The Way Forward For Charities?

In the last year 2300 charities contacted the Charity Commission enquiring about mergers. Our own specialist charity team is experiencing an increasing number of south west charities asking for help to join forces with other organisations.

Why? If many charities are to achieve their aims they may need to merge or work together with other organisations.

Charities are finding it increasingly difficult to obtain adequate funding for some or all of their activities in today’s highly competitive climate. Many believe the interests of their beneficiaries can be served more efficiently by another organisation operating in the same field.

In other cases the trustees of smaller charities providing front line services may simply find it difficult to cope with the increasing levels of regulation and risk.

The Charity Commission views charity mergers positively and are keen to minimise duplication of effort and for charitable benefits to be provided by strong, effective organisations. Charities are actively encouraged to work collaboratively with other charities to provide their beneficiaries the best possible services or products.

The Commission also now expects anyone setting up a new charity to consider very carefully beforehand whether their proposed objectives could be achieved equally well by working with an existing charity instead.

Sometimes the legal implications of bringing two or more charities together can be highly complex and a deterrent. One problem can be dealing with donations made to the old charity after the merger, and has meant a large number of dormant charities being maintained and administered long after they have stopped serving a useful purpose.

Parliament has now passed new regulations which will make it a great deal easier, from the legal perspective, for a charity to merge with or to transfer some part of its operation to another charity.

Firstly, trustees can apply to the Charity Commission to officially register a charity merger. Once a merger is registered any property or assets donated to the old charity will automatically be applied to the merged charity.

Secondly, the trustees of a charity can make a single ‘vesting declaration’ which will have the effect, in most cases, of automatically transferring legal title to a charity’s assets, including land and buildings, to the merged charity without any need for further documentation.

These changes mean a reduction in legal complexities involved in mergers and that a large number of obsolete, dormant charities can be dissolved and removed from the register of charities. This must be a good thing and a real encouragement for charities to consider mergers.

For more information or advice, please contact James Evans

Published 15/01/2008. The author of this article is James Evans