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OG531-1 Removal of Charities from our Register: Dissolutions and Voluntary Removal

Last reviewed:
14 March 2012
Last updated:
14 March 2012

Policy Statement/Overview

This guidance is about charities that decide to dissolve or ask for their voluntary registration to be removed from the Register of Charities and what we must do to keep the Register up to date. It looks at incorporated and unincorporated charities and the circumstances under which they elect to dissolve, what they need to do and what action we take.

The principles involved when considering dissolutions apply to all charities that are Registered with us although our procedures differ where a charity's income is £5 million or more or where a charity has assets worth in excess of £100 million. 

In most cases charity trustees have the power to dissolve their charity without our permission. However, they are legally obliged to tell us that the charity has ceased to exist. Where we are told that a charity has wound up we will remove it from the Register unless we have any regulatory concerns. This helps us to comply with our legal duty to maintain an accurate Register of Charities.

This guidance will not deal with cases where charities have failed to show they are still active because they have not filed their accounts, Annual Updates or Annual Returns. Inactive charities are considered in OG 531-2.

Cases where organisations appear on our Register but no longer appear to be charitable are considered by Operations and are not covered by this guidance.

Summary of the guidance

Section B Casework Guidance considers trustee responsibilities and what actions they might need to take before winding up the charity. It sets out the factors we look at when considering applications and what happens if the application is not straightforward.  This section also looks at what we do to remove charities registered on a voluntary basis.

Section E sets out the legal requirements for maintaining the Register of Charities and the reasons why we would remove charities from the Register.

Section G provides text for letters where a voluntary registered charity has been removed.

OG Contents (Site map)

Casework Guidance

B1 The action taken by charity trustees and us to remove a charity from the Register

B1.1 Charities with incomes of less than £5 million and assets of £100 million or less?

This guidance applies to all charities with an income of less than £5 million where:

  • we have received an application to have the charity removed from our Register because it has dissolved or ceased to exist; or
  • the trustees have asked for a voluntary registration to be removed.

Section B1.4 sets out what we must do where the charity has an income of £5 million or more. We have separate guidance (OG 531 - 2) where a charity has not confirmed it is still active because of failure to send in accounts, Annual Returns or Annual Reports.

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B1.2 Action for charity trustees where a charity wants to dissolve or has ceased to exist  

We ask charity trustees to make an application to have the charity removed from our Register by completing online form CSD 1077. There are also notes (CSD 1077A) for trustees to read before completing the form.

The trustees are responsible for winding up the charity and completing all the actions necessary to apply charitable assets in line with the charity's trusts. This might include:

  • following the action set out in the charity's governing document to dissolve the charity;
  • making an application to spend permanent endowment;
  • making an application to change a charity's administrative procedures;
  • merging with another charity;
  • passing assets to be administered by another charity (see E2.1);
  • selling charity assets and land or transferring them to another charity.

The trustees certify on form CSD 1077 that they are properly appointed as trustees and that they have completed all the actions necessary for the winding up of the charity.

Following the dissolution the trustees must arrange for its accounting books and records (including cash books, invoices and receipts) to be kept for:

  • at least 3 years following the year they were made if the charity was a company; or
  • at least 6 years following the year they were made if the charity was unincorporated. 

Even though the charity is dissolved the trustees remain responsible for the decisions taken whilst they were in office.

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B1.3 What action do we take where a charity dissolves or cease to exist?

We check all applications received to see:

  • that the form is completed fully; and
  • whether we have any information that might cast doubt on the validity of the application.

We hold information about previous case involvement with charities and accounts and annual reports history.  Checking applications is done in line with our Risk Framework, which is published on our website.

The factors we look at are:

  • the charity's history;
  • the type of charity (including the charity's name to see whether this indicates ownership of land, eg a recreation ground);
  • previous non-compliance;
  • impact on an individual charity or charities;
  • impact on the charity sector;
  • impact on public confidence; and
  • complexity and urgency.

These factors are explained in more detail in the Risk Framework. Not all factors will apply in all cases. In straightforward cases, First Contact will remove the charity's details from the Register. Where there is doubt that any of the elements certified on form CSD 1077 are not correct the case should be passed to Operations for further action. Operations will seek to verify the information given or make further enquiries with the trustees. Where we think that there are regulatory concerns, as set out in the Risk Framework, we should consider if regulatory compliance action might be appropriate. 

Operations will consider:

  • scale of assets at risk, or already misapplied;
  • annual income and size of assets of charity;
  • public profile of charity (for example, small local charity or well-known household name);
  • a high level of public interest. Indicators include interest from the media, parliamentarians and members of the National Assembly for Wales, or from the local community;
  • profile of trustees (number of trustees and the range of skills and experience in the trustee body);
  • risk to charity reputation;
  • risk to public safety;
  • curtailment or withdrawal of services;
  • damage or potential damage to public confidence in the charity, charities generally or in the Commission as regulator;
  • level of co-operation by trustees;
  • charity previously investigated or given advice and guidance on the issue;
  • risk of further harm to charity or beneficiaries;
  • involvement of the Police/other regulator;
  • potential for self regulation through an umbrella body or other charity groups.

Where, following assessment, no compliance action is required the case should be returned to First Contact for removal action. Cases that need compliance action will be passed to Investigations and Enforcement.

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B1.4 Charities with an income of £5 million or more and assets worth more than £100 million

We have fewer cases of dissolution or charities ceasing to exist in this income bracket. These charities tend to have a higher profile and there is a greater public interest in what they do. As a consequence we will take a closer interest where such a charity ceases to exist.

The charity trustees should notify us by letter or email of their intention to wind up the charity and their reasons for taking this action. As with smaller charities the trustees are responsible for taking action to wind up the charity and ensure that its assets are properly applied. These cases will be considered by Operations using the Risk Framework as described in B1.3 above. Caseworkers may also need to liaise with the Press Office if there is likely to be a wider interest in the dissolution.   

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B1.5 Charities that ask for their voluntary registration to be removed

Not all charities need to be on the Register, some have their details put there on a voluntary basis. Usually, these are charities with a gross income of £5,000 or less but can also include those excepted from registration by our Order or by other regulations - see section E1.6 for more detail. Exempt charities (those who are supervised by another regulator) are not entitled to be on the Register. They will be removed without any need for any request for removal. 

Trustees can ask for their charity to be removed from the Register by a simple email request; form CSD 1077 is not appropriate in these circumstances. First Contact will check whether the charity is subject to voluntary rather than compulsory registration. Where those conditions are satisfied we will remove the charity and notify the trustees - see letter text at section G1.

Refusals to remove are rare, an example would be where a charity has been registered voluntarily because its income has been below the threshold, and a request for removal is received at a point where income has risen above the threshold. We would check to see if the income level is likely to remain above the threshold (rather than being a single occasion); if it is, then we would refuse to remove.    

B1.6 Right of appeal

The decision to remove a charity from the Register can be appealed to the First Tier Tribunal (Charity) by the charity trustees, the charity itself (where it is a corporate body), or any other person that is or may be affected by the decision. Where an appeal is brought we must show that we have taken reasonable steps to contact the trustees or those with reasonable knowledge of the affairs of the charity before removal. This is not usually an issue with dissolution and voluntary removal cases but it is nevertheless important to record all steps we take to remove the charity from the Register.

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Legal /Policy/Accountancy Framework

E1 Removals from the Register of Charities and the law

Our approach to removing charities from the Register stems from our legal requirement to keep an up to date register of charities.

E1.1 Legal requirements for keeping an accurate Register of Charities

Section 29 of the Charities Act requires that the Commission continue to keep a register of charities "in such manner as it thinks fit".

Section 38 of the Act provides that the Register shall include, as well as details of existing charities, "entries cancelled when institutions are removed". The same section provides for access by the public to the Register at all reasonable times, this includes access to details of removed charities.

Under section 34 of the Act we have a duty to remove from the Register any organisation that:

  • has ceased to exist or does not operate; or
  • no longer appears to us to be charitable.

This is a duty and not a power and, therefore, we have no discretion in the matter.

We will also comply with a request to remove a charity which is registered with us on a voluntary basis because of income levels or that it is excepted from the duty to register - see E1.6 below. Any exempt charities that are on the register must be removed as they are supervised by other regulators. Section 30(2) of the Act provides us with the authority to make these removals. 

Section 35(3) of the Act also requires charity trustees to tell us if:

  • their charity ceases to exist;
  • there are any changes to the charity's registered particulars, and to supply us with copies of the new or altered trusts. 

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E1.2 What we mean by "cease to exist" and "does not operate"

The terms "cease to exist" and "does not operate" are used at section 34 of the Act and provide the basis for removing charities from the Register. These terms are used throughout this guidance and it is important to understand what they mean in the context of incorporated and unincorporated charities. 

An incorporated charity has a power to spend all its assets on its charitable purposes and only "ceases to exist" when its legal personality has been terminated by dissolving the corporation. In effect this means when it has been struck off the Companies House Register - see E2.2 below.  There are, however, other circumstances when we have power to remove an incorporated charity from our Register on the basis that it "does not operate" This term should be taken only to apply to those incorporated charities that:

  • have not technically ceased to exist (because the corporate body has not actually dissolved); but
  • are effectively defunct because they have no assets.

In other words, we should be prepared to remove from our Register any incorporated charity on grounds that it "does not operate" where it no longer appears to have any assets, whether or not it has been legally dissolved.

An unincorporated charity "ceases to exist" when it no longer has any property held on its trusts. This may happen properly in a variety of ways, for example:

  • the charity follows the specific provisions in its governing document (probably a dissolution clause) that say how the charity can be dissolved and how the net assets should be used; or
  • all the assets of the charity have been properly applied to further its objects; or
  • a Scheme or Order made by us may provide for authority to terminate the charity in one or other of these ways; or
  • the effect of a resolution made under either section 268 or 281 of the Charities Act.

Alternatively, we may decide to say that an unincorporated charity has ceased to exist where the assets have been misapplied to the point where it appears the charity no longer has any assets.

lawyer_referThis is not straightforward and legal advice may need to be taken as such a charity may legally have a claim against those who misapplied the assets, and/or against those who assisted, or obtained a benefit from, the misapplication. However, the claim can only be regarded as an asset of the charity if its enforcement is a reasonably practical proposition.  Similarly, if the charity has a right to receive property, for example payments owed for the provision of a service, and a claim can be realistically pursued, the charity cannot be removed under section 34 even if we know that it no longer has any other assets.

In this context "realistically pursued" means:

  • that the amount at stake is worth pursuing, having regard to the complexities of the claim;
  • that the person or organisation that is the subject of the claim (the defaulter) is not considered likely to have a successful defence, or claim for relief of the liability;
  • that the defaulter has the means to meet the claim; and
  • that it is otherwise practical to pursue the defaulter.

If it is not reasonable or realistic to pursue a claim the effect is that the charity has no property and so has "ceased to exist" in the same way as it would have done had its assets all been properly applied for its purposes and all outstanding payments received, and it can be removed from the Register.

An unincorporated charity will cease to exist once it has no assets whether or not it has actually been legally dissolved. 

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E1.3 Final accounts

All charities with a gross income of less than £5 million and assets worth £100 million or less can apply to us on form CSD 1077 to have their details removed from the Register. In most cases the form is sufficient for our purposes. Our policy is not to request final accounts from charities unless the charity's governing document requires it (see E1.5 below about retention of records) or we have other concerns (see B1.3)

E1.4 Notice of removal 

There is no legal requirement for us to inform anyone that we are removing a charity from the Register. Our policy is that, in all cases, we should advise the charity correspondent of removal (except in the case of inactive charities where the trustees cannot be traced).

E1.5 Retention of records

We have a statutory duty under section 38 of the Act to retain indefinitely the registered particulars of a removed charity for public inspection. We do this by keeping these details on the Public Register. The entry will need to show the status of the charity as "removed".

The public's right to inspection under section 38 of the Act does not extend to the governing document, accounts or reports of a removed charity. These will all be kept on the electronic Governing Document and Accounts (GDA) file, which is retained for five years after the removal takes place. During this period members of the public have a right under section 170 of the Act to see any annual reports or accounts submitted by a charity under Part 8 of the Act, but this does not include final accounts. Final accounts, where received, should be filed on the electronic Key Documents file rather than the GDA file. Any requests to view or to receive copies of the governing document or final accounts (where we have them) of a removed charity should be considered in line with our Freedom of Information Act guidance. 

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E1.6 Removal of voluntary registered charities

Every charity must be registered on the Register of Charities unless, it is:

  • an exempt charity (which we will remove once identified, without the need for a removal request from the trustees);
  • a charity which is for the time being:
    • permanently or temporarily excepted by order or regulation of the Commission or the Secretary of State; and
    • complies with any conditions of the exception, and
    whose gross income does not exceed £100,000; and
  • a charity whose income does not exceed £5,000.

These charities may ask us to remove their entry from our register. 

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E1.7 Reinstatement to the Register of Charities

A charity that is removed from the Register on the grounds that it:

  • does not exist or does not operate: or
  • has ceased to be liable for compulsory registration;

may be restored to the Register without the need for a further application from the trustees if the removal is the result of a mistake. In these circumstances we consider the original application for registration to have a continuing effect and therefore do not require further application.

Examples of mistakes might include:

  • an assumption that we made about the absence of assets was subsequently shown to be wrong; or
  • removal where we believed that a charity did not satisfy the minimum requirements for registration and our belief was incorrect.

Before reinstatement, a charity removed on the basis of ceasing to exist or to operate, will need to provide us with evidence to support the claim that it has owned assets during the period since its removal and continues to do so. Evidence may take the form of meeting minutes or charity accounts. It will also be required to submit the relevant Annual Reports or Annual Updates.

A charity which has been removed on the basis that it has ceased to be liable for compulsory registration may be restored to the Register at any time at the request of the trustees, and must be restored if it meets the criteria for compulsory registration. 

A charity correctly removed from the Register can only be reinstated on the basis of a fresh application for registration. 

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E2 Why we remove charities from the Register of Charities and particular issues about charitable companies

Charities may request to be removed from the Register of Charities because they have ceased to exist or are excepted from registration. The way in which these circumstances arise may differ and are explained below.

E2.1 Section 268 and 281 resolutions, Schemes and linking charities under section 12

Unincorporated charities have the power (subject to certain restrictions) to use the powers contained within section 268 and 281 of the Charities Act to transfer property to another charity and to spend permanent endowment. Use of these powers may result in a charity ceasing to exist and therefore liable for removal from the Register. Guidance for transfer of property under section 268 can be found in OG 45 Unincorporated Charities and guidance about spending permanent endowment can be found in OG545 -1 Identifying and Spending Permanent Endowment. Where a charity uses these powers the trustees must inform us that the charity no longer exists and request removal from the Register on form CSD1077.

A Scheme will be made only where there is no other practical way to achieve the action required. This is most likely where there are express provisions in a governing document that prevent the transfer of property to another charity.

Schemes that may result in a charity being removed from the Register might include: 

  • transfer of property from one charity to a second charity so that its property can be administered by the trustees of the second charity (for the purposes of the first charity) with a direction to link charities being made for registration purposes;
  • amalgamating two or more charities to form a single charity (using an existing charity to form the amalgamated charity). We will retain the amalgamated charity on the Register and remove those that have ceased to exist because of the amalgamation. Occasionally a new charity might be set up to receive the property of other charities, that charity would need to be registered .   

Trustees of the charities involved in transfers and amalgamations have the responsibility to ensure that all assets have been properly transferred to recipient charities.

We use sections 12(1) and 12(2) of the Act to link charities together for administrative purposes. These are known as Linked Charities (previously Uniting Directions). The charities involved continue to exist in their own right although this arrangement has an effect on what we display on the Register. There will usually be a reporting charity (previously called the lead charity) for the charities being linked or a new charity created for the group. The lead or new charity will appear on the Register with the other charities listed as subsidiaries of that charity and those subsidiary charities will have their former registrations removed. 

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E2.2  Charitable companies and action under the Companies Act 2006

All live charitable companies must be entered on the Register of Companies held by Companies House and are subject to the provisions of the Companies Act 2006 in addition to charity law. Charitable companies removed from the Register of Companies will, in turn, need to be removed from our Register. 

Under company law there are 3 ways in which a charitable company can cease to exist:

  • the company is not carrying on business or is not in operation - done by Companies House usually because the charitable company did not comply with reporting requirements;
  • the company has dissolved by application to the Registrar of Companies - done voluntarily by the charitable company;
  • the company has dissolved after being wound up - done as part of the winding up process because of insolvency.

Companies House or insolvency practitioners have no legal obligation to tell us that action is being taken to dissolve a charitable company. However, the directors of the charitable company are required to tell us if the charity has ceased to exist. The Register of Companies at www.companieshouse.gov.uk is a useful link where we can check if the charity has been dissolved and removed from that Register.   

Company law recognises that a company may be "dormant", that is, it continues to exist but has no significant accounting transactions. A company will not be removed from the Register of Companies simply because it is dormant. However, we are under a duty to remove it from our Register under section 34(1)(b) of the Act if it does not operate (ie it has no assets). Where a dormant charitable company recommences activity we will reinstate it to our Register provided it satisfies the conditions for registration. 

 

lawyer_referLegal advice must be taken where we think a charity is being left on the Register of Charities simply to receive legacies (which are then passed on to a related charity).  

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E2.3 What to do in cases where charitable companies have been dissolved and have unapplied assets

Cases of charitable companies that have been dissolved but have unapplied assets are rare. Nevertheless, it is important to know what to do if we come across it.

When we remove a charitable company because we find out that it has ceased to exist we should check whether there is evidence that it held:  

  • corporate property that may have vested in the Crown or in the Duke of Cornwall or in the Duchy of Lancaster as bona vacantia ("ownerless goods"): and/or
  • any property that it held as charity trustee. Any such property remains on held charitable trusts, for which we can appoint a new trustee or new trustees under section 80 of the Act. 

Occasionally charities removed from the Register of Companies will need to be reinstated to that Register. This may occur when:

  • an inactive charity is found to have unapplied property; or
  • an inactive charity is still active (even though it did not submit returns).

The charity directors should apply for reinstatement to the Bona Vacantia Division of the Treasury Solicitor's Office. We are unlikely to become involved in the process of restoring dissolved charitable companies to the Register of Companies. However, there may be rare cases where there is a need to revive an inactive charitable company to ensure that remaining corporate property is applied for charitable purposes. We will encourage the directors of such a company to make the necessary application. Where they will not, it is possible for us to make the relevant application.

lawyer_referThis should be done only with legal advice.

 

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E2.4 Human Rights Act 1998

In taking removal action we conform to the principles of Article 1 of the First Protocol for the protection of property.

E2.5 Time charities

Time charities exist for a set period of time and must be removed once the trusts are fulfilled. They are identified by a marker on the Register. To remove them it is important to know the nature of such charities so that they can be removed at the correct time. 

A fundamental principle of trust law in England and Wales is that there must be "certainty of subject matter" for a valid trust to be created. In this context it means that identifiable property (usually land, investments or cash) must be settled on trust for exclusively charitable purposes for there to be any charity.

A "time charity" is a charity where the income for the trust (and sometimes the capital) is to be applied for charitable purposes for a limited period. After that period has expired, either:

  • the trust property may be distributed among non-charitable beneficiaries (or a mixture of charitable and non-charitable beneficiaries);
  • the trust may continue for the benefit of non-charitable beneficiaries (or a mixture of charitable and non-charitable beneficiaries).

This creates a fixed period called the "charity period". It is expressed either as a fixed number of years (eg 21 years from...) or as leading up to a particular event (eg "until X reaches the age of 18").

When we enter a time charity on the Register, the date on which the charity period ends must be included. When the period expires and all property that must be used for charitable purposes has been applied the charity ceases to exist and must be removed from the register.

We cannot register the trust where there are provisions in the settlement that:

  • allow the trustees to apply the income for non-charitable purposes during the charity period (for example, a power to add unused income to capital); or
  • permit the trustees to disadvantage the charitable income interest in comparison with the non-charitable capital interest - normally the law is  that trustees must exercise their investment powers in an even-handed way between capital and income interests; or
  • have some underlying non-charitable purpose (or activity).

Time charities run a greater risk of charity property being applied for private purposes where capital is to be returned to private ownership at the end of the charity period. It may be that future private capital is bolstered at the expense of charitable income during the charity period. Our approach where we think that private benefit has occurred should be in line with our Risk Framework.    

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Q&A

F1 Why do we have a Register of Charities? 

This is a requirement of the Charities Act. The legal requirements for keeping the Register are set out at section E1.1.

F2 What do we mean by 'cease to exist' or 'does not operate'?

These titles have a particular meaning in law and are explained at section E1.2.

F3 When will we remove a charity from our Register? 

The circumstances that would cause us to remove a charity from the Register are set out in section E2, this includes Time Charities.

F4 Can all charities use the online application procedure?

No, they are for charities with an income of less than £5 million or with assets worth less than £100 million. See section B1.1.

F5 What must trustees do if they want to dissolve their charity?

This depends on the individual circumstances of the charity concerned. Reasons why we would remove a charity are set out at section E2 and the action trustees must take is set out at B1.2.

F6 Does being a charitable company make any difference?

Yes, section E2.2 sets out what is required under the Companies Act 2006.

F7 What do we consider when we receive an application to remove a charity?

Our action is based on our Risk Framework. Section B1.3 and B1.4 set out the action we take on receipt of an application.

F8 Do trustees need to submit final accounts?

No, unless the charity's governing document states otherwise, see section E1.3.

F9 Do we tell trustees when we have removed their charity from the Register?

We inform the charity correspondent, even though we are not legally obliged to, see section E1.4. Section G1 contains text for letters when we remove a charity that was registered voluntarily.

F10 Do we keep records once the charity has been dissolved?

Yes, section E1.5 sets out what we must retain and for how long.

F11 Does the charity keep records following dissolution?

Yes, section B1.2 confirms what charities must retain and for how long. 

Model Letter and Orders

 

G1 Model text for charities removed from the Register by application

Dear xxxx

Charity name and number

Further to your correspondence I have been able to remove the above charity from the Central Register of Charities. This should be reflected on our website within the next five days.   

Yours sincerely