Charity mergers include a range of legal and practical issues. There are very many charitable organisations, and both small and large have good reasons for considering combining to maximise their charitable impact.
Other charities may have reached the end of their useful life and want to manage the process of winding-up and dissolving the organisation.
Main issues to consider:
- Types of merger – the process will be determined by the outcome sought; a new charity may be formed to take the assets of two existing charities; one may dissolve and pass its assets to another; one charity may become a subsidiary of another
- Charitable objects – a charity must always act within the terms of its objects. It is important for charities that are combining to have compatible objects; if they differ, then the objects will need to be amended
- Role of the Charity Commission – where there are problems with a charity's ability to amend its objects, the Charity Commission can implement a cy-pres scheme. The Charity Commission can be involved in making a scheme, where a permanent endowment is held and the receiving charity is a company
- Issues to be considered – structural and practical issues need to be addressed - the constitution of the trustee board, membership, internal organisation and of course name
- Possible future liabilities – a charity receiving the assets and activities of another charity can take over liabilities; particular areas of concern may be VAT, the transfer of employees, and a defined benefit pension scheme with ongoing liabilities
- Register of charity mergers – introduced by the Charities Act 2006, this transfers gifts or legacies made to the merged charity to the successor charity.
For further information please contact one of the team.