Good news for charity trustees

The Official Receiver (OR) pursued disqualification orders against the non-executive trustees and directors of the Kids Company charity, along with its CEO who it alleged was a de facto director.

The OR made a single allegation of unfitness against the Trustees, namely that they “…caused and/or allowed Kids Company to operate an unsustainable business model …” and that they knew or should have known about this and took insufficient action to address it" and “…knew or ought to have known that failure was inevitable without immediate material change…” by no later than 30 November 2014. The business model complained of was a demand led model of self-referral, with the charity’s policy of “never turning a child in need away”.

The directors claimed that the failure of the company was due, not to the business model, but rather due to allegations of child abuse made against the charity in July 2015, following which it went into liquidation in August 2015. The Judge reviewed the business model and the events leading up to the liquidation and found that the allegations were not made out. The Judge also rejected the argument that the CEO was a de facto director.

Looking at the experience of the trustees and the advice that they took, it is not a great surprise that the proceedings were unsuccessful and the decision is welcome news for the many trustees across the land who volunteer and are not paid for their services. However, it does highlight the importance of having proper management structures in place.

Re Keeping Kids Company [2021] EWHC 175 (Ch)

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