McTear Williams & Wood Limited were contacted in October 2023 by trustees of a charity who built a reputation as a leading UK authority assisting with individual, community and national wellbeing. The charity was set up in 2014 with a mission to improve wellbeing and reduce misery in the UK.
The charity sought advice from their accountant regarding the financial situation who then recommended they discussed the position with McTear Williams & Wood as a known specialist in advising charities who are facing financial challenges.
Challenges the charity faced
Many companies have suffered due to COVID-19 and the cost-of-living crisis in recent years however this has particularly been the case for the charity sector who have faced these challenges paired with the continued rise in demand for services from the public.
The trustees were looking for support and guidance when considering the trading future of the charity and the viable short and long term options. As with most charities, the trustees wanted to ensure that where possible they could fulfil the agreed obligations under the contracts they had entered into with clients and continue to meet its mission to improve wellbeing.
The Charities Commission will expect Trustees to address any insolvency issues together with having a plan for an orderly wind down. In a situation where cashflow permits and there is sufficient time available it may be possible to negotiate a merger or transfer of resources to a successful charity who has similar objectives.
With the announcement of the Autumn 2024 budget we expect that charities along with many other small businesses will continue to face financial difficulties as a result as the increase in national insurance and rise in minimum wage therefore it is imperative that trustees seek advice from an insolvency practitioner at the earliest opportunity to protect the company’s creditors including employees and preserve the services which the charity provides to the community.
The solution
After attending several board meetings and gathering significant financial information in relation to the charity, it was established that the charity could not continue to trade in the long term and McTear Williams & Wood Limited worked alongside trustees to carefully curate a detailed timeline for an orderly wind down which would avoid a formal insolvency process.
As the trustees had sought advice at an early stage, the orderly wind down plan incorporated fulfilling contractual obligations for clients, providing employees with in excess of three months’ notice of redundancy and raising funding for legacy materials to ensure the charity’s mission could be continued.
Kelly Goodman, Manager comments: “Whilst this case did result in an organised wind down of the charity, I would deem it a success and it is a prime example of why we always recommend seeking advice at an early opportunity where Trustees are concerned about the financial position and the future of a charity.
We had sufficient time to create a detailed wind-down plan over several months which included raising legacy funding to finish final contracts and ensuring staff had full notice and received full redundancy pay. It was a pleasure working alongside the Board for several months and to ultimately see the legacy of the charity survive through the wind-down process.”
Summary:
After completing all contractual obligations and making staff redundant, the charity prepared and filed final accounts and proceeded with dissolution at Companies House.
The process
The orderly wind down plan spanned a five-month period and during which McTear Williams & Wood Limited attended weekly meetings with the charity’s finance committee to monitor the cashflow position against projections, ensure the trustees were reminded of their fiduciary duties and obligations where necessary, to assist with employee-related issues and to generally ensure the wind down was progressing as planned.
The result
The orderly wind down of the charity was a success for a number of reasons but particularly as a result of trustees seeking early advice from an insolvency practitioner which provided them with sufficient time to wind down all affairs whilst keeping the mission of the charity at the forefront.
