Trustees at the defunct public services charity People Can received "misinformed" advice when they chose to place it in administration last November, according to the charity’s main creditor, the Pensions Trust.
Documents published last month show the trust is owed £17.8m out of the total £21.5m owed to creditors by People Can. Stephen Nichols, chief executive of the trust, told Third Sector that the charity had "surrounded itself with perhaps misinformed advisers" who had recommended it had to go into administration because of its pensions debt.
"We can’t work out why it happened," said Nichols. "They decided they couldn’t settle the pensions debt, but that’s not something that should rush you to close your business. As far as the Pensions Trust is concerned, the decision was puzzling."
He said the trust would have been happy for People Can to continue, providing it met its continuing contributions to its pension fund.
Another source close to the charity, who did not wish to be named, also said that the board had been advised to go into administration too soon and confirmed that the Pensions Trust had not pushed for immediate administration. "The charity could have taken three months to wind down, saving more contracts and more jobs," he said.
Andrew Barnett, chair of People Can at the time it went into administration, said the board had been advised that the charity was balance-sheet insolvent, and that it was the board’s duty to go into administration immediately.
"We did that on the advice of our lawyers and of insolvency practitioners," he said. "It was our legal duty to take that advice.
"To do otherwise would have been trading while insolvent, which would have led to serious exposure for trustees personally, not just financially but also in terms of being barred as directors. We acted within the law and in the best interests of creditors."
Pinsent Masons, the law firm that advised the charity on its decision to go into administration, said it was unable to comment because of client confidentiality.
A spokesman for the accountancy firm PwC, which advised the charity on matters relating to its pension debt, said the company did not want to comment. PwC has been appointed as the charity’s administrators.