In the Official Receiver V Camila Batmanghelidjh & others [2020] EWHC 2839 (Ch), the Official Receiver (OR) has been barred from making certain allegations of impropriety against the board of the Kids Company and its trustees. The OR should have raised these matters sooner.

  • The OR has been investigating the failed charity, the Kids Company, since its collapse in 2015. The OR has been seeking disqualification proceedings against the directors/trustees of the charity.
  • Former CEO, Ms Batmanghelidjh, has been held to be a de facto director. As such she could face a ban on holding office as director for six years. Further allegations have been made against the charity's other trustee directors.
  • The OR applied to the High Court to allow to be permitted to allege that specified loan repayments were preferences voidable under section 239 Insolvency Act 1986 and that there were breaches of duty under sections 172, 173 and 174 Companies Act 2006, being the duty to promote the success of the company, the duty to exercise independent judgment and the duty to exercise reasonable care, skill and diligence. 
  • The OR made a single allegation against all the defendants that they caused and/or allowed Kids Company to operate an 'unsustainable business model', an allegation which is supported by a series of particulars set out in the OR's report on the charity's insolvency. 
  • The OR also had concerns that certain loans were made to connected and unconnected parties shortly before its collapse were made in preference to other creditors.

The High Court found that:

  • Whilst the OR's reports ran into hundreds of pages over the five-year investigation, these specific allegations were new.
  • They were only being raised for the first time in the OR's skeleton argument which was served two weeks before the start of the trial against the directors.

All things considered, the OR had not made these allegations on a timely basis and not in a way that gives the defendants a proper opportunity to consider their position and to respond.

For reasons of procedural fairness, the court concluded that the OR is not permitted to seek findings of breaches of sections 172, 173 or 174 of the Companies Act 2006, or that there were preferences voidable under section 239 of the Insolvency Act.

This hearing was to make a preliminary ruling on these late allegations against the directors.

Useful guides on this topic

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External links

Official Receiver V Camila Batmanghelidjh, Erica Jane Bolton, Richard Gordon Handover, Vincent O'Brien, Francesca Mary Robinson, Jane Tyler, Andrew Webster, and Alan Yentob [2020] EWHC 2839 (Ch)

 

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