The High Court has ruled on the case of The Official Receiver v Atkinson & Ors, deciding that the disqualification proceedings brought against the CEO and trustees of Kids Company be dismissed.

Kids Company, a charity that provided support for children and young-adults, closed its doors in 2015. It entered into liquidation on the 20 August 2015, whereby an Official Receiver was appointed as liquidator.

The Official Receiver brought director disqualification proceedings (under section 6 Company Directors Disqualification Act 1986) against Camila Batmanghelidjh (the founder and CEO of the charity) and seven other trustees of Kids Company. The Official Receiver brought these proceedings on the basis that the trustees were unfit to act as directors; that they had poorly managed Kids Company and that they had allowed the charity to operate in a financially unsustainable manner.

On 12 February 2021, Mrs Justice Falk of the High Court decided that she was “wholly satisfied that a disqualification order is not warranted against any of the Trustees”. Instead, she concluded that “on the contrary, I have a great deal of respect for the care and commitment they showed in highly challenging circumstances”.

When talking about a particular trustee, Jane Tyler, Mrs Justice Falk expressed how she was “obviously careful and extremely conscientious”. In particular, “she properly pointed out the trustees’ legal obligations… when that was appropriate, and arranged professional advice when it was needed”.

We expect the number of corporate insolvencies to increase in the coming months. When a company is placed into liquidation, the office holder is obliged to report to the Insolvency Service on the conduct of the company directors. It is extremely important that directors understand their legal obligations when a company becomes insolvent, in order to avoid Insolvency Service investigations and/or proceedings in the future.

This decision highlights the importance for directors of taking legal advice early once realising their company may be insolvent. We have advised a number of directors on director disqualification cases and have the expertise and experience to provide you with the best advice. Please get in touch with Farleys’ specialist insolvency team on 0845 287 0939 or you can contact us by email if you prefer.