Insolvency Act can't wind up charities
A religious charity, Gilbert Deya Ministries, was successful in restraining a winding up petition made by the Kashmir Broadcasting Corporation Limited because of an alleged debt that had arisen for a contract for provision of a satellite TV channel.
The fact that the debt was disputed by the charity, and on reasonable grounds, ended up being irrelevant because of the basic point of law that a registered charity cannot be wound up under the Insolvency Act 1986. His Honour Judge David Cooke explains: “It is plain that since the charity is not constituted as a limited company registered under the Companies Acts, it cannot be the subject of a demand pursuant to section 123 of the Insolvency Act. That section is within Part 4 of the Insolvency Act which is headed ‘Winding up of Companies Registered under the Companies Acts’ and is exclusively restricted to dealing with companies registered under those acts.” The judge commented that the creditor should have sought to hold the trustees personally liable for the debt and could avail of the personal insolvency provisions set out in the Insolvency Act to bankrupt the trustees, if necessary.
Stephen O’Reilly, from law firm Russell-Cooke told Caritas: “This case shows that winding up or bankrupting a charity is far from a simple process. Many creditors of the sector, and their advisers, fail to understand the different legal forms a charity can take. In this case the creditor set about extracting a debt in entirely the wrong way. Had they used the correct means the trustees would have been liable without limit. The important point to take from this case is that unincorporated charities should seek the protection available by incorporating and thus limiting their liabilities.”
Gilbert Deya Ministries v Kashmir Broadcasting Corporation Ltd [2010] High Court of Justice, Chancery deivision, 9 June 2010
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