<strong> 1. Ensure Governance Is Both Effective and Evident</strong>

In an earlier High Court decision, Kids Company’s trustees were ultimately found by the High Court to have acted responsibly (in the context of a claim brought by the Official Receiver, seeking their disqualification as company directors).  The controversies relating to the charity’s closure arose in part because of the appearance of blurred lines between formal governance structures and informal influence, the rapid growth of the charity, and a focus on delivery of aid to beneficiaries over longer term planning.
<ul>
 	<li>Charities must ensure their governance arrangements are robust, clearly defined, and capable of withstanding regulatory scrutiny in both substance and in how they are perceived.</li>
</ul>
<strong>2. Maintain and Justify Financial Resilience</strong>

While the judicial review decision recognised that low reserves were not necessarily the cause of Kids Company’s insolvency, it highlights how financial decisions can become focal points in regulatory reviews.  (It is notable too that a significant number of recent new inquiries have been initiated having first come to the Charity Commission’s attention due to the late filing of accounts, as an early indicator of financial problems.)
<ul>
 	<li>Charities should document risk management strategies, justify their reserve policies, and consider stress-testing their financial models for resilience in adverse conditions. Regular financial audits and risk assessments can help identify potential vulnerabilities and allow for timely interventions.</li>
</ul>
<strong>3. Engage Proactively with Regulators and Record Evidence</strong>

One of the key issues in this case was the Commission’s failure fully to grapple with the evidential findings of the judgment in the earlier High Court case (see point 1, above).
<ul>
 	<li>Charities engaging with the Charity Commission should ensure that all communications and decisions are clearly documented, especially where they deviate from standard practice. A proactive and collaborative relationship with regulators can mitigate the risk of future disputes and serve to protect reputations. Charities should also choose to seek legal advice when necessary to protect their interests.</li>
</ul>
The Kids Company judgment is a nuanced reminder of the challenges that can arise when a charity faces public and regulatory scrutiny. While the court identified significant flaws in parts of the Charity Commission’s report, it also reinforced that trustees must act with both care and accountability. For charities across the sector, this is a moment to reflect on governance, financial oversight, and the importance of fair regulatory processes.

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If you would like to explore the implications of this case for your organisation, or need guidance on engaging with the Charity Commission, our team is here to help.

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