If the charity can't pay, can they come after me?

England and Wales: This page sets out the position in full, for each structure, with the defences and the relief. Scotland: the same position — unincorporated trustees are exposed in the same way and wrongful trading is the same law, because insolvency is reserved; Scotland adds a separate exposure for trustees paid unlawfully, set out below. Northern Ireland: the same position under Northern Ireland’s own Order, with no CIO form; one possible difference, for charities in administration, is flagged below and has not been confirmed.

Unincorporated: the debts are yours

Take a charity that is an unincorporated association or a trust. If it cannot pay its debts, the creditors can come after you personally. Not the charity — you.

This page assumes the board has asked the two insolvency tests in recognise financial distress early and is worried by the answer. Trustee liability in ordinary times is covered in the governance hub: are trustees personally liable?.

The Charity Commission’s guidance CC12 covers England and Wales. It says this in its own words:

The trustees of an unincorporated charity are personally liable for the charity’s debts and liabilities.

CC12 is not warning about a rare case. The rule is how an unincorporated charity works. Such a charity has no legal existence apart from its trustees. A lease, a staff contract or a supplier’s order is signed by the trustees, or for them. So the contract is theirs.

Where the rule comes from matters. No Act of Parliament says this. The rule follows from general law. An unincorporated charity has no legal existence of its own. So there is nobody else to be liable.

Only CC12 says it in so many words. The source is general law plus the regulator’s guidance, not statute.

CC12 adds that such a charity “cannot technically be insolvent” in the company-law sense. No formal process exists for it. Trustees can choose to bring in an insolvency practitioner, or agree terms with creditors. Either way, the debts stay theirs.

Company or CIO: protected, but not a clean escape

A charitable company and a charitable incorporated organisation (CIO) each exist in law in their own right. Limited liability is the default. Failure alone does not make trustees owe the charity’s debts.

The exception is wrongful trading, under the Insolvency Act 1986 (England, Wales and Scotland). The rule reaches a trustee who kept going after they “knew or ought to have concluded” the charity could not avoid going under. The distress step, Recognise financial distress early, sets out that test.

It reaches CIO trustees, not only company directors. In England and Wales, SI 2012/3013 applies the Insolvency Act 1986 to CIOs. The SI says, verbatim, “any reference to a director of a company is to be read as a reference to a charity trustee of a CIO”.

Its Schedule 1 applies whole Parts of the Act and lists only what is left out. Section 214 is not left out (para. 1(2)(a)). Nor is section 246ZB (para. 1(2)(b)). So both wrongful-trading rules apply to a CIO trustee.

CC12 puts the same point more loosely, for England and Wales. It says personal liability can arise “if the charity continues to trade when the trustees knew or ought to have known that there is no reasonable chance of avoiding insolvency”. The statute’s words — “ought to have concluded” — are the test.

How a wrongful trading claim works

The liquidator or administrator brings a wrongful trading claim, or someone they assign it to — not the creditors in their own right. Any order is a contribution to the charity’s assets. You will read that wrongful trading lets creditors “pierce” limited liability. That overstates it.

• No creditor can sue you directly for wrongful trading. The liquidator (Insolvency Act 1986 s.214(1)) or the administrator (s.246ZB(1)) applies to court. Either can instead assign the claim, with its proceeds, to someone else (s.246ZD). All three provisions apply in England, Wales and Scotland, and to CIOs.
• The order is a payment into the charity’s assets. The court can order “such contribution (if any) to the company’s assets as the court thinks proper”. Unless the claim has been assigned, the money goes into the pot for all creditors.
• Each trustee is judged on their own, by the test in s.214(4). It is not a bill for the whole board.
• It is civil, not criminal. Not a fine, and not prison.

In short: the claim comes through the insolvency process, not from each creditor separately.

Shadow trustees: a company–CIO difference

In a charitable company, wrongful trading can catch an influential founder or funder who was never appointed. In a CIO, the rule does not reach them. This is one difference between the two structures that survives.

For a company, s.214(7) of the Insolvency Act 1986 (England, Wales and Scotland) says, verbatim, “In this section ‘director’ includes a shadow director”. A shadow director is someone the board is used to taking orders from. That person was never appointed.

For a CIO, the rule is in SI 2012/3013 (England and Wales), Schedule 1 paragraph 1(3)(k). It says “any reference to a shadow director is to be treated as omitted”.

So an influential founder or funder who is not a registered trustee can be caught by wrongful trading. That applies in a charitable company, but not in a CIO.

The defences, and the relief that does not cover contracts

Two routes can protect a trustee, and both matter.

1. The safe harbour in the statute. In England, Wales and Scotland, s.214(3) of the Insolvency Act 1986 is the safe harbour. It bars an order against a trustee who “took every step with a view to minimising the potential loss to the company’s creditors” that they ought to have taken. Section 246ZB(3) does the same in administration.

This test decides what to do next. Take formal insolvency advice and know when to stop sets it out.

2. Relief from the Charity Commission. In England and Wales, s.191(2) of the Charities Act 2011 lets the Commission excuse a trustee, wholly or in part. It covers a trustee who “acted honestly and reasonably and ought fairly to be excused”.

The court’s own powers to excuse sit alongside it (s.191(6)). They are in Trustee Act 1925 s.61 and Companies Act 2006 s.1157.

But s.191 has a hole in exactly the wrong place. Section 191(4), verbatim: “Subsection (2) does not apply in relation to any personal contractual liability of a charity trustee or trustee for a charity.”

The table sets out who is exposed to what, and whether the Commission can relieve it.

Who	What they are exposed to	On what basis	Can the Commission relieve it under s.191?
Unincorporated trustee	The charity’s debts — leases, staff contracts, suppliers	General law, stated in CC12	No, for personal contractual liability — s.191(4)
Company trustee	A contribution ordered for wrongful trading	Insolvency Act 1986 s.214 or s.246ZB	Safe harbour in s.214(3) / s.246ZB(3); s.191 relief may be sought
CIO trustee	The same, applied by SI 2012/3013	Insolvency Act 1986 as applied	The same

The relief is least open to the trustees most at risk. An unincorporated charity’s debts are mostly contracts — the lease, the pay, the supplier. Those are the debts s.191(4) leaves out.

What Kids Company actually shows

Kids Company shows both halves: the exposure is real, and so is the court’s view of honest trustees. The case is the counterweight, and it belongs here.

Keeping Kids Company was one of the best-known charity collapses in the UK. The Official Receiver then sought to ban its trustees and chief executive from acting as directors. The case was Official Receiver v Atkinson [2021] EWHC 175 (Ch), in the English courts. The claim failed on the merits against every trustee who fought it. Falk J said, verbatim:

The public need no protection from these Trustees. On the contrary, this is a group of highly impressive and dedicated individuals who selflessly gave enormous amounts of their time to what was clearly a highly challenging trusteeship.

The judge also noted that the courts “have long taken a benevolent approach towards charity trustees in circumstances where (as here) no dishonesty or wilful misconduct is alleged”.

Keep the two proceedings apart. Each half of the story gets told without the other:

• The court refused disqualification, and recorded that “there has been no allegation of wrongful trading”.
• The Charity Commission, separately, found mismanagement in the charity’s administration — late payments to HMRC and payroll. That finding stands, and was upheld on judicial review in 2025.

“The trustees were cleared” overstates it. “Kids Company shows trustees get ruined” is wrong. Both halves are true. The exposure is real. And in this case the court refused to disqualify any trustee who contested the claim.

Scotland and Northern Ireland

Scotland. Trustees of an unincorporated Scottish charity are liable in the same way, for the same reason: the charity has no legal existence of its own. A SCIO has limited liability, with its own rules for closing.

For a Scottish charitable company, wrongful trading and the two tests apply as they do in England and Wales. Insolvency of companies and similar bodies is reserved to Westminster (Scotland Act 1998, Schedule 5, Part II, Head C2). The Kids Company case is English, so in Scotland it is only persuasive.

A SCIO sits outside Head C2, because an insolvent SCIO is sequestrated under its own regulations (SSI 2011/237). Whether wrongful trading reaches a SCIO’s trustees was not established for this page.

Scotland also has a separate exposure that has nothing to do with insolvency. It applies if a trustee is paid outside the rules in section 67 of the Charities and Trustee Investment (Scotland) Act 2005. Section 67(7) says, verbatim: “the charity may recover the amount of remuneration; and proceedings for its recovery must be taken if OSCR so directs.”

Recovery is optional until the Office of the Scottish Charity Regulator directs it. Then it is compulsory. And under section 66(4) of the same Act, a breach of a trustee’s general duties “is to be treated as being misconduct in the administration of the charity”.

This exposure can arise in a healthy charity, the moment an unlawful payment is made. No rule this explicit was found for England and Wales. That comparison has not been checked independently.

Northern Ireland. Unincorporated charities are in the same position: the trustees are personally liable. Northern Ireland has no CIO, so the only way to limit liability is a charitable company.

A charitable company’s wrongful-trading rule is Article 178 of the Insolvency (Northern Ireland) Order 1989. The wording is almost the same: “knew or ought to have concluded”, the same standard, the same safe harbour. The liquidator applies.

One possible difference, not confirmed. Great Britain added a second wrongful-trading rule for administration in 2015. The Northern Ireland Order’s contents list shows no matching Article. And Article 178 speaks only of liquidation.

So a Northern Ireland charitable company in administration may not face a claim from an administrator. That is read from a gap, not from a provision that says so, and it has not been confirmed. Do not rely on it.

Your written position, by structure

Record where the trustees stand:

1. Name your structure from the register: unincorporated association, trust, charitable company or CIO.
2. If unincorporated, list the contracts the trustees are bound by — lease, staff, suppliers, loans.
3. If a company or CIO, record the two tests from the distress step and the board’s answer to each, with the date.
4. Record anyone who shapes decisions without being a trustee, if you are a charitable company.
5. Take advice, and minute the date you took it.

Trustee indemnity insurance and incorporation, as ways of limiting exposure in future, are covered in decide your liability position. The next step now is to take formal insolvency advice and know when to stop.

Common mistake: assuming “the charity” will be pursued, when it is unincorporated

The point is often played down. CC12, for England and Wales: “The trustees of an unincorporated charity are personally liable for the charity’s debts and liabilities.” The charity is not a separate legal person. It has no formal insolvency process. No statute says it. General law does, and CC12 states it.

Common mistake: assuming wrongful trading cannot reach a CIO trustee

CIOs are charity-law bodies. The Insolvency Act is company law. So the rule seems not to fit. But SI 2012/3013 applies the Act to CIOs and reads “director” as “charity trustee of a CIO”. Both wrongful-trading provisions apply. One difference survives: shadow directors are caught in a company, not a CIO.

Common mistake: reading Kids Company as either “trustees get ruined” or “the trustees were cleared”

Both halves are true, and they come from different proceedings. The court refused to disqualify any contesting trustee. No one alleged wrongful trading. The Commission’s separate mismanagement finding stands and was upheld on judicial review.

Common mistake: counting on Commission relief to cover a lease or a salary

In England and Wales, relief under s.191 of the Charities Act 2011 does not apply to personal contractual liability (s.191(4)). Yet that is the exposure an unincorporated charity’s trustees carry.

Worked example

Wrenfield Village Hall and Tollgate Youth CIO each cannot pay a supplier.

Wrenfield is an unincorporated association in England. Its trustees are personally liable for the debt. That is the default, not an exception. The contract was made for them. If the hall’s funds do not cover the debt, the supplier can pursue the trustees. Commission relief under s.191 does not reach a contractual debt.

Tollgate is a CIO in England. Limited liability is the default. Its trustees are not liable merely because the CIO fails.

The risk comes if they carry on after they ought to have concluded there was no reasonable prospect of avoiding insolvency. Then a liquidator or administrator can ask the court to order them to contribute. Their protection is to show they took every step to minimise the loss to creditors from that moment.

If Tollgate were in Northern Ireland, it could not be a CIO. The limited-liability option there is a charitable company.

Each board writes down its structure, its exposure and the date it took advice.