Closing a Registered Charity

The decision to close a charity can be a difficult one. The following is guidance about the steps that you should take when making this decision. 

The Law 

The Charities Act 2011: 

• Requires the trustees of registered charities to inform the Charity Commission if their charity ceases to exist; and 
• Requires the Charity Commission to remove from the Register any charity that has ceased to exist or does not operate 
• Requires Trustees of charities that are closing to use or transfer existing assets correctly. 

Failure to inform the Charity Commission that a charity has dissolved or wound up will lead to enquiries being made about what has happened to the charity and its assets. 

The Charity Commission may take action against the former trustees if the assets have been wrongly applied. Former trustees remain responsible for decisions taken while they were in office and the Charity Commission can make enquiries about any actions they have taken even after their charity has been wound up or dissolved. 

First Steps 

• Get support: If you think that your charity might need to close, talk to Connected Voice as early as you can. Our services help charities in difficulties and help you understand your responsibilities as trustees. 
• Read your governing document: most governing documents will have a ‘dissolution clause’ that explains the way to make a decision to close, including who needs to be involved in making this decision. It may also tell you what you are allowed to do with your charity’s property. If your governing document does not have a dissolution clause, you may have additional steps to take in order to be able to close.  
• Follow the rules in your governing document: take the decision to close by following the rules in your document. The rules you need to follow will depend on your type of legal structure, as well as other amendments that may have been made to your governing document. 
• Assess your liabilities: make an assessment of the money that your charity owes or could owe to others. This includes things like; unpaid loans, mortgages, redundancy pay, fees for leaving contracts (including rental contracts), and solicitor’s fees if you have complicated assets to sell. You will need to pay for these liabilities using your charity’s assets. You may need to ask your accountant to help you do this. 
• Assess your existing assets: you will need to find out how much your charity currently has in cash, and in other assets such as equipment. Only count cash that is ‘unrestricted’. You may need to return any unspent grant funds. You may also have ‘permanent endowments’, ‘designated land’ or ‘special trusts’ that must be used in specific ways and may need to speak to the charity commission about how to deal with these. If you do not have sufficient assets to pay the charity’s debts or settle its liabilities, you should take guidance from your charity’s accountant, solicitor, or an insolvency practitioner. 

Who you should tell if you take the decision to close 

Before you tell relevant parties that you have taken the decision to close, it is important that you have made a plan about how you will close, including a budget for closure. This is likely to be a stressful time for staff, volunteers and beneficiaries, and so clear and open communication is essential. 

Some examples of the parties that you should inform of your decision: 

• Employees, employees’ representative and unions 
• The organisation’s accountant and auditor or independent examiner 
• The organisation’s solicitor 
• The organisation’s insurers or insurance broker 
• The organisation’s bank manager 
• The organisation’s funders 
• The Charity Commission (see below) 
• Immediate past trustees (current trustees should already know) 
• Anyone with a fixed charge or mortgage over any property the organisation owns 
• All creditors 
• Service users 
• Other organisations that the organisation is involved with or are members of 
• Any other organisation or person that the trustees think relevant 

Next Steps 

Once you have a clear picture of the assets and liabilities of your charity, have taken the decision to close, and have informed the relevant parties of your decision, the next steps that you need to take are different depending on your legal structure and the rules in your governing document. These next steps will usually involve transferring remaining assets, informing the charity commission, and preparing your final accounts. When and how you inform the charity commission of your intention to close depends on your legal structure. 

You can find information about the steps for each legal structure on the Charity Commission website here: https://www.gov.uk/guidance/how-to-close-a-charity 

The next steps also differ if you are closing your charity because you are changing your legal structure. Guidance about changing your legal structure can be found on the Charity Commission website here: https://www.gov.uk/guidance/change-your-charity-structure 

After the organisation has been formally wound up 

• The bank account should be closed. 
• All paper records that do not need to be kept should be shredded (not just thrown away). See ‘Keeping records’ on this page for further information. 
• All computer hard drives should be cleaned or reformatted so that files and documents relating to the organisation are no longer available. 
• All headed notepaper, compliment slips etc. should be destroyed. 
• The website should be closed down. 
• All email accounts should be closed. 

Keeping Records 

All charities need to keep records after they have closed. These include financial statements, as well as all other accounts and records. These should be kept for six years after the financial year in which they were made.