Kids Company case
After a 3-year legal case, the high court dismissed claims by the Official Receiver that the CEO and seven former trustees were running an unsustainable business.
The Official Receiver had argued that trustees as directors, and its CEO as a de-facto director should have been disqualified for their management approach in the final two years. Yet the court ruled that whilst elements of the business were “high risk”, it was not “unsustainable in principle”. The unprecedented case focused on alleged financial mismanagement in the months leading up to the insolvency and could have resulted in a directors ban. Instead, the trustees and former CEO have been acquitted.
In his analysis David Ainsworth explores some of the detail of the case and highlights areas where it may have been presented differently. David also flags some lessons on management and the approach of the board. This analysis provides helpful learning from a drawn-out case. As Kirsty Weakley wrote in her Civil Society article “there are no real winners” and “the ruling itself exposes how poorly charity law is understood.”
I do think the sector and trustees can take some reassurance from the courts decision, in particular for me there are two key take-aways:
- That where trustees can evidence that they commit time, skill and do their best to comply with their duties, acting honestly and in good faith, then the law generally protects them against such cases. This is important because recruiting suitable qualified trustees can be a challenge, particularly for smaller organisations. Had the case gone the other way it could have served to dissuade people from volunteering to join boards.
- The ruling makes clear that in her capacity as CEO, Batmanghelidjh was not a ‘de facto director’. Meaning there are no significant implications for the division of executive and non-executive responsibilities. Had a different outcome been proven then this would have raised significant questions for the division of executive and non-executive trustee boards.
The case does serve as a reminder that trustees should clearly define and delineate respective roles, establish clear delegations and never ignore their responsibility to exercise oversight of the senior staff. Some of our Knowhow resources and guidance can help with this. No doubt it will also raise questions on the value and prospective of unitary governance structures.
It is not over yet. The Charity Commission opened a statutory inquiry into what happened but the work of the Insolvency Service takes precedence. We can now expect the outcome of the Commission’s work.
Charity Commission Oxfam GB report
The Charity Commission has published its inquiry into Oxfam GB and lifted its statutory supervision of the charity. This comes after an independent investigation in 2019 made over 100 recommendations for improved culture and safeguarding practice at the charity.
In the latest report the Charity Commission say they are now satisfied that Oxfam GB has significantly strengthened its approach to keeping people safe and makes clear that the leadership has responded positively having implemented wide-ranging changes to its organisational culture, and strengthened its approach to safeguarding.
In response to the report Danny Sriskandarajah the CEO of Oxfam GB said “We have worked hard to learn from the mistakes of the past and ensure that our vital work to save and improve lives takes place in as safe an environment as possible in a way that is consistent with our values”.
The report highlights the importance of ongoing work to maintain good practice in both culture and safeguarding and so there are lessons here for all charities. Trustees should take time to assess their culture and can make use of the safeguarding resources and guidance on our website:
The latest iteration of the Charity Governance Code’s integrity principle also reflects the importance of this work by placing renewed emphasis on values, culture and the right to be safe.
From the Commission
Ian Karet has been appointed as the interim chair of the Charity Commission until 26 August 2021, whilst the appointment process for a permanent chair is conducted. Ian Karet joined the Charity Commission board in January 2019. He is a solicitor and a partner of Linklaters LLP, specialising in intellectual property and technology. The appointment follows the announcement by Baroness Stowell that she would not seek a second term.
Governance Forum – 19 March 2021
NCVO’s Governance Forum meets twice a year with the purpose of providing peer support, learning and the sharing of good practice for individuals from organisations across civil society about good governance. We will be running the next NCVO governance forum virtually on the 19 March 2021 from 10:00 – 13:00.
On 19 March 2021 we will:
- Explore the updates to the Charity Governance Code published in December 2020.
- Receive an update from the Charity Commission on key developments.
- Examine, and share experience on how boards can effectively assess and manage power imbalances.
- Explore the “Where power lies” report on the importance and value of lived experience on boards.
In order to cover the costs of running this event we charge a fee of £25. To register for the event please visit our event page.
Training and events
- Online trustee training: We run regular online trustee inductions and refresher courses over two half days.
- E-learning induction for trustees: We recently launched our new e-learning module for trustees. This offers trustees a low cost introduction to their roles.
Dan Francis is NCVO’s lead governance consultant. For more regular updates follow @mynameisdanfran or @NCVO on Twitter.
Dan is responsible for NCVO’s governance consultancy offer, focusing on governance reviews, board performance and trustee training. He joined NCVO from the National Union of Students (NUS) where, as a long standing consultant, he supported the organisational development of local students’ unions as charities. 
