SMALL CHARITIES: DISSOLUTIONS AND REMOVAL FROM THE REGISTER OG202 B2

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OPERATIONAL GUIDANCE

SMALL CHARITIES: DISSOLUTIONS AND REMOVALS FROM THE REGISTER

CONTENT OF PAPERS, BOUNCE BACK AND CASE HANDLING

OG 202 B2 - 5 July 2006

Purpose

This OG explains what evidence is required from unincorporated small charities that have, or intend to dissolve, to enable them to be removed from the Register, and the action we will take if the trustees have or have not provided that evidence. It also indicates the level at which the decision to remove a small charity from the Register may be taken.

Functional responsibility

For action

Charity Services

For information

Legal Division

Contents

1. Content of papers
2. Bounce back
3. Case handling
4. Level of authority
Glossary of Terms used in this Guidance

Index to further related information


The Law	Refer to a lawyer	Refer to an accountant

	Note: Section 1 of this guidance does not apply to small charities with permanent endowment whose assets are valued at more than our current de minimis limit.

1. Content of papers
	1.1 Procedure for charities generally 1.2 Procedure for small charities

	1.1 Procedure for charities generally
	Section 3(7)(b) of the 1993 Act requires trustees to inform us if their charity ceases to exist.
	OG 17 B1 provides details of the evidence of the disposal of the assets of the charity we should obtain before it can be removed from the Register. That evidence is a copy of the final accounts showing a nil balance and, where possible, either:
	a certified copy of the resolution to dissolve; or
	a copy of the minutes of a meeting showing the decision to wind up.

	1.2 Procedure for small charities
	Section 1 of OG 202 B1 indicates when a charity may dissolve and be removed from the Register using the fast track approach. If a charity is able to use the fast track approach any of the following can be accepted as evidence that it has dissolved:
	A completed standard form of declaration using form CSD 1344B. This is the preferred option since the trustees clearly take responsibility for the proper dissolution of the charity and the legal requirements involved. The form may be accepted even if it is not signed by a trustee provided that the signatory indicates in what capacity they sign and they have a reasonable knowledge of the charity and its administration.
	Providing false or misleading information on this form is an offence under section 11(1) of the 1993 Act;
	or:
	If the charity has a dissolution clause in its governing document, either a certified copy of the resolution to dissolve, or a copy of the minutes of the meeting where the decision to dissolve the charity was taken. Depending on the type of charity and the wording of the dissolution clause the relevant meeting may be a meeting of the membership of the charity or a meeting of the trustees. The wording of the resolution should indicate how the remaining assets of the charity have been applied (bearing in mind the discretion permitted in section 3 of this OG). We can also accept final accounts showing that the charity has no remaining assets and that after meeting all liabilities the remaining assets have been applied for the purposes of the charity; or
	If the charity has no permanent endowment and no dissolution clause in its governing document, a copy of the final accounts showing that after meeting all liabilities the assets have been applied for the purposes of the charity (bearing in mind the discretion permitted in section 3 of this OG) and consequently there is a nil balance.
	When considering information from small charities that have wound up we should place the emphasis on satisfying ourselves that the assets have been properly applied bearing in mind the discretion referred to in the last two bullet points. Instead of the evidence referred to above we can also accept other documentary evidence confirming that all the assets have been applied, this includes financial information other than accounts, such as bank statements, or management accounts.
	If the most recent available accounts (received within the last five years) indicate that the gross assets are worth less than our current de minimis limit the letter stating that the charity has dissolved and applied its assets can be regarded as sufficient evidence for us to remove the charity from the Register.
	If the evidence shows that the assets were applied for inappropriate or non-charitable purposes we do not pursue the matter because the amounts involved are relatively minor. See section 3 of this OG for further information.
	We will also not pursue the matter if the charity has received further assets after the final accounts have been drawn up, for example a late donation or the return of a grant unless the amount takes the charity over the de minimis limit.

2. Bounce back
	Before a case is opened for a charity that has dissolved, the papers that have been received should be checked to see that we have sufficient information to remove the charity from the Register. If further action by, or information from, the trustees is required the papers should be returned (bounced back) to them without a case being opened. Divisional statistics of the number of bounce back letters issued may be maintained manually.
	Wherever possible bounce back should be avoided and emphasis should be placed on accepting the evidence provided.
	There are two possible situations when bounce back may be used, both of which apply if the charity is compulsorily registered and has gross assets valued at more than our current de minimis limit in the most recent available accounts (received within the last five years):
	The charity has no permanent endowment; or
	The charity has permanent endowment that does not include land that is used for the purposes of the charity and a gross annual income of not more than £5,000.
	Where the first of the above situations applies a form letter (see OG 202 L1) can be issued, accompanied by a copy of the guidance notes CSD 1344A (see OG 202 C1) and declaration form CSD 1344B (see OG 202 C2).
	Where the second situation applies a copy of CC44 and forms CC44 A1, A2, A3, and A4 can be issued, or the trustees directed to our website.
	Bounce back cannot be used if the charity has permanent endowment and a gross income of over £5,000 in its last full financial year and/or specie land. In such cases a Scheme may be required and the procedure set out in OG 1 should be followed.

3. Case handling
	3.1 Permanently endowed charities with gross assets valued at more than our current de minimis limit 3.2 Charities with gross assets worth less than our current de minimis limit 3.3 Small charities with gross assets valued more than our current de minimis limit and no permanent endowment

	The various situations that might arise in small charities dissolution cases and the action to be taken are summarised in the chart in section 5 of OG 202 A1.

	3.1 Permanently endowed charities with gross assets valued at more than our current de minimis limit
	Permanently endowed charities with gross assets valued at more than our current de minimis limit cannot use the fast track procedures described in this series of OGs. There are other possible actions that the trustees might consider. Refer to:
	OG 201 (Small Charities Provisions) for guidance if the charity does not have a gross income of more than £5,000 and does not own specie land.
	OG1 (Orders and Schemes) if the charity has an income of more than £5,000 or owns specie land.

	3.2 Charities with gross assets worth less than our current de minimis limit
	Charities with gross assets known to be worth less than our current de minimis limit from the last available accounts (received within the previous five years) should be removed from the Register on receipt of notification that they have been dissolved and without any further evidence, such as the final accounts. The removal should proceed even if there is evidence:
	that the charity had permanent endowment, or
	that the charity previously had substantially greater assets and has properly applied them as part of the dissolution process, or
	that the assets were applied for inappropriate or non-charitable purposes, or
	that the assets are subject to section 14 of the 1993 Act and the donors cannot be identified.
	As the amounts involved are relatively minor we will not pursue complaints of misuse of the assets of such charities unless the complainant produces evidence that:
	Gross assets worth more than our current de minimis limit were applied on inappropriate or non-charitable purposes; or
	There is another public consideration with which we must take issue, for example if there is primary evidence of crime or wilful misconduct, or the problem forms part of a recurrent pattern of mismanagement or misbehaviour, either within a charity, or by an individual trustee or body of trustees.

	3.3 Small charities with gross assets valued more than our current de minimis limit and no permanent endowment
	If we are advised that a charity with gross assets valued at more than our current de minimis limit and without permanent endowment has dissolved we must consider how those assets have been applied.
	The trustees’ action will be acceptable if the assets have been applied in accordance with the requirements of the dissolution provision in the charity’s governing document or, if there is no dissolution provision, for the purposes of the charity.
	In the absence of a dissolution provision, or purposes in the charity’s governing document that are workable, we will also accept assets being applied for purposes that are as similar in character to the purposes of the charity as is practical in the circumstances.
	It follows then that a resolution to alter the purposes of a small charity made in accordance with the provisions of section 74(2)(c) of that Act must meet the test provided by section 74(5)(b) of the 1993 Act. This allows a wide discretion and the trustees’ view of what is practical in the circumstances should be accepted unless the assets are applied for a purpose that is completely unrelated to the original.
	It is the trustees’ responsibility to justify the way the assets have been applied and the link with the provisions of the governing document if that link seems tentative. Provided the link appears reasonable the charity can be removed.
	Situations where the purposes of a charity are unworkable on dissolution may occur because the charity may have substantial assets even though it is dissolving. For example, it may not be practical for a charity for the relief of poverty with a gross income of, say £1,000 and an area of benefit with a few hundred inhabitants to easily dispose of assets valued at £20,000 (based on investments producing interest at a rate of 5%) in accordance with its stated purposes. In the circumstances of this example we will usually accept assets being applied for any charitable purpose for the general benefit of the area in which the charity operates.

4. Level of authority
	Officers of Pay Band 2 and above in Charity Services and NHS Charities Unit who have delegated authority (Assistant Commissioner powers) may remove small charities from the Register.

Glossary of Terms used in this Guidance
	1993 Act
	De minimis
	gross income
	permanent endowment
	Scheme
	specie land

Index to further related information