Insolvency 'need not mean closure'

Trustee boards are less willing than directors of private companies to take the personal risks involved in keeping charities going, says expert

Jason Baker, partner, FRP Advisory
Jason Baker, partner, FRP Advisory

Trustee boards of charities that face insolvency are often too quick to close their organisations rather than find ways to keep them going, according to an insolvency expert who helped to save the Work Foundation from closure.

Last week, the foundation was sold to Lancaster University after its pensions trustees almost forced it to close because it could not afford the £26.9m shortfall on its defined-benefit scheme. Jason Baker, a partner at FRP Advisory, which advised the trustees on the sale, said that if it had not gone ahead the organisation would have closed because "there was no one else we could have gone to".

Baker said he expected many other trustee boards faced similar pensions problems and were less willing than directors of private companies to take the personal risks involved in keeping them going.

"Trustee boards have a tradition of service," he said. "But when the charity runs into difficulties there's a tendency to seek a solution that removes the risk of the problem from their perspective. Directors of commercial organisations find any solution that will stop the business failing.

"To the credit of the Work Foundation's trustees, they took the right decision, but it was finely balanced for several weeks."

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