Charity Commission inquiry into Kids Company concludes with no regulatory action against the former trustees and CEO

Bates Wells successfully represented several of the former trustees in last year’s High Court case.

We’re pleased that after completing its inquiry into Kids Company, the Charity Commission has concluded that the legal test has not been met for it to take regulatory action against the former trustees or CEO of Kids Company.

The Commission has contradicted the far more authoritative opinion of the High Court by making one finding of mismanagement relating to the late payment of some creditors. The High Court found that:

“In their roles as directors of Kids Company the Trustees were required to, and did, balance a range of factors. They were seeking to meet Kids Company’s charitable objectives, and in doing so not only to address the significant needs of the charity’s vulnerable clients for whom the charity provided a very real safety net, but to have proper regard to safety and safeguarding issues (which included ensuring that the work was properly staffed). They were required continually to assess whether sufficient funding could be obtained, both from the government and private sources, and whether the position with creditors could be appropriately managed. The decisions they made were matters of honest judgment, made in difficult circumstances in what they thought were the best interests of the charity. The Official Receiver has not demonstrated that decisions that the Trustees took, or failed to take, in the factual context were outside a range of reasonable decision-making…”

Decisions taken honestly in the interests of a charity and within the range of reasonable decision-making cannot constitute mismanagement and the former trustees are right to reject this finding of the Commission.

The Commission’s report ignores far too much of the judgment of the High Court. There is a notable absence of positive comment and a number of central features of this case are missing. For example, the assurances of funding from government and philanthropists, on which the trustees were entitled to rely, are critical to understanding the context in which the trustees made decisions, as the High Court acknowledged. The Commission also ignores the High Court’s finding that the charity would most likely have survived (following a restructure) if unfounded allegations of sexual assault had not been made.

The Commission does acknowledge the highly challenging nature of the charity’s work, the skills and experience of the trustees, that the trustees held the charity’s executive to account, and that the trustees were entitled to rely, and did rely on the expertise and assurances of a significant senior leadership team at the charity.

Over the past seven years, the former trustees of Kids Company have been subject to continual scrutiny and public speculation at immense personal and professional cost, successfully defending their actions in lengthy court proceedings. While we are pleased that the final inquiry has come to an end without further action being taken against our clients, it is disappointing that the Charity Commission has missed an opportunity to provide the charity sector with a fairer and more balanced report.

Statement from the former trustees of Kids Company

After an investigation lasting over six years, the Charity Commission has not found anything that would warrant bringing regulatory action against anyone involved with Kids Company. We are pleased with that conclusion but disappointed that the Commission, in criticising some decisions we took, has chosen to discount the clear findings of the High Court that completely exonerated us.

The High Court undertook a far more forensic examination of the affairs of the charity than the Charity Commission. In a ten-week trial, it examined more than 18,000 pages of evidence and heard evidence under cross-examination from all relevant and available witnesses before dismissing the case against us not just because of the OR’s own failings in how they pleaded their case, but on the substance of our conduct as trustees. The High Court made it clear that the case should never have been brought and awarded us indemnity costs against the Official Receiver.

The High Court concluded:

“In their roles as directors of Kids Company the Trustees were required to, and did, balance a range of factors. They were seeking to meet Kids Company’s charitable objectives, and in doing so not only to address the significant needs of the charity’s vulnerable clients for whom the charity provided a very real safety net, but to have proper regard to safety and safeguarding issues (which included ensuring that the work was properly staffed).

They were required continually to assess whether sufficient funding could be obtained, both from the government and private sources, and whether the position with creditors could be appropriately managed. 

The decisions they made were matters of honest judgement, made in difficult circumstances in what they thought were the best interests of the charity.”

In relation to reserves the judge concluded: “I do not agree with the suggestion that, if it had had appropriate reserves, Kids Company would have been able to survive notwithstanding the unfounded allegations. That is not demonstrated by the evidence…” 

The judge found us to be “a group of highly impressive and dedicated individuals who selflessly gave enormous amounts of their time to what was clearly a highly challenging trusteeship. I have a great deal of respect for the care and commitment they showed, and the fact that they did not take the much easier path of not getting involved in the first place or walking away when things got difficult.” 

She also said: “Most charities would, I would think, be delighted to have available to them individuals with the abilities and experience that the Trustees in this case possess. It is vital that the actions of public bodies do not have the effect of dissuading able and experienced individuals from becoming or remaining charity trustees.”

The High Court found that the decisions we took in relation to the charity’s reserves fell within the range of reasonable decisions that trustees could make in exercising their discretion. That finding, together with the Judge’s findings as to the selflessness, skill, care and commitment shown by the Trustees, made clear that there was no basis for concluding that there was mismanagement in the conduct of the charity’s affairs.  We reject the Commission’s finding to the contrary.

The Judge also found that the charity would probably have survived if unfounded allegations of sexual abuse had not been made.  It is disappointing that the Commission has purported to make a finding which is contrary to that conclusion.  

We are concerned that by disregarding or dismissing the importance of the findings of the High Court and criticising us with the benefit of hindsight, the Commission is doing exactly what the High Court warned against and discouraging good people from becoming charity trustees, contrary to one of its statutory functions.

The material in this article is provided for guidance and general information only and is not intended to constitute legal or other professional advice upon which you should rely. In particular, the information should not be used as a substitute for a full and proper consultation with a suitably qualified professional. Please do contact the Bates Wells team if you require further information.