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Former chair disqualified after charity liability with loan company reaches £1.5m

04 Jan 2021 News

The Charity Commission has found former trustees to be responsible for serious financial failings after charity property was left at risk of repossession.

The regulator concluded its inquiry into Christ Apostolic Church World Soul Winning and Evangelistic Ministry at the end of last year. This has seen the disqualification of the charity’s former chair, Pastor Paul Obadare, for a period of 10 years.

The inquiry revealed serious regulatory concerns at the London church, including failings in the charity’s financial management.

Repossession of the charity’s land

An inquiry was launched in 2015 when concerns were raised in connection with the repossession of the charity’s land and property and subsequent litigation costs incurred by the trustees.

The trustees of Christ Apostolic obtained a bridging loan for £250,000 purportedly to fund maintenance work for their church building. 

The former chair told the inquiry they discovered that solicitors, who were acting on their behalf, received £188,858 of the loan funds and the majority of this was paid to five companies they had not previously heard of. 

A total of £35,000 is believed to have been used to repair the church roof. The inquiry found that it was not possible to establish the end use of the remainder of the loan funds.

The inquiry was told that the former trustees failed to carry out background checks on a broker they relied on for financial advice. 

Two former trustees said they signed the bridging loan agreement, which included the church as collateral, without seeing the terms and conditions. The former trustees defaulted on repayments of the loan and the property was repossessed by the loan company.

A fire destroyed the building and the land was then sold by the loan company. 

Legal proceedings undertaken by the charity to dispute the repossession had increased their liability with the loan company to more than £1.5m. The charity then received none of the £1.2m proceeds from the sale of the land.

The official report also criticises the trustees for failing to submit timely serious incident reports to the Commission.

The Commission had not received any serious incident reports in respect of the charity’s defaulting on loan repayments, repossession of the property and the subsequent legal action. 

Data for the financial year ending 31 December 2019 on the Commission's website states that charity has a total income of £11,477 and total expenditure of £6,920.

‘This case should send a clear message to other charities’

Amy Spiller, head of investigations at the Charity Commission, said: “The public expects each charity to show that it is doing its bit to uphold trust in charity more generally, and this expectation starts with the chair and trustees. The former trustees failed in this expectation, allowing a catalogue of serious mistakes and misjudgements to occur. Their mismanagement had a direct and profound impact on the charity resulting in the loss of its largest asset – its property.

“Our inquiry found the trustees had not acted in their charity’s best interests or that of its beneficiaries. Their actions and oversights ultimately exposed the charity to undue and avoidable risk. This case should send a clear message to other charities about the need for financial controls, due diligence and correct conduct and the potential impact should these not be in place.”

A new board of trustees has been appointed and the Commission has issued them with an action plan. It is satisfied that the new trustees are now acting in the charity’s best interests and have made significant progress.

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