Factors to consider before closing

Whatever your reasons for considering closure, you’re likely to have legal responsibilities to follow.

Here are some of the key issues to consider when closing a voluntary organisation.

You should understand your liabilities and the full costs of closure for your organisation.

Make a list of all potential costs for closing and ensure you can afford to close. For example redundancy payments for staff or liabilities for leases. If needed, you can use your reserves to cover these closure costs.

If you can’t meet the costs you may be at risk of insolvency. This may affect the actions you can take.

Learn more about some of the areas to consider when managing financial difficulties and insolvency.

The Charity Commission also has guidance on managing a charity’s finances.

Your organisation’s governing documents will usually include specific details on how the organisation can be dissolved. These could include your constitution or memorandum and articles of association.

Depending on your legal structure there may be different obligations of how you close.

• You may need your membership your membership to vote.
• Your trustees or management committee might be able to make the decision.
• You may need to give particular notice for meetings or publish certain information.
• There are also particular rules on how charitable incorporated organisations can close.

Learn more in the Charity Commission guidance how to close a charity.

Decisions to close are significant and should be documented. There may be different views about closing. However, everyone making the decisions should focus on what will best enable the charity to carry out its purposes.

Everyone should be open to considering that closing and transferring their assets to another organisation may be the best way to make a difference to your cause.

Charity trustees must always act in your charity’s best interests. They must make balanced and adequately informed decisions, thinking about the long term and short term. Learn more in the Charity Commission guidance on charity trustee decision making.

The Commission also has guidance on how to act when there are disagreements and disputes in charities.

The Essential Trustee explains trustees’ responsibilities to the charity and factors to inform their decisions.

You can also follow our guidance on leading an organisation through closure.

For registered charities, the trustees can be held liable for the decisions made whilst in role. They may be contacted by the Charity Commission or others who believe that there is an outstanding liability.

There are also requirements for some records to be kept.

Learn more in the Charity Commission guidance on how to close a charity.

You may find the following pages helpful.

• Leading people through closure gives you guidance on providing leadership, clear communication and appropriate support to staff and volunteers.
• Planning for closure gives you questions you will need to answer, guidance on what needs to be in a closure plan, and advice on managing your financial affairs during closure.
• Carrying out closure lists issues to consider and practical actions to take when closing.