In the UK alone, around 5,000 charities are deregistered with the Charity Commission each year. Some of these may merge with other charities, and therefore continue to operate in some form. However, some simply stop operating. Their trustees may, for example, decide to stop raising further funds, or they may consider that their work is done.

Given the numbers involved, there is a clear and defined process that charity trustees need to go through to wind up or close a charity. This page discusses and explains that process. It is focused on the situation in England and Wales, but many of the issues will be similar elsewhere. If your charity is based somewhere other than England or Wales, you should check the guidance in your location before closing down your charity.

Making the Decision

The decision to close a charity can only be made by the charity’s trustees. Our page on Being a Charity Trustee sets out that trustees must always make decisions in the charity’s  best interests. It therefore follows that trustees cannot decide to close a charity just because it is inconvenient to run it, or there are some tricky decisions coming up.

Instead, they must genuinely believe that closing the charity is in its best interest.

Trustees will also need to check the charity’s governing document to see what is stated about closing the charity. You may, for example, need to consult your members, or a third party before making the decision. You may even need their consent, or the consent of the regulator. The document may also stipulate what you need to do with the charity’s remaining funds.

Whatever you do must be consistent with the charity’s governing document.

You will also need to make sure that your closing arrangements comply with charity law in the country in which you are registered and operate.

It may therefore be a good idea to consult a lawyer or other professional before starting closing activities.

What To Do Before Closing a Charity

There are several things that you need to consider and do once you have made the decision to close your charity. These include:

• Paying your charity’s debts

  This will include any money owed to suppliers, any bank loans, and any professional fees. It is important that you keep enough money back to pay any professional fees associated with closing the charity. You may therefore need to ask lawyers and other advisers to provide an estimate of the likely costs of their support.

  You also need to check any contracts for services, to see if you will have to pay any penalties for ending them early, or if there are any other financial implications to closing the charity such as managing pension liabilities.

• Spending or dealing with any remaining funds

  Your charity’s governing document will almost certainly contain a ‘dissolution clause’ setting out what should happen to any remaining general funds (for more about which funds are covered by this description, see our page on Running a Charity: Financial Issues). For example, the dissolution clause might say that any funds are to be passed to a similar charity, or another charity with similar aims.

  If there is a dissolution clause, trustees should follow that when deciding how to deal with any remaining general funding.

  If there is no dissolution clause, you can probably spend the money in any way that generally “furthers the charity’s purpose”. However, it is wise to check this with a lawyer or other professional. You may also be able to transfer funds to another charity, though again this is worth checking with a professional.

  For funds other than general funding, the conditions under which the charity acquired the money will affect what you can and should do with it. For example:

  • Unspent grant money should usually be returned to the grant-giving body. It is best to check with that body to see how they would like to proceed.

  • You may be able to use unspent donations raised for a specific purpose for a similar purpose, or pass them to another charity for a similar purpose. This will depend on how you worded your fundraising appeal, and whether you sought donors’ consent for this.

  • Some donations may need to be returned to the donor, for example, if they asked you to do that if their donation could not be used for a specific purpose.

  Generally speaking, your starting point when dealing with funds raised for a specific purpose is that donors should be given the option of having their money back. However, you may not need to contact all donors individually. Small donations are exempt, as are those put into a collecting box, tin or bucket. You may also be able to use social media or advertising to invite donors to apply for their money, with a time limit on contact. Your chosen method of contacting donors will need to be approved by the regulator.

• Dealing with any land, property, endowments or trusts owned by the charity

  The trustees are responsible for dealing legally and appropriately with any property, land, endowments or trusts owned by the charity. Some of this may be fairly simple—for example, terminating a lease on a building rented by the charity, or disposing of any investments owned by the charity.

  However, other aspects may be more complicated. For example, you may need to transfer property that was given to the charity with a designated purpose (such as a recreation ground or community centre) to another charity.

  WARNING! Legal compliance matters

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  Everything that you do to dispose of property or manage assets should comply with the law. Some of what applies will be charity-specific, and other aspects will be more general law, such as that applying to tenancies.

  Once again, if you are in any doubt about what to do, consult a professional.




• Apply to break any formal links with other charities

  If your charity is formally linked to any other charities (see box), you will need to do two things:

  1. Tell the other charities that the linking is over; and
  2. Apply to the regulator (in England and Wales, the Charity Commission) to end the linking.

  What is a linked charity?

  Charities that are closely connected or have the same trustees can apply to the Charity Commission to be linked. This means that they can share a charity number, and submit a single set of accounts.

• Winding up the charity’s affairs and services

  You will also need to consider how you wind up the charity’s activities and any service provision. This might include:

  • Informing your customers or clients. They will need to know when the last services will be delivered, and whether someone else will be taking over the service delivery.

  • Informing your volunteers and paid staff. You will also need to consider any pension or employment liabilities and make provision to cover these. This may need professional advice.

  • Informing any delivery partners, who will also need to know if anyone is taking over the services.

  • Considering how to deal with your charity’s records. This will need to comply with any relevant legislation such as provision on holding personal data. In Europe, including the UK, this is the General Data Protection Regulation (GDPR).

Formal Closure of a Charity

Once you have gone through all these steps, and informed everyone, you can formally close your charity.

There are particular procedures that you need to go through depending on the format and structure of your charity. For example, some are bound by company law, so you need to apply to the companies’ regulator to wind up the company. Others simply need a form from the regulator. You should check government guidance to see exactly what you need to do.

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And Finally—Or Rather, Not Quite the End...

Even after a charity has closed, the trustees still have some responsibilities.

First, they need to retain all the charity’s records, including accounts, for a period of at least 6 years from the end of the financial year in which the charity closed.

Note, too, that trustees cannot evade their general responsibility by closing down a charity. They still remain accountable for the decisions that they made as trustees while the charity was operating. It is fair to say that regulators take the responsibility of trustees very seriously, and that closing a charity is not quite the end of the story.

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