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Charity Finance Professionals Community

Kids Company: Mismanagement claims thrown out

Author: Kristina Kopic, Head of Charity and Voluntary Sector, ICAEW

Published: 26 Feb 2021

What does this case mean for the sector?

More than five years ago, Kids Company suddenly closed its doors and faced intense scrutiny and criticism for its financial management and governance.

Now claims against the charity’s former trustees and its founder and former CEO Camila Batmanghelidjh, brought on by the Official Receiver more than three years ago, were thrown out by the court.

The claims had alleged that the former trustees and the CEO of Kids Company had failed to operate the charity on a financially sustainable basis and sought to disqualify them from holding directorships.

However, the ruling cleared all the accused of personal wrongdoing and concluded that the charity may have survived had it not been falsely accused of criminal activity at the time.

The judge dismissed claims that Batmanghelidjh was a de facto director and praised the “enormous dedication she showed to vulnerable young people over many years” and her efforts in founding a charity that “until 2014 was widely regarded as a highly successful one, doing what senior members of the government rightly described as incredible work.”

Bates Wells, the law firm which represented most of the trustees, declared the ruling a “clear message to trustees that they will continue to receive the protection of the court when making honest and reasonable judgments under difficult circumstances.”

Many trustees will be reassured by the judgement, but this should not distract from what Kids Company has taught the sector about the importance of good governance.

Particularly now that so many charities have to balance reduced resources with increased demands, this case should remind charity trustees that it is crucial to understand their charity’s business model and act in the best interest of their current and future beneficiaries.

At ICAEW, we understand how important it is for all trustees, ICAEW members and non-members alike, to get to grips with the finances, legal responsibilities, and good governance. We offer e-learning Trustee Training modules and Management Liability Insurance to all members of our Volunteering Community.