Closing a Charitable Company

Closing a Charitable Company

Making the difficult decision to close your charity can be emotionally challenging, but following the correct procedures is essential. Here's an overview of the key steps for charitable companies.

BEFORE YOU BEGIN

Review your governing document: Check for specific closure requirements and accounting period rules. Your charity's constitution may have unique procedures you must follow.

Adjust your financial year: Hold a trustee meeting to decide whether to extend or shorten your accounting period to align with your closure date. This creates cleaner final accounts and must be formally minuted with board approval.

CLOSURE PROCESS

Make it official: Hold a trustee meeting to formally resolve to wind up the charity. Document the decision date, reasons for closure, and ensure all trustees present are recorded in the minutes.

Follow your rules: Some governing documents require member consultation or approval. Check your dissolution clause for specific requirements including notice periods and voting procedures.

Appoint a closure lead: Designate specific trustees to manage the closure process and ensure accountability for completing all required tasks – there will still be work to do after the closure date.

FINANCIAL AND OPERATIONAL RESPONSIBILITIES

Settle all debts: Pay outstanding obligations and budget for closure costs including redundancy payments, professional fees, and possibly final accounts preparation and examination.

Handle assets properly: Follow your dissolution clause for distributing remaining funds. Dispose of property assets and give proper notice on leases and annual commitments.

Manage operations: Communicate with beneficiaries about service endings, address staff employment issues, review contracts for penalties, and ensure GDPR compliance for data handling.

THE OFFICIAL CLOSURE

Step 1: Companies House (after 3 months): You can only apply to Companies House after 3 months of inactivity. Submit form DS01 for voluntary removal. The bank account must be closed before this application and the fee must be paid personally by trustees, not from charity funds.

Step 2: Charity Commission: Once removed from the Companies House register (typically 3-4 months later), notify the Charity Commission using their online closure form, explaining why the charity closed and confirming Companies House removal.

Step 3: HMRC If registered for charity tax relief, notify HMRC with a copy of the DS01 form and complete form ChV1.

YOUR OBLIGATIONS AFTER CLOSURE

Keep records safe: Maintain charity accounts, books, and records securely for at least 6 years from the date of closure.

Ongoing responsibility: Trustees remain accountable for decisions made during their tenure, even after closure, so need to be aware of this.

REMEMBER:

  • Always check your specific governing document requirements.
  • Formally minute both year-end changes AND closure decisions as separate resolutions.
  • Ensure you have funds available for closure costs.
  • The process typically takes 6-7 months from the closure date.
  • Professional guidance can help navigate complex requirements.

CONCLUSION

Closing a charity requires careful attention to legal and regulatory requirements. When emotions run high, having a clear checklist helps ensure nothing is overlooked in this important process.

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