Transfer of property for smaller charities

How smaller non-company charities can transfer their assets to other charities

Contents

1. Who this guidance is for

1.1 This guidance is for trustees of charities, including those having property that is permanent endowment, and:

  • have a total yearly income from all sources of £10,000 or less;
  • do not have land that must be used to achieve some or all of the charity's purposes (designated land); and
  • are not charitable companies or some other form of body corporate.

Some charities may already have power in their governing documents to make these changes and therefore may not need to use these provisions. Where there is an existing power in the governing document, the trustees may choose whether to use this or to use the statutory power.

1.2 Where a charity meets those requirements its trustees can decide to transfer all its property to one or more charities; provided that:

  • they believe that it is in the best interests of promoting their charity's purposes if all its property is transferred to another charity or other charities; and
  • the charity or charities receiving the property have purposes that are substantially similar to the transferring charity.

1.3 The process to transfer property to another charity or charities with similar purposes is usually straightforward. It involves passing a resolution using the “transfer power” provided by the Charities Act 2011 and then passing the charity’s assets over to the receiving charity or charities.

This guidance sets out:

  • What trustees must do before passing a transfer power resolution (see section 3)
  • How trustees pass a transfer power resolution (see section 4)
  • What the Charity Commission does when it receives a transfer power resolution (see section 5)
  • What the trustees must do to bring the resolution into effect (see section 6)

1.4 Some charities that use this procedure will have assets that are "permanent endowment", meaning that there are restrictions on what the charity can do with the property (see section 2) and the conditions for passing these assets to another charity or charities are more rigorous.

1.5 Charities that are able to spend all their assets without permission will be able to pass them to another charity or other charities as donations provided that the recipient charity uses them for the purposes of the donor charity. In these cases it may be helpful to register the transfer on our Register of Mergers (see section 8).

1.6 If your charity is not eligible to use the transfer power but you would like to transfer all the property of your charity to another charity or other charities we may still be able to help. Please see our publication Collaborative Working and Mergers (CC34) for more information.

1.7 All the publications referred to in this guidance, along with all our other publications, are available on our website at www.charitycommission.gov.uk.

2. Some terms used in this guidance

In this guidance:

Must is used to refer to actions that trustees (or their agents or employees) have to take by law.

Where we use terms such as the trustees should or we recommend we are referring to actions that the trustees (or their agents or employees) could take and we consider to be good practice, but are not legal requirements.

A body is a charity if it is:

  • set up under the law of England and Wales; and
  • established for exclusively charitable purposes.

This guidance does not apply to organisations set up under the laws of a foreign country, or in the Channel Islands, the Isle of Man, Northern Ireland or Scotland.

Charitable company means a charity formed as a company and registered at Companies House with a memorandum and articles of association as its governing document.

Designated land is land held upon trusts that must be used for any or all of the purposes of a charity. Common examples are land that is used to provide village halls or recreation grounds.

Governing document means any document that sets out a charity's purposes and, usually, how it is to be run. It may be a trust deed, constitution, memorandum and articles of association, Scheme of the Commission, conveyance or will.

Permanent endowment means assets (for example land, buildings, investments, or cash) that may not be spent by the trustees as if they were income. Further information on spending or transferring permanent endowment can be found in our guide:

Transfer a permanant endowment to another charity

Transfer power means the power provided by section 268 of the Charities Act 2011, that enables the trustees of the charities referred to in paragraph 1.1 to transfer all the assets of their charity to another charity or charities.

Trustees means charity trustees. You are a charity trustee of an unincorporated charity if you are:

  • a member of the committee that is responsible for running a charitable group such as a community association or a parent teacher association; or
  • the trustee of a charitable trust (charitable trusts are usually created by a formal legal document, such as a declaration of trust or someone's will).

An unincorporated charity is a charity that is established as an unincorporated association or a trust. This means that they usually have a constitution, rules, or a formal legal document such as a trust deed or a will as their governing document.

3. What trustees must do before passing a transfer power resolution

3.1 Trustees can use the transfer power only if they are satisfied that it is 'expedient in the interests of furthering the purposes for which the property is held for it to be transferred in the way which is proposed'.

3.2 If some or all of the assets to be transferred are permanent endowment, requirements for the receiving charities vary depending on whether the transfer is to a single charity or more than one charity. If the transfer is:

  • to a single charity the purposes of the receiving charity must be substantially similar to all of the purposes of the transferring charity;
  • to more than one charity:
  • the purposes of the receiving charities, taken together, must be substantially similar to all of the purposes of the transferring charity; and
  • each of the receiving charities must have purposes that are substantially similar to one or more purposes of the transferring charity.

3.3 This means that overall the receiving charities must have purposes that are substantially similar to all purposes of the transferring charity but each individual charity can have narrower purposes than the transferring charity. For example, a charity that has purposes to relieve need and promote education in a particular area can transfer its assets to a charity that only relieves need and a charity that only promotes education in that area.

3.4 If none of the assets to be transferred are permanent endowment, the requirements are less rigorous as the purposes (or any of the purposes) of the receiving charity, or each of the receiving charities, only have to be substantially similar to the purposes or any of the purposes of the transferring charity.

3.5 We will usually accept the receiving charity having wider purposes that include those of the transferring charity. However, if the effect of the resolution will be to exclude beneficiaries of the transferring charity, we may see this as a reason to object to the resolution.

3.6 We look at the proposals flexibly when deciding whether the purposes of the charities involved are "substantially similar". This includes consideration of the circumstances of the charities and the reasons for the transfer. You provide this information in the online application form.

3.7 The trustees of the transferring charity must check with the trustees of the receiving charity or charities that they are:

  • prepared to accept the assets of the transferring charity;
  • aware that (where appropriate) any assets of the transferring charity that represent permanent endowment will continue to be permanent endowment after the transfer; and
  • aware that, as far as is reasonably practicable, they must use those assets for purposes that are similar to those of the transferring charity, unless they consider that to do so will not result in a suitable and effective method of using them.

3.8 What is "reasonably practicable" will depend on the circumstances of the receiving charity. For example, if the property has been transferred because the number of beneficiaries is dwindling, it will be necessary for the receiving charity to find additional alternative uses for the property.

3.9 If a receiving charity is a charitable company it cannot hold property that is permanent endowment as part of its general or corporate assets. This is because all the assets of a company can be spent generally for its purposes while permanent endowment is held upon a trust that prevents it being spent. It is important that a charitable company receiving the permanently endowed property as trustee understands that the property is subject to its original trusts and keeps it separate from corporate property.

3.10 Once the trustees are satisfied that:

  • the transfer is 'expedient in the interests of furthering the purposes for which the property is held for it to be transferred in the way which is proposed'; and
  • the receiving charity or charities are suitable; and
  • all the other requirements are met;

they must pass a formal resolution to enable the transfer. We recommend that the wording of the resolution makes it clear that the trustees are using the power provided by section 268 (and sections 273-274 , if some of the assets represent permanent endowment) of the Charities Act 2011.

4. Passing a transfer power resolution

4.1 To pass a transfer power resolution the trustees must call a meeting or take action as set out by the charity's governing document for their proposals to be voted on. If the governing document sets a quorum for trustees' meetings then at least that number of trustees must be present at the meeting. A postal vote of the trustees may be used if the governing document allows it.

4.2 If the transferring charity is closely connected to a charity with a membership we recommend that the members are consulted about the transfer.

4.3 A resolution under the transfer power must be passed by a majority of two-thirds of the trustees of the transferring charity who actually vote on it. When calculating the majority we will not include:

  • trustees who are present at the meeting where the resolution is passed and do not vote; or
  • trustees who have not voted in a postal ballot.

For example, if there are four trustees present at a properly constituted meeting:

  • two vote in favour of the resolution;
  • one votes against the resolution; and
  • the other does not vote.

The resolution is validly passed because two thirds of the trustees voting on the resolution have voted in its favour, despite the fact that only half those present have voted for it.

4.4 If the transferring charity is passing its assets to two or more charities, the resolution should make it clear how those assets are to be divided between the receiving charities. We expect that in most cases the property will be divided equally between the receiving charities. If it is not divided equally the trustees should explain why they have done this in their statement of reasons for passing the resolution (see paragraph 4.8).

4.5 In cases where:

  • the property to be transferred represents permanent endowment; and
  • the trustees propose to transfer it to two or more charities; and
  • they have asked for our advice about how to divide the property;

they must take account of that advice when passing the resolution.

4.6 When they have passed the resolution the trustees must:

  • confirm the details of the resolution and their reasons for passing it; and
  • confirm that all the requirements for passing the resolution have been met.

4.7 This information should be sent to us using the online application form.

4.8 The reasons for passing the resolution are very important to us. They should explain how the transfer is in the best interests of the charity in furthering the purposes for which the property is held. Where there are unusual circumstances these should be explained, for example, an unequal division of assets between two or more receiving charities.

4.9 If any of the charities named in the resolution are not registered with us, the trustees should also send us a copy of their governing document (which we are unlikely to have) so that we can check that their purposes are sufficiently similar. The document can be emailed to us online.

4.10 The completed online form should provide all the detail we need to consider the resolution and reduce the risk of us having to ask for more information, which will delay the transfer.

5. What the Charity Commission does when it receives a transfer power resolution

5.1 When we receive a copy of a transfer power resolution we will check that all the requirements for passing such a resolution have been met. We are allowed 60 days to do this from the date we receive the resolution (the 60-day period), although we will aim to respond within 15 working days.

5.2 If we are satisfied that the requirements have been met we will acknowledge the resolution advising the trustees of the date when it will come into effect.

5.3 If we are not satisfied that all the legal requirements have been met we will contact the trustees telling them we object to the resolution and the reasons why. Our objection prevents the trustees from bringing the resolution into effect. As the resolution process is relatively straightforward, we do not expect to object to transfer power resolutions very often.

5.4 If we are not sure that the requirements have been met we can direct the trustees to:

  • give public notice of the resolution;
  • provide us with more information or an explanation about the circumstances in which they have decided to act and their compliance with any of the requirements connected with the resolution;
  • if some of the assets to be transferred represent permanent endowment and the transfer is to two or more charities, explain why the property is to be divided in the way proposed, if this is not included in the online form.

5.5 The circumstances when we may ask for public notice and/or more information include where:

  • the purposes of the receiving charity or charities may not be sufficiently similar to the purposes of the transferring charity; or
  • the procedural requirements have not been followed.

5.6 Where notices are published people with an interest will be invited to make their comments to the Commission. They will have 28 days from the date the notice was first published to do this. Examples of people who might have an interest in a charity include beneficiaries or potential beneficiaries, donors or someone who is owed money by the charity.

5.7 In most cases we will ask the trustees to publish a single notice in a way they choose using their knowledge of the charity and its beneficiaries. We will ask the trustees to:

  • provide details of where the notice was published;
  • confirm to us that the method of publication chosen is appropriate in the circumstances; and
  • explain why this was the best way to publicise the resolution.

5.8 Where we require:

  • the publication of a notice (or notices), the 60-day period is suspended for a period starting on the date on which we give the direction until 42 days (the 42-day period) from the date on which the trustees first publish the notice(s).
  • further information, the 60-day period is suspended from the date we ask for the information until we receive it (effectively this only applies where we ask for the information in writing rather than telephoning the correspondent).

5.9 If we have required both the publication of notices and further information the 60-day period is suspended until the end of the 42-day period or we receive the required information, whichever is the later.

5.10 If the 60-day period is suspended for a period of more than 120 days because the trustees have not published the required notice(s) or provided the required information we will treat the resolution as if it had never been passed and it cannot come into effect.

5.11 Where the outcome of the publishing notices and/or providing information:

  • satisfies us that all the legal requirements have been met, we will write to the trustees confirming the date on which the resolution will come into effect;
  • does not satisfy us that all the legal requirements have been met we will write to the trustees informing them that the resolution cannot take effect and why.

6. How the trustees bring the resolution into effect?

6.1 If we do not object to the resolution, it takes effect at the end of the 60-day period. The trustees of the transferring charity are responsible for arranging for all its assets to be transferred to the receiving charity or charities on an agreed date.

6.2 The trustees of the transferring and receiving charities may need to consult about how the transfer should be completed, particularly if the assets to be transferred include land or investments.

6.3 The trustees of the transferring charity must arrange for its books, records and statements of account to be kept for at least seven years after the year to which they apply. We recommend that these documents, together with a copy of the transfer resolution and our letter confirming the effective date, are handed over to the trustees of the receiving charity (or one of the receiving charities).

6.4 If the transferring charity is registered with us the trustees must inform us once the transfer of assets is complete. They do this by completing the online declaration form. We will then remove the charity from the Register of Charities.

7. How to transfer investments

7.1 Where investments are held in the names of individual trustees and are to be held in the name of the receiving charity or its trustees, a stock transfer form will have to be completed by the trustees of the transferring charity for each security and lodged with the registrar for the investment concerned (usually shown on the stock certificate).

7.2 Stock transfer forms can be downloaded free from the Internet (we suggest the website of the registrar named on the stock certificate is tried first) and can also be obtained from banks or law stationers.

7.3 Before the trustees of the transferring charity can complete the stock transfer form they must ask the trustees of the receiving charity to tell them the full names and postal addresses of those trustees to whom the stock is to be transferred (these details will be shown on the new stock certificate). If the receiving charity is a company or some other form of corporate charity or the transfer is to a body corporate entitled to act as custodian trustee, the stock transfer form must show the full corporate name and the address of its registered office together with any other description the registrar may ask for.

Stockholders unable to complete the transfer

7.4 In some cases it may not be possible to complete the transfer because some of the named stockholders have died. Where this happens certified copies of the death certificates should be sent to the registrar together with the stock certificates and transfer forms. This is not necessary if the death has already been notified to the registrar and the stock certificates amended accordingly.

7.5 If all the stockholders have died, the legal representative of the last surviving stockholder (often this will be the executor of that person's will) may execute the stock transfer forms, which should be lodged with the grant of probate (or a certified copy of it), certified copies of all the death certificates of the stockholders and the stock certificate.

7.6 If all the death certificates cannot be found or the trustees experience other problems (perhaps because some of the stockholders cannot be traced), they should contact us so that we can make an order vesting the property in the names of the new trustees. The order will not itself transfer the investments, but it will enable the body corporate or persons it names to ask the registrar to transfer the investments into other names (which do not have to be the same as the persons calling for the transfer), such as holding trustees, a custodian trustee, or a nominee.

7.7 Holding and custodian trustees and nominees have similar roles. Depending on the circumstances they may be individuals or corporate bodies (such as a companies), normally appointed by the trustees of a charity, who hold the legal title to the charity's property or investments on their behalf. They have no role in the charity's management and must act on the lawful instructions of the trustees.

Transferring uncertified securities

7.8 Not all investments are in the form of stock certificates; there may be uncertified securities such as shares in Common Investment Funds (CIFs), such as the COIF Charities Investment Fund. In their case a letter from the transferring trustees should be sent to the Fund Managers instructing them to change the name and other details on the account to those of the receiving charity. A certified copy of the resolution should be supplied and a dividend mandate will be required.

7.9 If both the transferring and receiving charity hold some of the shares the instruction to the Fund Managers should be to amalgamate the accounts under the details of the receiving charity. This is because CIF shares cannot be transferred from one charity to another - it must be shown that the holding charity is now a legal entity. No stock transfer form exists for CIFs.

Selling the investments before being transferred

7.10 The trustees of the receiving charity may wish to sell the existing investments and reinvest the proceeds. If this is the case, the trustees of the transferring charity should instruct a stockbroker or other agent to sell and either send the cash to the trustees of the receiving charity for investment by them, or reinvest as instructed by them. Before deciding how to handle investments, trustees should always get advice from someone whom they have reason to believe is qualified to give advice on financial matters.

8. The Register of Mergers

8.1 The trustees of any charity that has transferred all its assets to another charity or charities, using the transfer powers, may apply for the transfer to be entered on our Register of Mergers. This will provide a permanent record of the transfer in case the transferring charity receives any further property, for example, through a legacy or a covenant. Entry on the Register of Mergers enables such property to be passed to the receiving charity or charities automatically.

8.2 You will need to complete and send us a notification form, which can be downloaded from our website. Before completing the form you should read the notes that accompany it.

9. Completing the form

If you think that the transfer powers are suitable for your charity to use you should complete the online application form.

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