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