A legal challenge against a regulator’s report into the collapsed charity Keeping Kids Company can continue following the death of its founder, a High Court judge has ruled.

Mr Justice Swift said on Friday that Michael-Karim Kerman, the former clinical director of the charity, could be “substituted” for Camila Batmanghelidjh, who began legal action against the Charity Commission but died aged 61 in January.

Ms Batmanghelidjh – who was also chief executive of the charity – had been permitted to challenge findings made in a report by the Commission about Kids Company, which was wound up in 2015, before the case was postponed due to her ill health and death.

I am satisfied that as a former senior employee of the charity, Mr Kerman is sufficiently identifiable with the charity as to be materially affected by this report, which criticises the way in which the charity was operated and was run

At a hearing in October this year, lawyers for Mr Kerman asked a judge to “substitute” him for Ms Batmanghelidjh, claiming both sought to “vindicate those who are affected by the report”.

The Charity Commission opposed the bid, claiming that Mr Kerman did not have “standing” and that the case was “extremely stale”, but Mr Justice Swift ruled that Mr Kerman was “an appropriate substitute claimant”.

He said: “I am satisfied that as a former senior employee of the charity, Mr Kerman is sufficiently identifiable with the charity as to be materially affected by this report, which criticises the way in which the charity was operated and was run.”

Keeping Kids Company, which was also known as Kids Company or Kids Co, supported vulnerable children and young people in London and Bristol, and attracted celebrity backers including former prime minister David Cameron, Coldplay, artist Damien Hirst and comedian Michael McIntyre.

The charity’s closure came shortly after police launched an investigation, which was later dropped, into unfounded allegations of abuse and exploitation at the charity following the broadcast of a BBC Newsnight report.

In February 2022, the commission published the results of a statutory inquiry into its collapse and found there was “mismanagement in the administration of the charity” over the failure to pay creditors, including its own workers, on time.

In the circumstances of this case, the passage of time does not present any particular obstacle to the fair determination of the issues the case raises

Keeping Kids Company had operated a “high-risk business model” and trustees allowed spending to increase without a secure stream of income to cover increased costs or mitigate an unexpected fall in fundraising, the regulator said.

In December 2022, Ms Batmanghelidjh was given the go-ahead to bring a legal challenge against the Commission over the report, claiming its findings were unlawful.

The commission opposes the legal challenge, with the court previously told that its findings were fair and supported by evidence.

Alex Goodman KC, representing Mr Kerman at the latest hearing, said that Ms Batmanghelidjh expressed a wish for the case to continue before her death and that the report “has had a serious negative impact on the lives and reputations of those associated with Kids Company”.

Tom Hickman KC, for the Charity Commission, said in written submissions that the report did not criticise Mr Kerman and others were “better-placed” to challenge the report.

He added that the report’s status is now “withdrawn” and that there had been a “considerable delay, albeit without fault” in the case, which was now “extremely stale”.

But Mr Justice Swift said that the report “remains publicly available” online and that continuing the case would cause no “prejudice” to the Commission.

In a 10-page ruling, he said: “Ms Batmanghelidjh not only sought vindication of the charity for her own sake but also for the sake of those, such as Mr Kerman, who had been closely associated with the charity.”

He continued: “In the circumstances of this case, the passage of time does not present any particular obstacle to the fair determination of the issues the case raises.”

Following the decision, a Charity Commission spokesperson said: “We respect the decision of the court, and are now preparing to robustly defend the findings and conclusions of our inquiry into Kids Company.”