How to transfer a charity’s money, investments or property to another charity if it closes, merges or is replaced by a charitable company or CIO.
About charity asset transfers
Your charity can make grants or gifts to other charities as a way to support its purposes (unless your governing document specifically prevents this). But you may decide to formally transfer all your charity’s assets to another charity if you:
- close an unincorporated charity to create a new charitable incorporated organisation (CIO) or charitable company – known as ‘incorporation’
- merge with another charity, for example if you merge one charity into another or form a new charity to replace the original charities
- close your charity so another charity can take on its assets and do similar work
You will often need to get the Charity Commission to approve charity asset transfers.
Asset transfers allowed by governing documents
Usually, a charity has a power to transfer in its governing document, often in the dissolution section. This may say what any assets you transfer can be used for. For example, it may say that they can only be used by a charity with similar purposes.
You must follow any procedure for agreeing and making the transfer that your charity’s governing document specifies.
Asset transfers allowed by law
The Companies Act allows you to transfer corporate property between charitable companies.
The Charities Act allows you to transfer some types of asset if your charity is a CIO, provided you follow the rules below. It also allows you to transfer most types of asset if:
- your charity’s income is under £10,000, and
- it’s ‘unincorporated’ (not a charitable company or CIO)
How to transfer an unincorporated charity’s assets
You must be satisfied that the transfer is the best way for the assets to continue to be used as they were intended to be. The charity receiving the assets must have at least one purpose similar to yours. It can have wider charitable purposes than yours unless this means people that could currently benefit from your charity won’t be able to after the transfer.
At a charity meeting, agree the transfer - see ‘how to pass a transfer power resolution’ below.
You can’t transfer land which your charity’s governing document says must be used for a specific purpose (known as ‘designated’ or ‘specie’ land). If you want to do this, you’ll need to:
- consult the public about the proposed transfer
- ask the Commission to make a ‘scheme’, a formal legal document that approves the transfer
If some or all of the assets you’re transferring are permanent endowment (money or property that was originally meant to be held by a charity forever), they’ll continue to be permanent endowment after they transfer.
Transfer permanent endowment from an unincorporated charity to a CIO
If you have permanent endowment which you want to transfer, you need to:
- register a new CIO, then
- make what is known as a vesting declaration. This is a legal document that transfers all the property of the original charity to the new CIO.
The vesting declaration will:
- transfer property which has no restrictions to the CIO to be held as part of its corporate property
- vest legal title to the permanently endowed property in the CIO, to be held on its original trusts
- appoint the CIO as trustee for the permanent endowment trust and give it the powers of a trust corporation for that trust
- mean that the CIO and the permanent endowment trust are treated as a single charity for registration and accounting purposes, so they won’t need to register separately or produce separate accounts
You may need to take professional advice.
How to transfer a CIO’s assets to another CIO
You may need to transfer one CIO’s assets to another if you’re:
You can either:
- pass a members’ resolution agreeing the transfer at a general meeting (three-quarters of those voting must be in favour)
- get unanimous support for the transfer resolution from all members by other means
If you’re transferring a CIO’s assets to another CIO, its members need to accept the transfer by passing a resolution in the same way. You need to get a PDF copy of this resolution and contact the Commission to ask for approval.
The receiving CIO must have substantially similar:
- charitable purposes
- rules on what happens to its property if it closes
- rules on benefits to trustees, members and connected persons
How to transfer investments
Complete a stock transfer form (various templates are available for download from external sites) and send it to the registrar named on the stock certificate. You need the full corporate name and registered office address of any receiving CIO or charitable company (trustees’ names and addresses if it’s unincorporated).
Alternatively, instruct a stockbroker or other agent to sell the stock and release funds to the receiving charity.
Take advice from someone suitably qualified to act on your charity’s behalf, particularly if the situation is complex. For example, transferring shares in Common Investment Funds or if a named stockholder has died.
How to pass a transfer resolution
Using the Charities Act provisions
First, check the charity you’re transferring to:
- has agreed to accept the assets
- knows that any permanent endowed assets will continue as permanent endowment
- intends to use the transferred assets for similar purposes, where reasonably practicable
Your transfer power resolution then needs to set out:
- which charity or charities will receive the assets
- how and when the assets will be transferred (especially if transferring to more than one charity)
- how you will make sure the assets will be used for similar purposes by the receiving charity or charities
Agree the transfer power resolution at a trustee meeting attended by enough trustees to make a decision. At least two-thirds of trustees voting must be in favour of the transfer. Don’t count people who abstain from voting.
Make sure the minutes of the meeting state that you’re relying on the transfer power in the Charities Act provisions. Ask the Commission to approve the asset transfer (see below) before you make it.
Using a power in the charity’s governing document
Make sure that the meeting is called in accordance with the governing document and that there are sufficient trustees present to form a quorum.
Follow the requirements of the transfer power/dissolution section and ensure that you comply with any special conditions it makes.
Ask the Commission to approve an asset transfer
Asset transfers from an unincorporated charity to a CIO or charitable company
Unless there is no overlap of trustees between the transferring and the receiving charity, one or both charities will usually need the Commission’s approval for an asset transfer if you’re closing an unincorporated to set up a CIO or charitable company.
This is explained more fully in the flowchart.
You need to:
identify both charities (names and registered number)
give details of the assets (and any liabilities) to be transferred and in particular (in the case of a company) whether they include a substantial non cash assets or any permanent endowment
confirm that you followed the rules in charity law and your governing document (stating which power you are planning to use, if authorised to proceed)
explain how the transfer is in each charity’s best interest
set out how many of the trustees of the transferring charity are also trustees of the receiving charity
indicate whether the trustees of the transferring charity are seeking an indemnity from trustees of the receiving charity
check that the Commission has the latest accounts of the unincorporated charity, and if not, provide a copy of these
tell us if there is a deadline for transfer (and why)
If having considered the flowchart you think you need Commission approval, please contact us and provide the information set out in the bullet points above.
What if we have already proceeded with a transfer and/or granting of indemnity without first obtaining the Commission’s approval?
A transfer (or granting of indemnity) that should have had Commission approval but has gone ahead without it does not automatically require any further action.
In certain circumstances, the Commission can take steps to help a charity affirm its previous decisions. However, we would only consider doing this if a third party indicated to the trustees that it intended to challenge the transfer or granting of indemnity. It may then become necessary to establish and confirm that the trustees’ decision was in the charity’s interest.
The Commission would not be able to grant retrospective authority, but could affirm the continuation of the situation. This affirmation, however could not:
be given to a charity that has ceased to exist after transfer; or
authorise trustees to retain payments received as a result of an indemnity being triggered
If there is no prospect of challenge to the transfer or to the granting of indemnity, there is no need to contact us.
If the trustees of either a transferring (and still existing) charity or of a receiving charity are facing a challenge to a transfer or granting of indemnity that would have required the Commission’s approval, but did not obtain that approval, please contact us. You should explain the situation providing information about what approval you believe should have been provided and why, and the challenge.
Asset transfers from one CIO to another
Ask the Commission to approve a CIO asset transfer by completing its online form, attaching PDF copies of the members’ resolution from:
the transferring CIO, agreeing to transfer the assets
the receiving CIO, agreeing to receive the assets
The Commission can direct the transferring CIO to give public notice of the transfer. It must take into account any representations made to it within 28 days.
The Commission must decide to confirm or refuse the transfer within 6 months of either:
- the date that the resolution is received, or
- the start of the public notice period (if required)
The Commission can extend this timescale by a further 6 months if needed.
If you’re transferring all a CIO’s assets, rights and liabilities to another CIO because it’s closing, the Commission will automatically dissolve the transferring CIO once it approves the new, receiving CIO. All the original CIO’s property, rights and liabilities then belong to the receiving CIO.
How to complete an asset transfer
Once the transfer power resolution is passed and any necessary approval granted, arrange for all assets to be transferred to the receiving charity/ charities on an agreed date. Give any receiving charity:
- a copy of the transfer power resolution
- a letter confirming the effective date of transfer
- title deeds and other relevant documents if transferring land or property
If you’re closing your charity, you must arrange for its last year’s meeting records, accounts, trustees’ annual reports and any other documents to be kept for at least seven years after you close it. The receiving charity may agree to do this for you.
If you’re transferring assets because your charity is closing, you can only remove it from the register of charities once the resolution has been passed, paperwork completed and all assets transferred.
Take legal advice if you need it, for example if the transfer is complex because it involves permanently endowed land or investments.