Getting on board… Kids Company and charity trusteeship

Article 25 March 2021 Experience: Charities and non-profit

Kids Company was a high profile charity which fell into insolvency in 2015 amid widespread media coverage. The story generated more lines of newsprint than a usual charity collapse for two main reasons. First, because Kids Company had attracted vocal support from such figures as then Prime Minister David Cameron, and second, because the collapse followed hard upon some safeguarding allegations that were themselves all over the papers and led to a police investigation. Those allegations were however subsequently dropped for want of evidence. Kids Company was a sad loss for the sector and for all its young beneficiaries. But now at least, there’s reason to be a little cheerful for those trying to recruit (or retain) charity trustees.

A lengthy judgment handed down in the High Court last month concerned the potential disqualification of the Kids Company trustees and the charity’s CEO, Camila Batmangelidgh (if she had been found also to be a de facto company director). The proceedings were brought by the Official Receiver on the basis that (per the judgment) “the defendants individually and collectively caused and/or allowed Kids Company to operate an unsustainable business model”. Mrs Justice Falk wasn’t at all sure that this was the right allegation to bring – it was more a question of whether the board had done too little, too late when things were starting to slide – but in any event she was happy to dismiss it. What’s more, she did so while praising much of the work that the charity had done.

The judge’s decision in the Kids Company case has been widely welcomed in the sector, because it was eminently sensible. It’s hard, for example, to take seriously criticism of a charity for being needs-led, when that’s exactly what it was set up to be. More generally, while charity trustees have strict duties to protect their charity’s assets and to act in its best interests – which mean they need to act reasonably and often quite commercially – it can be problematic to try to hold this type of charity to precisely the same standards and measures of good practice that would apply to a commercial business. The context is just not the same.

Had we’d seen the judgment go the other way, with the trustees and CEO disqualified from office for the next several years, we might have woken up to a world in which trustee recruitment and retention had become much, much more difficult for all but the smallest, safest-seeming charities. But we didn’t. And in fact, the Kids Company judgment followed another good and sensible decision that should encourage would-be trustees as well as those trying to recruit them: the Garden Bridge Trust case.

This time it was the Charity Commission rather than the court making the decision, but the result was somewhat similar. The Garden Bridge was a Thomas Heatherwick-designed confection that was to adorn central London at a suggested cost of around £200m. In the end, ‘only’ £50m was spent, but with nothing really to show for it other than a lot of noise and a website. Some in the sector feared that when the Commission got involved, trustee-heads would roll, but in fact the Commission was even-handed, finding that despite the huge loss of funds, the trustees had acted in line with their legal duties and done nothing wrong. They had only to act within the range of reasonable courses open to them, which they did, and inevitably from time to time one or more of those possible courses will lead to failure.

Remember too that in cases where there has been a breach of trust or duty that exposes the relevant trustee(s) to the risk of personal liability, the Commission has the power to relieve them where they have acted honestly and reasonably at all relevant times and ought fairly to be excused. And where there has been no such breach, trustees are often better protected from personal liability than many people think.

All in all, while negative media coverage, the pandemic, and a host of other things mean charities are operating in a highly challenging environment at the moment, the picture for trustees themselves has improved. The High Court and the Commission have shown that they can take a sensible approach when things go wrong, with due weight being given to the unique nature of charities and the work they do. So for those of you thinking of being charity trustees, try not to worry too much about the disaster scenarios, get involved, remember your legal duties and do your best. The sector needs you.