Kids Company Trustees And CEO Win High Court Case

After facing years of criticism and public censure, Camila Batmanghelidjh and the Keeping Kids Company former trustees have been exonerated in a High Court judgement which should provide reassurance for charity trustees working in these environments.

Background

As the demand for the Kids Company services grew substantially, so did its financial pressures. A restructure rescue plan was proposed but by August 2015 the charity was declared insolvent and the charity’s collapse hit the headlines. The High Court has now rejected the case brought against the former trustees and CEO (as a “de facto director”) by the Official Receiver who alleged that they “caused and / or allowed Kids Company to operate an unsustainable business model” and therefore should be disqualified from acting as company directors in the future.

Takeaways

The judgement shows an appreciation for the unique, and often challenging, environment that charities work in, and was critical of the Official Receiver for not having a better understanding of how charities are sometimes forced to operate in practice. Our key takeaways are summarised below.

First, the judgement suggests a high threshold will be set when considering disqualification orders for charity trustees in similar situations. This illustrates that the courts are keen not to dissuade able and experienced individuals from becoming or remaining charity trustees. Although the Official Receiver criticised the Kids Company’s “demand-led model”, the court disapproved of this and rightly pointed out that many charities focused on the relief of people in need are “pretty much by definition demand-led”. We will await the results of the Charity Commission’s statutory inquiry (put on hold for the court proceedings) that will hopefully identify wider lessons for other charities and trustees.

Secondly, the charity’s reputation is critically important. The judgement highlights that, in this case, any chance of the charity’s survival was more or less extinguished by the publicising of various sexual assault allegations relating to Kids Company in the week before the charity closed. Charity trustees should be mindful of the crisis management strategies they can implement to mitigate against adverse publicity generally, and to protect their charity’s reputation when this kind of event occurs.

Finally, this case reminds us of the importance of continuing to fight your corner as a trustee when you believe you are right.