Katherine Pipe | Wellers

Lessons from the Kids Company Judgment: Strengthening Charity Governance and Financial Oversight

Posted on June 12, 2025August 12, 2025 by Katherine Pipe

The High Court’s recent decision on the Charity Commission’s inquiry into Kids Company has important implications for all charity trustees. The judgment confirms that even well-intentioned, passionate leadership is not enough to protect a charity from serious governance failures and is a good moment to reflect on how we got here. This article sets out what happened in the Kids Company case, what the Commission and the courts found, and most importantly, what other charities can learn.

What Happened at Kids Company?

Kids Company was established in 1998 with the purpose of preservation of health for children in need of counselling, support and therapeutic use of the arts, by reason of their social or family circumstances. It received millions of pounds in public funding, including repeated government grants. In August 2015, Kids Company closed abruptly with many employees being made redundant triggering widespread concern and scrutiny from the media, government and the public.

The Charity Commission launched a statutory inquiry shortly after the closure, examining the charity’s governance, risk management, safeguarding, and financial practices. Its final report, published in February 2022, found significant mismanagement of the charity’s finances, particularly:
– Persistent cashflow crises
– Over-reliance on public funding
– Failure to build reserves or plan for financial shocks
– Weak financial oversight by the board

Crucially, the Commission did not find any dishonesty, bad faith, or personal gain by trustees or staff.

The Charity Commission’s statutory inquiry was paused when the Official Receiver initiated proceedings against all trustees who had been in office at or shortly before Kids Company’s collapse, along with the CEO. The Official Receiver sought to disqualify them under section 6 of the Company Directors Disqualification Act 1986, which permits disqualification where a person is found to have engaged in unfit conduct while serving as a director of an insolvent company. The Official Receiver argued that the trustees and CEO were unfit because they had caused or allowed the charity to operate an unsustainable business model.

However, the High Court dismissed the claims. It found that the trustees and CEO were not unfit, but had made honest decisions in good faith, under difficult circumstances, and with the charity’s interests at heart. The court emphasised that the trustees had sought and followed professional advice, including financial guidance, and viewed this as evidence of responsible governance—even though the charity ultimately failed.

Several former trustees challenged the Commission’s statutory inquiry findings in the High Court by way of a judicial review. In May 2025, the Court upheld the Commission’s core conclusions, stating they were based on “ample evidence.” The Court confirmed that the Commission had not predetermined its findings and had acted within its statutory remit. While the Court identified two paragraphs in the statutory inquiry report that contained important errors, it found the Commission’s overall findings to be rational and reasonable.

Key Lessons for Trustees and Charity Leaders

The Kids Company case offers timely and vital governance lessons for all charities, regardless of size or purpose. Below are four key takeaways to help trustees fulfil their duties and protect their charities from similar risks:

1. Build Financial Resilience

The Charity Commission characterised Kids Company’s financial situation as a ‘hand-to-mouth’ existence. It found that by not prioritising the creation of adequate reserves, the trustees neglected their duty of care to both employees and donors. This highlights a crucial lesson for trustees: prioritising realistic budgeting, accurate financial forecasting, and establishing clear reserve policies is essential to protect your charity’s long-term sustainability and fulfil your duties as trustees.

2. Governance must evolve with Growth

The Charity Commission found that Kids Company maintained informal, founder-led governance structures even as it grew into a large, national charity, which may have contributed to its ultimate demise. Trustees must regularly review their governance structures to reflect changes in the charity’s scale, complexity, and risk profile. They should also be aware that founder-led leadership by a charismatic individual can obscure risks embedded in established ways of working. While founders bring passion and vision, it’s important to balance their influence with robust governance structures to ensure ongoing challenge and oversight.

3. Document Risk and Decision-Making

There were insufficient records for the Charity Commission to make findings in some areas of the statutory inquiry. Clear records of board discussions, risk assessments, and financial decisions are critical, not just for compliance, but to demonstrate accountability in the face of scrutiny. This is particularly important where decisions involve significant risk.

4. Take and Record Professional Advice

The High Court recognised that Kids Company’s trustees had sought and followed professional advice, including on financial matters. This was a significant factor in the Court’s decision not to disqualify them, despite the charity’s failure. Trustees should not hesitate to seek expert guidance (whether legal, financial, or operational) when navigating complex or high-risk decisions. Importantly, they should also ensure that this advice, and how it informed board decisions, is clearly documented. Doing so not only supports sound governance but also provides protection in the event of scrutiny.

How We Help Charities Stay Compliant and Resilient

As specialist charity lawyers, we help charities strengthen governance, manage risk, and remain compliant under increasing scrutiny from regulators, funders, and the public.

We support charities with:
– Governance health checks and structural reviews
– Trustee training on legal duties and best practice
– Financial oversight and reserves strategy guidance
– Risk management and safeguarding policies
– Support during Charity Commission inquiries or serious incidents
– Constitutional amendments and governance advice

Whether your charity is scaling up, managing public funds, or navigating internal changes, we can help you build strong, resilient systems for long-term success.

Contact Kate Pipe at kate.pipe@wellerslawgroup.com or call 020 7481 2422

Why Volunteer Agreements Are Crucial for Charity Protection and Success

Posted on May 29, 2025August 12, 2025 by Katherine Pipe

Volunteers play a vital and often irreplaceable role in the charity sector. Many organisations simply couldn’t deliver their services or achieve their objects without them. However, although volunteers give their time freely, it’s still important for charities to set clear expectations through a thoughtfully prepared volunteer agreement.

Too often, charities see volunteer agreements as an administrative extra — but in reality, they are an important tool for managing risk, protecting the charity, and supporting a positive and professional experience for volunteers.

Why Volunteer Agreements Matter

A volunteer agreement helps to define the boundaries of the relationship between the charity and the volunteer. It sets out what is expected from the volunteer and what they can expect from the charity in return. More importantly, it gives the charity a framework to rely on if things don’t go as planned. From safeguarding concerns to reputational issues, a properly structured volunteer agreement can help reduce the risk of liability, clarify responsibilities, and ensure consistency across your volunteer programme

Common Risks Without an Agreement

Here are some examples of where problems can arise when a charity does not have adequate volunteer agreements in place:

1. Safeguarding and Misconduct

A volunteer is working with vulnerable beneficiaries but has not completed safeguarding training or undergone background checks. If concerns arise, the charity may struggle to show it took reasonable steps to prevent harm.

➡ A volunteer agreement can require volunteers to comply with safeguarding policies and complete relevant training, helping to demonstrate the charity’s proactive approach.

2. Health & Safety Incidents

A volunteer is injured while carrying out a task they weren’t properly trained or equipped for. There is no record of risk assessments or role-specific guidance being provided.

➡ An agreement can set out the charity’s approach to health and safety and reference any induction, training, or supervision that volunteers should receive.

3. Unauthorised Media Statements

A volunteer posts on social media or speaks to the press, giving the impression they are representing the charity’s official view.

➡ A volunteer agreement can stipulate that volunteers are not authorised to speak on behalf of the charity, helping to minimise the risk of unauthorised media statements.

4. Disputes Over Expenses

A volunteer incurs costs and expects reimbursement, but the charity has no policy in place. The result can be confusion or disappointment.

➡ Agreements can clarify what expenses will or won’t be reimbursed, helping to prevent misunderstandings or disputes.

What Should a Volunteer Agreement Include?

A good volunteer agreement should still be clear, consistent, and reflect your charity’s policies and practices. It should typically include:

A description of the volunteer’s role and responsibilities
The expected time commitment and any agreed hours or availability
Details of supervision, support, or training provided
Reference to key charity policies which the volunteer needs to abide by (e.g. safeguarding, confidentiality, data protection)
A clause covering insurance, including what cover (if any) is in place for volunteers
Information on speaking to the media and use of social media while representing the charity
A clear expenses policy
Health and safety information, including duties of care and risk management
A process for resolving issues or ending the volunteering arrangement

Final Thoughts

Volunteer agreements are essential tools for managing risk, while also fostering a positive and supportive environment for your volunteers. By setting expectations clearly from the outset, charities can build stronger, safer, and more sustainable relationships with the people who give their time and energy so generously.

For trustees and senior staff, reviewing your current volunteer agreement (or implementing one if it doesn’t exist) is a small but crucial step in safeguarding your charity’s operations and reputation.

If your charity needs assistance with drafting or updating its volunteer agreement, or would like a review of your volunteer management policies, please contact our charity experts Peter Spencer at Peter.Spencer@wellerslawgroup.com and Kate Pipe at Kate.Pipe@wellerslawgroup.com.

Making grants to non-charitable organisations – The dangers and pitfalls that you need to be aware of

Posted on August 24, 2022June 5, 2025 by Katherine Pipe

If your charity provides grants to non-charitable organisations, or intends to do so in the future, this article is for you.

Many charities pursue their purpose by providing grants to non-charitable organisations to fund certain programmes or projects. However, not all charities consider or manage the risks of doing so. What happens if the organisation doesn’t use the grant funding properly? What happens if the organisation is defunct or corrupt? What if a scandal effects the organisation and your charity is tied to it? These risks exist and it is the role and responsibility of the trustees to ensure these risks are mitigated.

Important Differences between Charities & Non-Charitable Organisations

To understand the risks associated with providing grants to non-charitable organisations, it is first necessary to understand the important differences between charities and non-charitable organisations.

Unlike charities, non-charitable organisations are not restricted by charitable purposes or public benefit. As a result, non-charitable organisations have the ability to do a lot of things that charities cannot. For example, they can:

pay dividends to their shareholders;
provide private benefit to stakeholders; and
undertake activities that are aimed at non-charitable purposes.

On the other hand, charities are required to carry out activities in line with their charitable purpose for the public benefit. As a consequence, when providing grant funding, charities need to ensure the grant will only be used by non-charitable organisations to fund projects or activities that are intended to further the charity’s purpose for a public benefit. Significantly, if grant funding is used inappropriately by a non-charitable organisation, there is a risk that the charity might lose its charitable status. Therefore, it is crucial that charities and their trustees take steps to mitigate these risks.

We have summarised the key ways to do so below.

Due Diligence

Before providing a non-charitable organisation with a grant, you want to make sure you have undertaken sufficient due diligence on the organisation. Depending on the circumstances, you may want to look at:

The nature of the organisation (e.g. is it incorporated, who are its directors, where does it operate, what does its ordinary business entail).
The financial stability of the organisation.
Whether the organisation has undertaken similar projects or programmes in the past, and if so, whether they have been successful.
The organisation’s mission statement and values.
The organisation’s reputation.
How decisions within the organisation are made.

There are many advantages to undertaking due diligence. It should help assure you and your co-trustees that:

The organisation is genuine, reliable and competent to carry out the project or activity being funded.
The organisation is suitable for your charity to work with and fund.
You will be able to check and confirm that your charity’s funds have been properly used in line with its purposes.

Overall, the trustees of a charity need to be satisfied that awarding the grant is in the best interests of the charity. Due diligence provides an opportunity to expose any potential issues that trustees might have been otherwise unaware of. In this way, it is an extremely important undertaking as if the due diligence reveals concerns, the trustees may decide against awarding the grant to that specific organisation due to it not being in the charity’s best interests.

Trustees should ensure they record the findings of their due diligence and the reasons for choosing a particular organisation because if something goes wrong, the trustees may need to be able to explain and justify the decisions they made.

Charities should consider whether a policy should be adopted that outlines the due diligence requirements, especially if the charity often provides grants to organisations.

Grant Agreement

Once your charity has identified a suitable recipient of the grant, the next step is ensuring the grant will be governed by an appropriate agreement. This agreement should be in writing and should contain (amongst other things):

A requirement for the organisation to only use the grant in specific ways, which must be in line with your charity’s purpose for the public benefit.
A requirement for the organisation to account for how the funds have been used and report on the progress of the project/program.
A requirement for the grant funds to be returned to the charity if the organisation fails to comply with the requirements of the agreement.

Failure to formalise a grant agreement can lead to misunderstandings around how the grant should be used, and may lead to the funding being misappropriated for non-charitable purposes. Therefore, it is of great importance that charities have written grant agreements that are properly executed by both the charity and the organisation.

Moreover, it is of importance to have a well-drafted grant agreement in place as the Charity Commission may request to see it to verify that funds are being used appropriately.

Monitoring

Once a grant is provided, monitoring should then take place as charities need to ensure that the grant is used for the purposes specified in the grant agreement. Monitoring can take a variety of forms and depending on the requirements in the grant agreement, may include (amongst other things):

The organisation providing receipts showing how the grant was spent.
The organisation providing photographic evidence of the project or programme funded by the grant.
The organisation providing a report describing how the project or programme achieved the specific purpose.
The charity visiting the organisation’s premises to witness the project or programme.

It is important for charities to carry out monitoring both to ensure legal compliance with their charitable purpose, but also to maintain the confidence of their donors.

Next steps

If your charity needs help with its grant-giving policies, procedures or agreements, please reach out to our specialist charities team. We can help in a variety of ways, including by drafting your grant-related policies, drafting your due-diligence procedures, and preparing a template or bespoke grant agreement.

Please contact Katherine Pipe on kate.pipe@wellerslawgroup.com or call 020 3831 2666 to discuss your charity’s requiements.