Closure

Formally ending an organisation can be referred to as: closure; closing; closing down; dissolving; dissolution or winding up.

a key in a door

Whichever term is used it covers the whole process of ceasing to operate and bringing an organisation to an end.

Information on how to close different types of third sector organisation is given below.

Closing an unincorporated association or trust that is registered as a charity

The trustees of the charity are responsible for the charity until it has ceased to exist. Moreover, former trustees remain responsible for decisions taken while they were in position as trustees. The Charity Commission can make enquiries about any actions they have taken even after the charity has been removed from the register.

Liabilities

The trustees must address the responsibilities they have in respect of debts and liabilities. If necessary they should seek the advice of an organisation such as WYCAS.

Employment

The trustees must also identify and act upon employment issues in accordance with employment legislation. Advice is available from the PERS. Failure to follow proper procedures could result in unfair dismissals and leave the charity vulnerable to a claim through an employment tribunal. Trustees are individually liable.

Follow the instructions contained in the Charity Commission guidance — How to close a charity — https://www.gov.uk/guidance/how-to-close-a-charity  and use the provisions in your constitution to follow the necessary procedures to dissolve the charity.

The final accounts must be prepared before formally dissolving the organisation. All appropriate agencies and individuals should be informed. These may include:

  • employees
  • unions
  • service users
  • funders
  • accountant
  • solicitor
  • insurance brokers or company
  • bank manager
  • immediate past committee members
  • creditors
  • other organisations that are involved with your organisation; for example, suppliers
  • any other relevant individuals or organisations.

Hold a Board Meeting to formally dissolve the organisation.

Once the charity has been dissolved:

  1. Close the bank account.
  2. Close any accounts with suppliers.
  3. Most formal record should be kept for 7 years.
  4. Paper records that are not required to be kept should be shredded.
  5. Computer hard drives should be cleaned or reformatted so that the documentation relating to the organisation is no longer available.
  6. Headed paper should be destroyed.
  7. Website should be closed down.
  8. All email accounts should be closed.

Removal from the Charity Commission Register:

The Charity Commission guidance, How to close a charity contains a link to an on line form called charity closure form — https://www.gov.uk/remove-charity-register

Closing a Charitable Company

A charitable company is regulated by company law as well as charity law. This means that there are two stages involved in the dissolution of a charitable company.

First you follow the process for removing a company from the Companies House register and then the Charity Commission’s process to remove the charity from the Charity Commission register of charities.

Companies House

Guidance on voluntary striking-off and dissolution of a company is available in “Strike-off, Dissolution and Restoration (GBW 2)” on the Companies House website as well as the relevant forms. Guidance is also available from the Companies House contact centre on 0303 1234 500.

Charity Commission

The trustees are responsible for notifying the Charity Commission of the dissolution and removal of a charitable company from the Companies House Register. They must notify the Charity Commission by using the link closure form — https://www.gov.uk/remove-charity-register  found under the heading close a charitable company in How to close a charity- https://www.gov.uk/guidance/how-to-close-a-charity

Closing a CIO

Check the dissolution clause in your CIO constitution. If you have used the Charity Commission model for either a foundation CIO or an association CIO you will be looking for clause 29. Voluntary Winding up or dissolution.

Now read the Charity Commission guidance on How to close a charity. 

https://www.gov.uk/guidance/how-to-close-a-charity

See the section:Close a CIO. Note that a CIO can not use the online closure form. The Charity Commission guides you in this section on how to inform them.

 

Closing an Unincorporated Association

This section is intended for a third sector organisation that is not:

  • registered as a charity
  • incorporated as a company
  • registered as an industrial and provident society.

There is no set procedure for closing down unincorporated associations other than those described in the dissolution clause of the organisation’s constitution. If your organisation does not have a constitution or does not have a dissolution clause in the constitution seek advice. The Small Groups Development Worker at VAL would be able to advise you further.

Liabilities

The management committee must address the responsibilities they have in respect of debts and liabilities. If necessary they should seek the advice of an organisation such as WYCAS (West Yorkshire Community Accounting Service).

Employment

The management committee must also identify and act upon employment issues in accordance with employment legislation. Advice is available from PERS (Pay and Employment Rights Service).

Failure to follow proper procedures could result in unfair dismissals and leave the organisation vulnerable to a claim through an employment tribunal. Management committee members are individually liable.

Dissolution Clause

Follow the procedures in your constitution. These are the usual steps:

  1. The management committee meets and decides it is necessary to close the organisation. Ideally, the management committee would have knowledge of the organisation’s assets and liabilities at this meeting.
  2. The management committee calls a special general meeting (or in your constitution it may be called extraordinary general meeting) giving the required notice to members as stated in the dissolution clause. This is usually either 28 or 21 days, however, it is essential to check your constitution. The notice will contain the resolution to dissolve the organisation.
  3. The special general meeting must be quorate. Check your constitution to see how many members must be present at a special general meeting.
  4. The meeting must formally approve the resolution by the majority stated in the dissolution clause.
  5. Minutes of the meeting that record the wording of the resolution must be kept. An example of the wording could be: “A special general meeting of the above named organisation called for the purpose of recommending closure to the members was duly convened and held at …… (place) on …… (date). It was agreed by the members present that the organisation should close. The members of the committee were instructed to proceed with closing the organisation in an orderly and proper manner.” The minutes of the resolution should also indicate how the assets of the organisation will be allocated after the settling of any outstanding liabilities. There may be a clause in the constitution relating to this.

After The Special General Meeting

The committee appoints someone to ensure that all assets, debts and liabilities are identified. This is usually the treasurer.

If there are enough funds to meet the financial obligations then these are paid off, contracts terminated, service providers are notified and remaining assets distributed as specified in the resolution.

If there are not enough funds to meet financial obligations the management committee should seek help to ensure that assets are properly disposed of and to reduce the risk of personal liability for them as individuals. The final accounts must be prepared before formally dissolving the organisation.

All appropriate agencies and individuals should be informed (see the list above in the Closing a Registered Charity section).

Hold a management committee meeting to formally dissolve the organisation.

Once the organisation has been dissolved:

  • Close the bank account
  • Close any accounts with suppliers
  • Most formal records should be kept for seven years.
  • Paper records that do not need to be kept by law should either be shredded or passed to West Yorkshire Archive Service.
  • Computer hard drives should be cleaned or reformatted so that the documentation relating to the organisation is no longer available.
  • Headed paper should be destroyed.
  • Website should be closed down.
  • All email accounts should be closed.

Help with Closure

Further help is available from the following organisations:

Charity Commission

Companies House

NCVO

Pay and Employment Rights Service (PERS)

West Yorkshire Community Accounting Service (WYCAS)

West Yorkshire Archive Service

Acknowledgments

Thanks to Newcastle Council for Voluntary Service for the use of their information sheets in providing this information.