Reasons to close

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:

• there’s been a significant change in the cause you were created to address
• there have been changes in your community or society which mean that your activities are no longer effective or suitable to achieve your purpose
• you can’t recruit suitable trustees or members
• there’s no viable succession plan to continue (particularly common in smaller organisations, especially those led by a founder)
• you’re financially viable in the short to medium term, but long-term trends show the organisation is unviable, and you feel you have limited opportunities to change your financial situation
• you believe you could achieve more for your cause by transferring your assets to another organisation
• you’re struggling to spend your money in line with your purpose or for the public benefit. In these instances you may be eligible for support from the government-backed Revitalising Trust Programme.

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.

• There are further details on our serious financial difficulties and insolvency pages and in the Charity Commission guidance on managing a charity’s finances.
• Registered charities should submit a serious incident report if your charity goes into insolvency or faces closure because of financial difficulties.
• Small charities fearing insolvency can contact our Small Charity Helpdesk. We can put you in touch with an insolvency practitioner for an initial conversation.

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:

• has ceased to exist
• no longer operates
• no longer appears to the Charity Commission to be charitable.

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.