What to consider when Winding up a Charity

If a charity is considering winding up, for whatever reason, be it to close down completely as it has insufficient funding or perhaps it is merging with another charity, it ought to carefully consider the guidelines issued by the Charities Regulator (the “Guidelines” which are available on the Regulator's website). A charity must also consider its governing document (for example, a constitution for an incorporated charity, a governing document for an unincorporated association or a trust deed for a charitable trust) or internal rules which may stipulate specific procedures before it takes steps in changing the legal form of the charity.

Winding up refers to the process of liquidating the assets of a charity. Charities can be wound up by liquidation, voluntary strike off and involuntary strike off. If a charity intends to wind up it must notify the Charities Regulator and answer any questions raised by it, including providing a copy of its audited accounts and for a clear plan of how the charity intends to deal with any surplus assets or funds.

If the charity being wound up is an incorporated charity, as well as the charity’s governing documents, the provisions of the Companies Act 2014 must be complied with.

The procedure for winding up an unincorporated charity is broadly similar to an incorporated charity. Where there is no procedure set out in the charity’s governing document, the Guidelines set out a number of recommended steps. The charity should issue a notice to its members and authorise the Trustees to deal with donating surplus assets or funds. Trustees should also vote to pass the motion to dissolve the charity by either a 50% or 75% majority. Trustees must ensure that all outstanding debts are satisfied when winding up, as they will be liable for a breach of their duties.

If the charity has a charitable tax exemption (CHY) number, it is important to note that when winding up to ensure the requirements of the Revenue Commission are adhered to.

Similarly, a charitable trust must comply with its trust deed and the Guidelines. After the charitable trust is dissolved, Trustees will hold any remaining assets on trust to be used for charitable purposes.

Trustees’ duties do not cease when the charity is wound up. Trustees will continue to be responsible for decisions made. Trustees (or the liquidator) must retain financial statements for six years after the winding up of the charity, unless the Charities Regulatory Authority consents to it being destroyed.

Directors of incorporated charities are required to fulfil their fiduciary and statutory duties, including planning an orderly wind up of the charity and having due regard to the charity’s beneficiaries, staff and other stakeholders.

Professional advice should be sought prior to winding up to ensure the charity is compliant with its governing document and any applicable legislation and regulation.

Cian Clinch

Hayes solicitors LLP

cclinch@hayes-solicitors.ie