How does running an insolvent charity affect me?

There will be no negative impact upon you either personally or professionally if you act quickly and appropriately. The effects, however, could be very significant if you are indecisive or you delay a hard decision. The sooner you act, the simpler the process will be for you. If you are unsure if it is too late, please contact us confidentially as we can help minimise difficulties.

Anyone running a charity or not-for-profit that gets into financial difficulty could suffer from effect such as:

  • An increase in pressure and worry. This may go on to affect your job or personal life
  • An increased focus on the fulfilment of the charitable/not-for-profit objectives. This now must come after survival or taking appropriate action
  • The increased risk in an incorporated organisation of personal liability; or an increase in the extent of personal liability
  • The increased risk of a creditor taking action against the organisation and/or its assets which reduces your ability to 'rescue' the organisation and maximise the return for everybody concerned.
  • The increased chance of facing director disqualification proceedings

This can be combatted by allowing Lucas Ross to take the burden. You will be quickly reassured about your position and that of the charity when you contact us. Please call today. It is without obligation or committed cost.

Taking the decision to restructure your organisation, enter into a formal insolvency process or wind up your charity will not:

  • Impact on your personal credit file
  • Result in you being automatically barred from being a company director
  • Result in you being automatically barred from being a trustee of another charity
  • Result in you becoming personally bankrupt
  • Result in personal liability unless
    • Your organisation is unincorporated
    • You have given a personal guarantee
    • You have breached the trust principles surrounding your charity and its income, even then this is a complex area and further guidance will be required

Future effects

It can be difficult emotionally for a trustee of a charity or not-for-profit organisation that has failed. You may be struggling with the feelings you have for a great cause(s) you have worked so hard for as well as all the stakeholders connected with your business.

It is uncomfortable to imagine yourself becoming the trustee who has had to take the hard decision to close. Now imagine yourself as the trustee who delayed seeking advice about your insolvent charity which led to the position being far worse. Facing the pressure of knowing that creditors were worse off would be one thing but imagine also the potential press or PR backlash to come from your actions. If you are a figure of high profile or are involved in several charities, this is especially relevant.

We have worked with a number of high profile charity trustees – from professionals (solicitors and chartered accountants), members of parliament, people who have been awarded an MBE to even members of the clergy. It carries a huge responsibility being a trustee and attracts a variety of people. Experience tells us that by going into administration, charity liquidation or even a voluntary arrangement, your charity could possibly attract some negative publicity. However, we know that you will attract negative publicity by failing to take appropriate action at the appropriate time. Therefore we highly recommend contacting charity insolvency practitioners.