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legal/preschool help needed urgent

(46 Posts)
foulmoonfiend Sat 07-Oct-06 10:03:47

just trying to help a friend out.

mums on preschool committee. preschool is having to close pronto due to financial difficulties. One staff member needs redundancy payment and there isn't enough funds availabe to pay it. commiittee mums have been told they are liable to pay the costs. I believe this is true BUT is there anywhere to get help in dealing with this? The mums will have to find ?500-?1000 each. If it was a limited company, the DTI might be able to help meet the payment but rules are different for preschool which is a charity.
It's a long shot but does ANYONE have any experience/knowledge?
Need to find out info urgently.
TIA for any help

SueW Sat 07-Oct-06 10:11:20

Find a way to keep the preschool open?

There are regular appeals in our local papers for help to get pre-schools out of trouble/closure and I can see why now.

for your friend and hope she can find some help but also for member of staff facing no job.

BloodRedRubyRioja Sat 07-Oct-06 10:14:04

If they are a member of pre-school learning alliance then they may have the insurance they provide (for this type of thing) with Royal Sun Alliance . They may be able to help with advice too.

foulmoonfiend Sat 07-Oct-06 10:28:04

suew - too late for that, 2 weeks before it closes they have tried everything.

TwigTwoolett Sat 07-Oct-06 10:30:11

am shocked the committee members are responsible for it

jeez

foulmoonfiend Sat 07-Oct-06 10:38:07

I'm not sure they wewre fully aware of any such possible implications when they joined. I used to be on a preschool committee and tbh, thought it was just a matter of baking buns, spot of fundraising etc.
Without wanting to put parents off supporting preschools, you do need to go in with your eyes wide open I guess.

foulmoonfiend Sat 07-Oct-06 10:48:38

bumping desperately...

marthamoo Sat 07-Oct-06 10:53:24

I had no idea this could happen (was secretary of a pre-school committee until last week). Are they in the Pre-School Learning Alliance? I would try them too, as RubyRioja suggests - and hope there is some kind of insurance in place. What a nightmare and so sad the pre-school is closing

Keep us posted on this one please, fmf - I think you're right, people should know about this stuff (though I would hate it to put anyone off helping out - I know how hard it is to get volunteers anyway).

Judy1234 Sat 07-Oct-06 11:02:29

I have a book on unincorporated associations not that I've often had to look at it. I believe it says that any group people form, even just a club for people interested in a book author, these people are members of the "association" and responsible for its debts. It is why some of those bodies decide instead to form limited companies so they can avoid that liablity.

When you say "staff member" who is that person a staff member of? Did the pre school/play group body/association, group of mothers employ this person and take off their tax and NI and were a registered employer with the tax office?

foulmoonfiend Sat 07-Oct-06 11:09:02

xenia - the committe are responsible for employing staff members so I guess they are liable We're just looking for anyway out of this but I suspect there isn't.
They are members of the PSLA but the insurance the preschool has doesn't cover the redundancy payout.
There is more to this, but can't go into details until Monday.

CorpseBride Sat 07-Oct-06 12:11:36

Have you got a copy of the Red Book?

The Management Committee are liable for debts, including salaries. If you had registered as a company you will be able to limit your liability but you will still be liable if found to have been negligent (ie. should have closed it down months ago).

Always sign documents 'on behalf of the Setting' - this will take some of the liability away on other debts such as rental agreements etc.

*You need to contact your local EYDCP Development Officer for advice.

Also phone your insurance company to see what's covered*.

If you do find you are liable, you may be able to sell the pre-schools assets to meet some of the debt. And start an appeal to raise as much as you can to lessen the burden on committee members.

CorpseBride Sat 07-Oct-06 12:13:25

Sorry FMF - missed that you've already checked your insurance.

Sorry it's so grim.

foulmoonfiend Sat 07-Oct-06 12:17:39

thanks everyone for the advice, will fill you in on monday when friend reports back.
lessons here for others i suspect...

marthamoo Sat 07-Oct-06 12:17:56

Can the committee resign? Would that make them not liable? I know that stinks for the person who is due the redundancy pay off...but I'm thinking of how I would feel suddenly faced with a bill for £500/£1000 just for helping out on a pre-school committee.

littlerach Sat 07-Oct-06 12:57:55

Generally the Trustees are liable for any finances due.

And usually you have to have a second bank account which covers 3 months of rent, wages and other overheads. I thought this was an OFSTED requirement??

LizP Sat 07-Oct-06 16:14:31

I've just had a newsletter this morning suggesting preschools become incorporated companies to avoid this sort of thing. Not really much help to your friend, but I think that the trustees and committee are liable and even resigning wont help as they have already made her redundant. She could presuambly take them to court for the money if they just didn't pay. Don't think it is an ofsted requirement to have 3 months running costs. Everyone seems suprised that our preschool keeps such big reserves - but I say we have six staff and these will allow us to run for 5 months. We also now have insurance for loss of fees via the PLA. Think things are too far down the line for your friend to get out of the mess - but at least someone else may avoid the same problems. Do they have any assest to sell ? Doubt the fund raising would work since if they could raise the money in a short space of time then they would have been able to raise funds to keep going.

Judy1234 Sat 07-Oct-06 19:41:30

One point, why is the redundancy pay out big? I thought statutory redundancy pay was absolutely tiny assuming they have the length of service needed to get anything. Or is it a payment in lieu of notice? It might be someone is just paying a lot more than needs to be paid. If they're under 40 I think you pay a week's pay for each year of employment for redundancy. and £280 a week is taken as the maximum pay even if higher.

Also do check who the employer is. I don't know anything about pre school groups so not sure how that system works however so it may well be that group.

flack Sat 07-Oct-06 20:04:25

I was on a preschool committee that was under threat of closure, I spoke to (several detailed mails with) the Charity commission about this + they said:

Basically, the trustees (the preschool committee members) are ONLY liable if the financial crisis is something they could and should have prevented. So, basically, only if there was financial mismanagement. Ordinary members of the committee (not the officers who should have a decent clue about finances and cash flow) are even less likely to be liable than the officers.

So while the trustees (committee members) are in theory liable, it's very hard to prove/get blood out of the stone.

Does the preschool have any assets (buildings, whatever) to meet its debts?

You should email/phone the Charities Commission to confirm all that and get further support.

There are drawbacks with being a company charity (the type where committee members/trustees aren't liable for the debts). I can't remmeber what all the disadvantages are, but really, it's only a good set up for charities that want to take on big debts (like having to borrow to buy property).

flack Sat 07-Oct-06 20:06:36

The trustees (committee members) are the employers, Xenia. I think you're absolutely right about the redundancy pay not being that much, though. Some fairly piddling statutory amount.

Email the Charity Commission, foulmoonfiend.

flack Sat 07-Oct-06 20:24:02

Actually, everything I've said could change depending on your constitution (could change, but unlikely to). The man I spoke to at Charities Commission last year was David Hughes-Jones (email=david.hughes-jones@charitycommission.gsi.gov.uk). He was patient + prompt in replying to emails.

I'm quoting part of one of his emails to me here:

"It is important to remember that that individual charity trustees can only be held personally liable where they have been found by a court of law to have acted in a wilfully fraudulent or negligent manner. Negligence cases are enormously time consuming and expensive and are usually only brought in high value cases (e.g. medical negligence cases where the awards can sometimes amount to millions). Most playgroups have an income of between £10,000 and £20,000 most of which is spent on staff salaries. It is therefore highly unlikely that anyone will think it worth their while to sue either the charity or the charity trustees as individuals since the costs of so-doing would outweigh any potential benefits."

hth.

Not sure you said, but out of curiousity, why is your group closing so suddenly?

Judy1234 Sat 07-Oct-06 20:28:49

I'm not sure it's a registered charity, though. It could just be an unincorporated association like a local tennis club and there all the members, even if there are 1000 are liable for the debts.

flack Sat 07-Oct-06 20:30:23

ooh, hadn't thought of that, Xenia. I guess we'll have to see what fmf has to say.

FatThighs Sat 07-Oct-06 21:35:21

I am so sad to read your email. I know how hard it is to get people involved and stories like this make you realise why!

I was chair of our preschool and have just become a trustee. I looked into it carefully and I am only liable if the trustees act in a fradulent or negligent manner, and I don't plan to do that.

I hope you find a way round this. Contact the preschool learning alliance - that is what they are for and their advice is usually good and quick - I think they would help even if you aren't a member.

I cannot believe this is right! I hope it isn't. Let us know.

foulmoonfiend Sun 08-Oct-06 10:20:09

can't remeber who has asked what so:
closing 'suddenly' because they have hit the wall financially speaking. For months they have been limping along with not enough kids but still have to have certain amount of staff in for ratios so they have to be paid.

Theyhave tried a lot of things, including grants but they can't be used to wages.

The redundancy pay out is not high (think it's £5,000k for one staff member and £500 for the other) The £5k is because she has worked there for 20 years and is in her 50s. In that context it's embarassingly low dont you think?

The only assets the group has is equipment and while there is a lot of stuff, not sure there's a huge market for 6 year old ELC farm sets and wax crayons [wry smile emoticom]

I really feel for both parties (ie the poor committee mums) and the staff member who is facing no job and no payout after 20 years of bloody hard work and love.

marthamoo Sun 08-Oct-06 10:38:03

I do too, fmf - I think of the staff at our preschool and the amount they do for what is a very paltry wage. Our group was nearly bankrupt a few years ago and several of the older staff went for a while without being paid - thankfully it's back on its feet and we even managed the first pay rise in about 5 years recently...but your words 'bloody hard work and love' sum it up completely.

I hope a solution can be found for all involved

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