Incorporated charity redundancy
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Hawky89
Posts: 8 Forumite
My girlfriend has worked for a small incorporated charity (A) for about 8 years. The main funding for the charity was provided by a larger charity (B) who, from the start of 2018, has run into serious financial dificulties and can no longer support charity A, leaving them with very little money. It has been suggested by the manager that the chairty may only have funds to pay salaries for the next 6 weeks, although they hope to secure new funding and carry on.
Should the worst happen and they do not secure any further funding, the money will run out and there will be nothing left for redundancy pay for the 5 employees. Given the length of service, my girlfriend should be entitled to around £3,200 plus a bit of holiday. There has been no official notice or consultation about redundancy as they are still hoping to carry on but given the circumstances, she should be given 8 weeks notice and there is potentially only 6 weeks left until closure.
My question is, given that the charity is incorporated, does the current situation count as wrongful trading even though they are trying to source more funding? Given that they could not pay redundancies even if they stopped straight away, I am assuming it does. And if that is the case, is it the trustees or the government who would be liable to pay the redundancies since the charity can't?
Should the worst happen and they do not secure any further funding, the money will run out and there will be nothing left for redundancy pay for the 5 employees. Given the length of service, my girlfriend should be entitled to around £3,200 plus a bit of holiday. There has been no official notice or consultation about redundancy as they are still hoping to carry on but given the circumstances, she should be given 8 weeks notice and there is potentially only 6 weeks left until closure.
My question is, given that the charity is incorporated, does the current situation count as wrongful trading even though they are trying to source more funding? Given that they could not pay redundancies even if they stopped straight away, I am assuming it does. And if that is the case, is it the trustees or the government who would be liable to pay the redundancies since the charity can't?
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Comments
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However, directors of charitable companies will need to ensure that the company does not continue to trade if they knew or ought to have concluded that there was no reasonable prospect that the company would avoid insolvent liquidation. This is known as wrongful trading and if proved in court can entail personal liability for the directors. Trading while insolvent may not necessarily be wrongful if there is a reasonable prospect of avoiding insolvent liquidation.
https://www.gov.uk/government/publications/managing-financial-difficulties-insolvency-in-charities-cc12/managing-financial-difficulties-insolvency-in-charities
So the question would be, is there a reasonable prospect that the company can insolvent liquidation?
P.S. Lots more info on that link.0
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