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We all benefit from the work of voluntary organisations. However, as circumstances change, they may no longer be appropriate, necessary or in the best interests of a cause or wider society.
Every voluntary organisation should regularly ask whether it’s still well placed to achieve its goals. Closure can seem like a difficult decision, but ultimately closing an organisation may achieve a greater impact for your cause.
Every organisation is unique and will face their own reasons for considering closure. You should understand these reasons as they may bring different legal duties if you do close.
Everything your charity does should focus solely on the purposes for which it is set up. Sometimes you may decide that closing the legal entity is the best way to further your cause.
You may choose to close if:
You may also want to consider alternatives to closure.
Broadly speaking, insolvency is where an organisation's available assets are not sufficient to cover the costs it faces. This includes the costs of closure such as staff redundancy payments.
Insolvency is a complicated matter and there are legal penalties if rules are not followed. Directors who were aware (or should have been aware) that the organisation can’t avoid insolvency but continue activities can be held personally liable for any debts. They could be banned from acting as the director of any limited company.
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. Make sure you’re aware of the costs involved before appointing an adviser.
The Charity Commission is the regulator of charities in England and Wales and maintains the charity register. The Commission’s priority is to make sure trustees meet their legal requirements and obligations. They have powers to investigate mismanagement or abuse.
They also have a legal duty to remove any organisation from the charity register that:
Being removed from the register is not a penalty or punishment. Charities are reinstated if they provide evidence that they are still active.
Learn more about when the Charity Commission takes enforcement action.
Steps you need to take before closing your organisation
Guidance on how to help people through the emotional and practical process of closure
Guidance on common situations charities face during closure
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