Trustees can put in a lot of work when planning for financial stability but often not-for-profit organisations and charities become insolvent for reasons they have no control over.

Public spending cuts, falls in investments and reduced voluntary donations & legacy gifts have been the cause of insurmountable financial strains for many charities and not-for-profit organisations. Some are even burdened with liabilities because of actions taken long before current trustees are involved – for example, final salary pension schemes that may have closed to new entrants many years ago.

Whatever the cause of the difficulty, Charity Insolvency is a very serious matter and must therefore be dealt with both swiftly and professionally.

Insolvency is defined as either a situation where liabilities exceed assets or debts cannot be paid as and when they become due – for example, by failing to pay taxes or suppliers on time.

Trustees Responsibilities

Trustees have very large responsibilities in their roles and, under the Companies Act, trustees who are involved in a company structure have even greater responsibilities. If those responsibilities are breached it can lead to serious personal financial consequences, even where the charity or not-for-profit organisation is incorporated into a limited company structure. Professional trustees (accountants, solicitors, etc.) are the most vulnerable when in an insolvent charity or insolvent not-for-profit organisation.

In an attempt to aid cashflow, some trustees unintentionally breach their duties by dipping into restricted reserves but such actions can have terrible consequences for the trustees if the charity is forced to enter into an Informal insolvency procedure. Not just that but in the event of the charity closing, those actions are highly likely to see all restricted funds being reclassified as unrestricted and available for all creditors.

Our Work with Charities

We have worked with numerous charities and understand the emotional struggles many trustees are faced with. The greatest hurdle to overcome is often accepting that fulfilling the goals of the charity may no longer be the primary objective once an insolvent position is reached, but is instead to ensure the position for creditors does not become worse. For some this means closing the charity immediately. We understand how difficult this is as well as how it could affect many people, from employees to those who use the services provided.

Our work with charities and not-for-profit organisations to develop never-before-seen solutions that are unique to them is shown through the matters we have dealt with. We are truly at the forefront with our solutions and the way they are delivered.

Please contact Kevin Lucas, today, if you are looking for a solution for your charity or not-for-profit organisation. We have restructured and rescued charities with debts 100 times larger than their annual operating surplus. We have saved charities on the edge of closure by trading them in administration whilst a new provider or charity is found to continue the good work whilst also providing seamless continuity of services to their users. Inevitably though we have also helped a number into liquidation in ways that reduce the impact of their closure on all stakeholders.

Please contact us so we can discuss your situation, whatever that may be, even if all that you need is a little reassurance on your approach.