A survey of 261 charities by Pro Bono Economics found that 1 in 10 expect to go out of business in the next 6 months. The survey also highlighted a potential funding shortfall of £10.1bn.
Charities set up as companies are treated like any other company under insolvency law, meaning Trustees are effectively the Directors of the Charity. This means Trustees owe the same duties to creditors and have the same risks of personal liability for breaching these duties as well as other Insolvency Act offences.
But this also means the debtor-friendly provisions being made available under the new Corporate Insolvency and Governance bill can be used to restructure the charity and help navigate this difficult period.
And it is not all doom and gloom for the charity sector as the survey also suggested that around 70% expected demand for services to increase in the next six months. However the large funding shortfall coupled with historic debts of the charity could impact your ability to meet increased demand.
So what should a charity be doing now? It’s important to understand your current position and to review all the options available to you. This will help you to restructure now, putting you in the right position to meet this increase in demand.
We’re here to help
If you are concerned about your business, PKF Francis Clark can help with a Covid Business Review – helping you to understand your current situation and the best steps forward from there. We have a team of experts experienced in restructuring and negotiating with creditors and our focus is always on rescue and survival.