Governance: UK compulsorily winds up fundraising company for misleading sales script

On 11 February 2011, the Secretary of State for Business Innovation and Skills obtained an injunction against the company in the High Court preventing it from raising more funds, because of concerns that its telesales staff were using a misleading script to raise public donations.

The investigation established the script used by telesales staff to raise donations failed to explain to donors the levels of commission paid to staff or that only a very low proportion of their donation would be given to charity. Only 9 – 22 pence in every pound donated went to charitable purposes. The balance of funding was used to pay for overheads and commissions earned by telesales staff and drivers who collected the donations. The findings were reinforced by financial information published in the company’s annual accounts.

Insolvency Service investigation Supervisor Scott Crighton, said; “This company’s fundraising methods were typical of a number of other companies that have previously been active in the same area of Manchester which have also been wound up in the public interest for failing to show transparency in their fundraising activity. By failing to tell potential donors exactly how much of their donation would go to charity, they were in breach of the Charities Act. As a result Needy Children International Limited has been wound up in the public interest by The Insolvency Service.”

Needy Children International Foundation Ltd was a company limited by guarantee and it was also registered as a charity by the Charity Commission; ‘Needy Children’ was incorporated on 3 January 2006 and its registered office is at 1 Merridale Crescent, Chapel Ash, Wolverhampton, WV3 9QY.

The petition was presented under Section124A of the Insolvency Act 1986 on 27 September 2010 and the Winding-up Order was made on 23 May 2011.

Needy Children International Foundation Ltd was found to have breached Section 60 of the Charities Act 1992.