Charity insolvency

In November 2012, People Can, a charity employing around 300 people, went into administration after being overwhelmed by a pensions deficit of more than £17m. With charitable donations and public funding reducing, People Can will not be alone, as many charities face an uncertain future.

The risk for Trustees of personal liability will often influence the decision to incorporate (or consider becoming a Charitable Incorporated Organisation in line with the new legislation). Registered companies and CIOs are separate legal entities and creditors cannot normally pursue Trustees personally for the charity’s debts (provided of course the Trustees have acted prudently and lawfully). Trustees of charities that operate as unincorporated associations or charitable trusts may be seen to face a greater risk, however, as if the charity had insufficient resources to settle its debts and liabilities, the Trustees could find themselves personally responsible for the shortfall. The Spirit of Enniskillen Trust was an unincorporated association set up following the Enniskillen Bombing in 1987. When it resolved to wind itself up in March 2013, it had a pensions deficit of £250,000 but assets of only £150,000. The Trustees will be personally liable to meet that shortfall if it is pursued…

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