Insolvency Practitioners and Director Disqualification

Alan Yentob Faces Director Disqualification Due to Kids Company Role. Could Insolvency Practitioners Have Helped?

Alan Yentob, the former creative director of the BBC, has been asked by the Insolvency Service to accept a 5 year director disqualification undertaking for his role as Chairman in the collapse of the high profile charity Kids Company in the summer of 2015. The deadline he has been given is 20th December 2017. This article looks briefly at how this came to pass and comments in more general terms on how insolvency practitioners can mitigate the personal risks that managers of distressed businesses face.

Background to Kids Company and the Threat of Director Disqualifications

In August 2015 Kids Company was wound-up amid allegations of poor governance and financial mismanagement. It is understood that the company received considerable amounts of public funds during its life. The Insolvency Service’s director disqualification proceedings named all 8 former directors: Sunetra Devi Atkinson, Erica Jane Bolton, Richard Gordonn Handover, Vincent Gerald O’Brien, Francesca Mary Robinson, Jane Tyler, Andrew Webster and Alan Yentob. The 9th person to be targeted was the charity’s high profile former chief executive Camila Batmanghelidjh who was not a director at the time of the collapse. She received a notice of an intention to commence proceedings on the basis that she acted as a de facto director.

How Can the Personal Risk of Directors be Mitigated?

When a company becomes insolvent, if the Insolvency Service has reason to believe that the insolvency was caused by a director(s) not carrying out his/her responsibilities correctly, then they will investigate. The responsibilities and duties of directors are many and if proven to have not been carried out can attract personal liability. The outcome of such an investigation can be director disqualification, as seems to be the case here with Mr Yentob, if he accepts the undertaking.

In general terms, once the Insolvency Service starts its investigation, the director has an opportunity to make representations to the Insolvency Service as to their individual responsibilities and whether or not they are culpable. The aim is to provide details of all relevant matters to the investigators to try and head off the intended director disqualification proceedings.

However, what could be done before insolvency? Looking at this specific case, as insolvency practitioners we see this as a reminder to all company directors and trustees that good financial control and management are key to any successfully run business.  When trading becomes challenging and there is any risk of failure, as happened with Kids Company, early advice from appropriate professionals  such as a licensed insolvency practitioner greatly mitigates the personal risks managers of distressed businesses face.

The 6 main signs of a company in distress, covered in more detail in our ICAEW Guide to Insolvency and Restructuring are:

If a company is facing some or all of these symptoms, then early advice from an Insolvency Practitioner can help.

Even if the outcome is still insolvency, the likelihood is that those under investigation will have all the necessary information at their finger tips to demonstrate to the Insolvency Service that despite the insolvency, all possible actions were taken to avoid it, thus mitigating the personal liability aspect.

Contact us for Help and Advice if Your Business is in Distress

The Kids Company story is a reminder that any company, charity or otherwise, can find itself in distress, for a variety of reasons. If action is not taken to address the situation, insolvency becomes more likely with the possibility of an Insolvency Service investigation. The sooner advice is taken from a licensed insolvency practitioner, the greater the number of available options.

Contact us or call us on 0208 088 0633 for a free initial consultation