A care company has been prosecuted and fined for running illegal children’s homes in what has been called the first case of its kind.

Catalyst Care Limited is the first unregistered children’s homes provider to be successfully prosecuted, according to Ofsted, which brought the legal action against it.

Its directors pleaded guilty at Croydon Magistrates’ Court in relation to failing to register children’s homes and have been fined a total of £92,400.

The Croydon company operated three homes in Kent between 2022-2025 which accommodated up to nine children. During this time the homes received over £1.7m million in payments from local authorities.

Ofsted said this was despite it repeatedly warning directors they were breaking the law.

All children’s homes in England must register with Ofsted, and managing a home without a registration is a criminal offence.

The directors, Miriam Ekhator and Davidson Lynch-Shyllon, were disqualified from carrying on and/or managing or having a financial interest in a children’s home.

They were also ordered to pay victim surcharges totalling £2,960, and costs of £17,250.

Musa Raji, on behalf of Catalyst Care Limited, said the defendants’ “focus was on the children in front of them and sadly not on the paperwork”, and they “made mistakes, but did not act out of malice or greed”.

The prosecution said unregistered children’s homes operate without oversight, meaning children who are placed there have no assurance of “safe or suitable care”.

Ofsted say in such homes there are no guaranteed checks on staff or living conditions and there is no accountability when things go wrong.

But according to the regulator, the lack of available places in legitimate settings has led to a shadow market of illegal care homes.

Although the exact number of unregistered homes is unknown, Ofsted estimates there are around 900 illegal children’s homes operating in England.

In 2024 a report by the Children’s Commissioner for England found that, any one time, hundreds of vulnerable children were placed in unregistered homes for an average of six months each.

Councils say that they are often forced to turn to unregistered children’s homes because there are not enough registered homes in the right locations or homes that are willing to take children with very complex needs.

Ofsted said increased funding will help them identify and investigate unregistered providers and that new powers granted through the Children’s Wellbeing and Schools Act will allow them to issue fines.

During the sentencing on Tuesday, Judge Sushil Kumar said it was of “great concern” that the defendants failed to register the homes despite receiving multiple warning letters.

Daisy Wrigley, for Ofsted, told the court the number of unregistered children’s homes in the UK was not known, which “highlights the importance of registering”.

Ofsted’s chief inspector, Sir Martyn Oliver, said the prosecution “marks an important milestone in our efforts to tackle illegal children’s homes and sends a clear message that operating outside the law will have consequences”.

He added: “We are currently consulting on proposals to downgrade local authorities who commission these illegal homes.”

Josh MacAlister, children and families minister who led a review into children’s social care, called it a “welcome start to our wider crackdown”.

“Vulnerable children deserve to be safe and properly cared for, and I want to see more action of this kind,” he said.

Additional reporting by Jemma Crew.