Charity Commission issues insolvency advice

29 Jun 2020 News

Charities in financial distress will have access to new rules on insolvency, which have been rushed through parliament in the last month.

The Charity Commission has issued guidance reminding charities that the Corporate Insolvency and Governance Act, which was passed into law on Friday and aims to address financial problems caused by the coronavirus pandemic, will apply to voluntary organisations as well as private companies.

New rules

The new rules include giving charities the right to apply for more time to avoid debt enforcement action, and limits the rights of contractors to terminate supply agreements with charities.

The Act also temporarily suspends some provisions in order to reduce the risk that trustees are personally liable during the crisis, and places restrictions on winding up petitions where a charity cannot pay its bills as a result of the pandemic.

It also introduces new procedures to help viable charities restructure if they are struggling with debt.

Charities under pressure

The sector could lose £12.4bn in income over the year as a result of coronavirus, according to estimates by the Institute of Fundraising.

The Small Charities Coalition has previously warned that several dozen small charities faced going out of business because of the impact of the coronavirus.

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