How to wind up a charity

Charities up and down the country are struggling right now – facing a triple threat of lower incomes, higher costs and increased demand. In fact, one in five say that they may be forced to stop operating this winter.

 

For some, that won’t be a temporary pause and they will have to close their doors permanently.

 

But there are many different reasons that a charity closes. It may be that:

• There’s been a change in the cause it addresses or that the organisation is no longer addressing the cause in a practical or appropriate way 
• It is not able to recruit trustees or members 
• It doesn’t have a viable succession plan 
• The best way forward is for the charity to merge with another 

If you’re facing the prospect of shutting down your charity, here are some signposts to help make the process as smooth as possible.  

 

 

Check your organisation’s governing documents

 

The way in which your charity needs be closed down will depend on its structure, and the first step is to understand what needs to be done specifically for your organisation. That means understanding what the formal process is, the costs involved, and any liability risks along the way (such as giving notice of redundancies).

 

Check your organisation’s governing documents as they are likely to include a section on dissolution, or winding up – that’s the process your trustees will need to take. For example, if you are a membership organisation, it will include requirements such as getting your membership to vote. 

 

 

Seek professional advice

 

Winding up a charity is complex and potentially costly, so it’s important to get professional advice if you need it – whether that’s legal, financial, or both.

 

This is especially important if your charity is facing insolvency – that’s when an organisation doesn’t have sufficient available assets to cover its costs (including, for example, redundancy payments). As the NCVO puts it:

 

“As soon as you’re aware that the organisation is facing an insolvency situation, you should take professional advice from an authorised insolvency practitioner or financial adviser.” 

 

Whatever kind of professional advice you need, be clear of the costs involved before you appoint an advisor. The NCVO has detailed guidance on financial difficulty and insolvency. It also signposts to pro-bono or low-cost legal advice, including LawWorks, a charity that links not-for-profits with volunteer lawyers.

 

 

Understand the process

 

There’s lots of in-depth guidance available to help and support you through the process. This includes: 

• The Charity Commission’s guidance on how to close a charity
• The NCVO’s thorough and detailed advice on closing your charity or voluntary organisation
• The Charity Commission’s online tool to remove a charity from the charities register. You can only do this after the charity has been closed or dissolved and it can take up to three months to remove a charity from the register
• Government information on how to strike off your limited company from the Companies Register, if your organisation is a charitable company

 

Create a closure plan

 

The NCVO recommends putting together a closure plan. This will help the process to go as smoothly as possible, and should include: 

• The tasks that need to be completed, how they will be completed and who is responsible for delivering each one 
• When each task will be completed, bearing in mind some will need to be completed before others can be started
• Who is managing the overall process and responsible for noting when tasks are completed

 

Communicate clearly and with care

 

The news that the organisation is winding up may be upsetting for employees, volunteers, partner organisations and, especially, the people you support.

 

The process of putting together a communications plan will help you to consider who needs to be told, what your key messages are, and what tone to take. Crucially, it can help to make sure that everyone who needs to hear about it, does so directly, rather than through someone else. This will help you to address any questions and offer support if needed. 

 

 

Keep good records   

 

Even after the charity is closed, the trustees must arrange for accounting books and records to be kept. That includes cash books, invoices and receipts. For a charitable company, they must be kept for at least three years after the year they were made. For unincorporated associations, trusts and charitable incorporated organisations, it’s six years.

 

 

Be proud of your legacy

 

Closing a charity can be tough emotionally, and may be genuinely devastating for some employees, volunteers, and the people you support. But closing down is not a sign of failure and can very much be the best decision for everyone.

 

Acknowledging everything that the organisation has achieved and all its successes can be a powerful way to move on. You could hold an event, put together a book of memories, and if you’re passing funds on to other charities, create a legacy website.