On Monday, the 24th of April, it was reported that The Insolvency Service had written to lawyers acting on behalf of Kids Company's former board members, informing them that the agency is likely to pursue disqualification proceedings against them.These actions are thought to include the founder of the charity, Camila Batmanghelidjh, and former BBC chief, Alan Yentob. They, and their fellow board members, face the possibility of being banned from serving as company directors for several years.
Kids Company collapsed in 2015
Set up in 1996 by Batmanghelidjh, Kids Company was a London youth work charity that supported children affected by mental health, gun and gang crime and those who suffered from neglect. Over its fifteen years of operation, it received approximately £42 million of public money.The charity collapsed in the summer of 2015, just a month after receiving a £3 million Government grant which was openly backed by then Prime Minister, David Cameron.
Approximately £800,000 of this grant was used to pay staff wages, when it was originally intended to be used for restructuring purposes. It remains to be seen whether the Government will be able to get this money back.
Batmanghelidjh and Kids Company staff blamed a police investigation into sexual and physical assaults within the charity for the closure, despite the charity's financial troubles having long been a cause for concern.
The Charity Commission is reviewing the financial collapse of Kids Company, with the intention of avoiding similar problems in other charities.
The Commons public and constitutional affairs committee also conducted a review of the collapse. One MP called it an "extraordinary catalogue of failures of governence and control", not just by the charity but by senior ministers, watchdogs and auditors too. They have called for a radical change in the approach to charity regulation at every level.
The consequences for directors
The Insolvency Service has the power to seek bans on directorships for individuals for up to 15 years. When asked about the former directors of Kids Company, The Insolvency Service said:"Our investigation into the circumstances surrounding the collapse of Kids Company and the conduct of the directors is ongoing. It is not appropriate to comment further at this time."However, if the directorship ban does take place, all the board members of Kids Company, at the time of collapse, must relinquish any other directorships they hold – whether these are within charities or commercial organisations.
Yentob established a television production called I Am Curious last year, and is a director, according to Companies House. He will have to step down if the Insolvency Service proceeds with this ban.
This will also seriously affect the earning potential and reputation of Richard Handover, the former boss of WH Smith, along with Andrew Webster, a former executive at AstraZeneca, and Erica Bolton, an arts publicist - all of whom were board members of Kids Company.
The former trustees issued a response, arguing that they should not be disqualified as directors due to the unprecedented nature of this court action and that they acted diligently throughout their tenures at the charity.While the final ruling is yet to be made, it is evident that the former board members of Kids Company should be prepared for a hefty and high profile legal challenge.
If you are concerned about your company's collapse, or possibly being disqualified as a director, talk to Company Rescue today for expert advice.
Categories: Implications for Directors