High Court Aids Divorced Founders of $4 Billion Children’s Charity

In a decision that will be required reading for family, charity and company lawyers, a divorced former couple who founded a $4 billion children’s charity have won the backing of the High Court in separating their benevolent interests.

Charity Commission LogoThe couple’s marriage had ended upon the husband paying the wife $530 million. However, their charitable interests had remained intertwined. Whilst together, they were the driving force behind the charity, each contributing to its success, but the end of their relationship had caused governance difficulties.

With a view to going their separate ways, they had agreed that the wife would resign as a member and trustee of the English-registered charity and that it would make a $360 million grant to a new philanthropic body that she had established. The Court’s approval was sought for that agreement to be put into effect.

In ruling on the case, the Court noted that the trustees of the charity had surrendered to the Court their discretion in relation to the making of the grant. It decided that, as the grant would confer a material benefit on the wife, the Charity Commission’s prior written approval was required.

The wife’s resignation meant that the grant would constitute a payment for loss of office, within the meaning of Section 215 of the Companies Act 2006. The grant would therefore also require the approval of the charity’s members. The husband and wife were precluded from voting on the issue as a matter of contract, but the Court directed the only other member of the charity to vote in favour of the grant.

Subject to the required approvals being obtained, the Court found that making the grant would be in the best interests of the charity. It would enable the wife to devote her considerable talents to her new organisation, which would have greatly increased assets at its disposal. The grant would also represent a cost-effective means of resolving the dispute and the charity’s governance problems.