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Charities and community organisations – closing down vs other options: Part 1

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The negative 

More than 60 per-cent of community groups across England and Wales have been forced to reduce their services or close completely because of the pandemic, whilst two-thirds say need has increased in their communities. The two big impacting factors, unsurprisingly, are reductions in funding and income.  

The positive 

Closure can, however, be a positive move, often arising from positive circumstances. And there are often other options too. 

The Manager of a local food bank was recently heard to say of the long term “We aim to close”. You can see what he means.  In an ideal world, many charity services would not be needed.  When the need for a charity’s services no longer exists, it can no longer function. If government, or society as a whole, has progressed to meeting a social need fully, then the charitable or philanthropic role has achieved its purpose.  

Possible reasons for closure 

Charities chose to close for many reasons, including: 

  • merging with another charity 
  • the original purpose having been achieved or is no longer relevant 
  • becoming a company or charitable incorporated organisation (CIO) 
  • losing funding or income 

 

It’s arguable that only the last of the above is negative. The others are forward-looking and show innovative thinking on the part of their Trustees.  Charity Commission guidance can be found here and NCVO offers advice here

Other options 

There are many ways your charity can reinvigorate itself to meet some of the challenges above.  

Updating the governing document  

Some charities have very restrictive and specific governing documents which mean they can only operate a certain way or reach a certain group.  You might update the document to be less restrictive, whilst remaining true to the charity’s original purpose.  There are strict processes involved, based on charity regulations and clauses in the existing document.  The Charity Commission’s general advice for amending a governing document can be found here.   

Collaboration 

Collaborating, donating to, or working with a similar group which might be more successfully pursuing the same charitable objectives. Collaboration helps with long-term viability by removing a competitor - and gaining an ally.  It can also reinvigorate your own organisation by increasing your profile.  It might just be that a more effective use of your resources in helping your beneficiaries could be in funding someone else who has a stronger system in place.  You should look carefully at both organisations’ purposes to make sure they are in accord.  

If donating money, you need to be clear what it can and cannot be used for; for example, you might only be able to support the homeless, but your recipient might work with homelessness and addiction, in which case you’d need to be clear about funding only one area of work.  Check our article on donating between charities here. https://www.communityactionnorfolk.org.uk/sites/content/charities-making...

Similarly, when collaborating, you need to make sure you are only carrying out what is in your charity’s interest and not drifting towards different areas of work.  The Charity Commission offers advice on working with others, here.    

Merging  

This can be done in different ways and will be determined by the types of assets you have (staff, property, technology, funds etc) and who you are looking to merge with.  You need to have at least one charitable aim in common. In certain cases, you will need to have a public meeting to pass a resolution to merge.  

You could become a linked charity – which means your assets must be used as in your governing document, but the other organisation becomes the Sole Trustee - read more in our article here.  Government guidance on how to merge or link charities can be found here, though the steps are simplified, and we really would recommend asking us for advice, as every case is different in the detail.  

Disposing of assets and Closure 

Some governing documents may specify how assets must be disposed of, transferred or gifted, and this may depend on the type of organisation you are thinking of giving your assets to. Funds from the selling-off of assets should be used to further your charity’s purposes. For example, if an area of Poors Allotments land is sold, the funds should be used to the benefit of the parish, as documented.  Again, you must follow Charity Commission regulations and your governing document. A public meeting may be required, and Trustees will need to be clear about what they can and can’t do with funds once the assets have been liquidated. 

We can help with any or all of this. Contact our highly experienced Community Development Officers on 01362 698216 or email [email protected]

Part 2 follows next week: A case study from Ashwellthorpe