buy its own policies, but either way its retail, events, venue hire, catering, staff and directors need to be clearly insured. Charity Commission guidance in CC35 says the subsidiary exists to protect charity assets, trustees must not prop it up, and shared costs should be recharged fairly. Subsidiary directors need cover that plainly applies to that role, which a trustee indemnity policy may not provide.

Does the charity's insurance cover its trading company?

Not unless the policies say so. A trading subsidiary is a separate company with its own contracts, staff, customers and directors. The parent charity's policies cover the parties named in the schedule, so the subsidiary needs either to be named as an insured on each relevant section of a group programme, or to hold its own policies.

Either route can work. A combined programme is often simpler and can give better aggregate buying power, but it needs careful drafting so that the subsidiary's claims do not use up limits the charity relies on. Separate policies keep risks apart, which suits the purpose of having a subsidiary in the first place. The group programmes page explains the trade offs, and the charity insurance broker guide covers the wider charity programme.

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Why separation matters: what CC35 says

The Charity Commission's guidance Trustees, trading and tax (CC35) explains that a subsidiary should be set up to protect the charity and its assets from trading risks, and that the charity's interests come first. Several points in it have insurance consequences:

Significant risk trading. Non primary purpose trading that involves significant risk to charity assets should go through a subsidiary. Insurance is one of the tools that keeps that risk inside the subsidiary.
No propping up. Trustees must not keep a failing subsidiary going at the charity's expense, and guarantees of subsidiary liabilities are often unenforceable and can expose trustees personally. An uninsured loss in the subsidiary cannot simply be absorbed by the charity.
Fair recharges. Premises used by the subsidiary need a formal lease or licence, and shared staff and equipment should be charged at fair value. The same logic usually applies to insurance costs, so the subsidiary should bear its share of premium rather than receive a hidden subsidy.
Gift Aid of profits. Subsidiaries often pay taxable profits to the parent as Gift Aid, capped by distributable profits. That is a tax arrangement, not protection. A subsidiary that pays out all its profits holds few reserves, so a large uninsured claim can quickly threaten its solvency.

CC35 also recommends at least one trustee who is not a subsidiary director, and at least one subsidiary director who is not a trustee or charity employee. That structure is relevant to how directors' liability cover is arranged.

Trading activities and the cover that usually responds

Activity or exposure	Cover that usually responds	Check
Retail shops and online sales	Stock and contents, public and products liability; see charity shop chain insurance	Bought in goods, donated electricals, product recalls
Ticketed events, challenge events, festivals	Event public liability and event cancellation	Which entity contracts with suppliers and participants
Venue hire, conferences, weddings	Property, public liability and loss of income; see venue hire requirements	Hirers' own insurance, licensing and alcohol
Cafes and catering	Public and products liability, contents, business interruption	Food safety, allergens, equipment breakdown
Staff employed by the subsidiary	Employers' liability naming the subsidiary	Each employer needs its own valid certificate or schedule entry
Subsidiary board decisions, insolvency	D&O for the subsidiary; see D&O and insolvency	Whether the charity's trustee cover extends to these roles
Card data and online shop systems	Cyber	Payment card data and supplier outages
Staff theft of takings	Crime	Cash handling across shops and events

Directors of the subsidiary and their liability

Subsidiary directors owe duties to the company under company law, separate from any duties they owe as charity trustees. Where the same people sit on both boards, they carry two sets of responsibilities and can face conflicts, for example over whether the charity should lend more money to a struggling subsidiary.

Under section 233 of the Companies Act 2006, a company may buy and maintain insurance for its directors, or directors of an associated company, against liability for negligence, default, breach of duty or breach of trust. That allows the subsidiary to pay for its own D&O cover.

CC49 notes that trustee indemnity insurance can extend to trustees' liability as directors where part of the charity's business is carried on through a separate company, and section 189 of the Charities Act 2011 gives charities a general power to buy trustee indemnity insurance. Whether a particular policy actually covers subsidiary directorships depends on its wording and on who is named. Directors who are not trustees, such as independent commercial directors, are often outside trustee cover altogether. See D&O insurance for charities and trustee indemnity exclusions.

Contracts with the parent, and illustrative examples

Charity and subsidiary usually sign agreements covering premises, staff, the use of the charity's name and the Gift Aid payment. Those contracts often contain indemnities and insurance obligations. If the subsidiary promises to indemnify the charity for losses at a shared building, its liability policy may not cover contractual promises beyond what the law would impose anyway. Insurers usually need to see these agreements and know who owns and insures each building.

Illustrative example 1: a festival injury

A subsidiary runs a fundraising festival on charity land. A visitor is injured by a falling structure. The subsidiary contracted with the stage supplier, but only the charity was named on the event policy. Insurers may question whether the right entity is covered. Naming both, and checking the supplier's cover, avoids the argument.

Illustrative example 2: a struggling cafe chain

Trading losses build up and a creditor alleges the subsidiary's directors continued trading when they should have stopped. The directors include two trustees. Whether their defence is funded depends on whether D&O names the subsidiary and whether the charity's trustee indemnity policy extends to subsidiary directorships, subject to exclusions.

What insurers usually want to see, and common mistakes

For a subsidiary, underwriters commonly ask for a group structure chart, the subsidiary's own turnover and wage figures, a breakdown of trading activities, an events calendar with attendance estimates, venue hire terms, product sourcing for retail, and claims history by entity.

Common mistakes include:

buying all cover in the charity's name while the subsidiary signs the contracts and employs the staff
relying on the charity's trustee indemnity policy for subsidiary directors without checking the wording
sharing one aggregate liability limit across the charity's services and a high risk events programme
not recharging insurance costs to the subsidiary
starting a new trading line, such as weddings or a festival, mid year without telling insurers

When trustees should review the programme

Trustees and subsidiary directors should review insurance at each renewal and whenever:

the subsidiary starts a new activity, venue or major event
it takes on staff of its own or moves staff from the charity
it makes losses, needs a loan from the charity, or its directors change
charity property is let or licensed to it, or its premises change
the charity reorganises its group, for example by setting up a social enterprise or CIC

A charity insurance programme review looks at the charity and subsidiary together, and the insurance programme review page sets out the process. For event risk at board level, see charity fundraising events and trustee liability.

Apex arranges insurance for charities and their trading subsidiaries; a broker reads every enquiry.

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Or email your schedules and renewal date to info@apexinsurancebrokers.co.uk, or call 0117 325 0027.

Sources

Frequently asked

Is our trading subsidiary covered by the charity's insurance?

Only if it is named as an insured on the relevant policies. The subsidiary is a separate legal entity, so it either needs to be included in a group programme by name or hold its own policies. Check each section, including employers' liability, D&O and event cover.

Do subsidiary directors need their own D&O cover?

Usually they need cover that clearly applies to their role as directors of the subsidiary. The Companies Act 2006 allows a company to buy insurance for its directors. A charity's trustee indemnity policy may extend to subsidiary directorships, but non-trustee directors are often outside it. Check the wording.

Should the subsidiary pay its own insurance premiums?

Charity Commission guidance in CC35 says shared costs such as staff and equipment should be recharged at fair value, so the charity does not subsidise trading. The same principle usually applies to insurance, so the subsidiary should bear its share.

Does Gift Aiding profits to the charity affect insurance?

Not directly; it is a tax arrangement. But a subsidiary that pays all its profits to the parent has little in reserve, and CC35 warns trustees not to prop up a failing subsidiary with charity funds. Adequate limits matter more as a result.

Can one policy cover both the charity and the subsidiary?

Yes, many programmes name both. The points to watch are shared aggregate limits, which risky trading can erode, and making sure each entity's activities, turnover and staff are disclosed. Separate limits for higher risk activities are worth considering.

Trustees: get a second opinion on your charity's insurance

Send us your current schedules, policy wordings and renewal date. We will review the whole programme and give you a one-page summary for your board: what to keep, what is missing and what to change. No fee and no obligation. Or call 0117 325 0027.

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Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.