This page contains information that has appeared on Sandy Adirondack's legal update website for voluntary organisations at www.sandy-a.co.uk/legal.htm. For current updates, including potential changes that are in the pipeline, see the legal update website.

These websites for each chapter update the 3rd edition of The Russell-Cooke Voluntary Sector Legal Handbook by James Sinclair Taylor and the Charity Team at Russell-Cooke Solicitors, edited by Sandy Adirondack (Directory of Social Change, 2009). The websites are not intended as a comprehensive update and should not be treated as such.

To order a copy of The Russell-Cooke Voluntary Sector Legal Handbook, print out the order form at www.sandy-a.co.uk/bookserv.htm or send an email order by clicking . It costs £60 for voluntary organisations or £90 for others, plus 10% p&p.

Chapter 24
FINANCIAL DIFFICULTIES AND WINDING UP

RECESSION RESOURCES

Added 27/4/09, links updated 10/1/10. This information adds to s.24.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
An A to Z of resources to help voluntary organisations cope with the economic situation.

• ACAS and the Chartered Institute of Personnel and Development have jointly published How to manage your workforce in a recession, a short 10-point action plan, at tinyurl.com/d4c9kh.
• If you can get beyond the cluttered home page, ACEVO's recession support website at www.recessionsupport.org.uk includes a useful range of articles and expert guidance on finance, management, career development, and sources of support.
• Business Link has an interactive tool on handling potential redundancies at tinyurl.com/d5569k to help employers understand when they can make redundancies, possible alternatives, and the law and good practice in relation to notification and consultation. CIPD has updated its factsheet on redundancy, via tinyurl.com/3bj62o. ACAS has a wide range of information on redundancy and short-time working, at www.acas.org.uk/index.aspx?articleid=1365.
• The Charities Aid Foundation now has a confidential financial crisis helpline, which provides a one-off confidential discussion with suggestions for survival. Details are at www.cafonline.org/Default.aspx?page=16919, or ring 0800 980 2000.
• The Charity Commission's Managing financial difficulties and insolvency in charities at www.charitycommission.gov.uk/publications/cc12.asp was written in happier times, but provides one of the best starting points for looking objectively at the organisation's financial situation and prospects.
• The Charity Finance Directors' Group has a recession watch page, full of useful information including sources of government funding, at www.cfdg.org.uk/cfdg/influencing_recession_watch.asp.
• Compact Voice has produced a two-page practical guide on key Compact principles for the economic downturn, at www.compactvoice.org.uk/category/resources/recession-0.
• The Development Trusts Association's Early warning guide at tinyurl.com/c9b5mg is my favourite — more pictures than words, bright and easy to use. As they say, "Just a quick flip through this guide should help you work out whether your organisation is heading for the cliffs or enjoying the walk."
• The Institute of Fundraising and Think Consulting Solutions have produced a free fundraising healthcheck, to help organisations assess the impact of the recession on their income and develop fundraising programmes and investment strategies. The healthcheck is online, the organisation does not have to give its name, no details are stored, and a report and recommendations can be printed out. The healthcheck is at www.fundraisinghealthcheck.org.
• NAVCA (the National Association for Voluntary and Community Action) has a recession resources page at www.navca.org.uk/localvs/recession/, intended primarily to help councils for voluntary service and similar organisations help other organisations. NAVCA's Challenging a funding cut, via tinyurl.com/c5b654, provides a framework for developing a strategy to campaign against a funding cut.
• NCVO has one of the best resource pages, at www.ncvo-vol.org.uk/advice-support/recession-resources. This has advice on surviving the recession and dealing with a financial crisis, as well as useful background to the recession, government action to help the sector, and organisations' experience.
• In the Office of the Third Sector's recession action plan Real help for communities: Volunteers, charities and social enterprise, the government confirmed that it is committed to ensuring public sector bodies pay invoices to contractors within 10 days. Voluntary organisations should use this commitment to put pressure on late payers, and should include payment within 10 days as an obligation in all new contracts with public sector bodies. Real help for communities can be accessed via tinyurl.com/chalpx and lists many other government initiatives, including funding schemes.
• Dealing with a fundraising crisis is a sensible information sheet, recently updated, from the South Yorkshire Funding Advice Bureau at www.syfab.org.uk/infshtsp/crisis.pdf.
• VolResource, a weekly email newsletter put together by John Howes, contains up to date information about new resources, new sources of funding, new government schemes, new consultations and lots more. I get some of my information from this newsletter, and John gets some of his information from mine so there's a bit of overlap but his goes way beyond the purely legal. Sign up for a free subscription at www.voluntarynews.org.uk.

RECOGNISING AND MANAGING INSOLVENCY RISK

Added 27/4/09. This information is included in s.24.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
Abridged and reproduced with kind permission of Wrigleys Solicitors, from an article by Sue Greaves of their Charity and Social Economy Team in the March-May 2009 issue of Social Economy. For a free subscription to Social Economy (highly recommended) go to www.wrigleys.co.uk/charity/sub.php?c=9.

"Trustees should not only know the indicators of insolvency, but also take active steps to manage the insolvency risk to their charity. Alarm bells should ring when there is pressure from creditors chasing overdue payments, when the charity is having to run down reserves on a regular basis to meet outgoings, where current liabilities are not covered by current assets (bearing in mind that anything in restricted funds may not be available to meet current liabilities), and where expected expenditure exceeds foreseeable income.

For directors of charitable companies, the provisions of the Companies Act 2006 apply. Such trustees not only have the common law duty to act in the best interests of the charity, they must also take care to minimise potential loss to the company's creditors.

Trustees who are concerned about the financial prospects of their charity may wish to seek legal or accountancy advice immediately. Trustees may safely incur expenditure on such advice since it may lead to a better realisation of assets. The advisors may guide trustees to an insolvency practitioner (IP) where appropriate.

In small charities it can be difficult to secure the services of an IP since there are no assets out of which the IP's expenses can be paid. Trustees in those circumstances may find that they have to take a hands on approach to winding up the charity.

Information may also be obtained from the Insolvency Service website at www.insolvency.gov.uk and the Charity Commission's CC12 Managing financial difficulties and insolvency in charities at www.charitycommission.gov.uk/publications/cc12.asp.

Even if none of these alarm bells are ringing for you, you may wish to consider preventative action as a matter of good governance. As a starting point there are a number of questions you might ask:

• When did your charity last carry out an insolvency risk assessment?
• Is the charity able to pay its debts as and when they fall due?
• Are the assets greater than the charity's liabilities?
• How secure and diverse are the sources of income? Charities dependent on a sole source of income may be particularly vulnerable.
• Are there significant liabilities on the horizon?
• Are there significant fixed costs?
• Do your trustees have sufficient time and skill to devote to running the charity?
• Do your trustees regularly and fully consider financial reports?
• Are financial reports available in advance of meetings?
• Are actual income and expenditure monitored against budgeted income and expenditure?"

SANDY ADIRONDACK
Governance and legal training and consultancy
for the voluntary sector
39 Gabriel House, 10 Odessa Street, London SE16 7HQ
Tel 020 7232 0726; fax 020 7237 8117
Email:
Web: www.sandy-a.co.uk