Should we merge with another charity?

England and Wales: This page sets out the position in full. Scotland: OSCR must consent to an amalgamation, and its checklist and legacy rules are set out below; whether OSCR applies a purposes test like England and Wales’s has not been established. Northern Ireland: a small unincorporated charity has its own statutory transfer power, with a notify-and-wait procedure instead of prior consent — see below.

Purposes first: the test that decides everything else

In England and Wales, one legal question comes before you merge with another charity. The question is whether the two charities’ purposes are the same or substantially the same. Most merger advice starts with fit, culture and finances. Those matter. But the purposes question is the gate. The Charity Commission’s guidance says, word for word:

“In most cases, charities can only merge with other charities that have the same or substantially the same purposes.”

This page assumes the board has already diagnosed what needs to change and checked which amendment route your charity uses.

If your purposes are not close enough, you cannot just merge. You change your purposes first. That is a regulated change, so it needs the Commission’s authority. The guidance says you need it “before you can use the general power to merge”. Can we change what our charity is for? covers that route.

So purpose fit is not a due-diligence question. It is the gate before due diligence. Answer it on paper first. Set both governing documents side by side before anyone spends money on the rest.

The special trust trap: read your dissolution clause first

If the other charity’s purposes are wider than yours, your assets may become a special trust instead of merging. This is the most-missed point in the Commission’s merger guidance. Missing it is costly.

Take a county-wide youth charity and a town youth club. The county charity’s purposes are wider than the club’s and include them. The club can still use the general power to transfer. But the guidance goes on, word for word:

“If the receiving charity’s purposes are wider than your charity’s purposes and include your charity’s purposes within them, you can use the general power – but… the receiving charity cannot merge your charity’s assets with its own. Your charity’s assets would become a special trust of the receiving charity.”

A merger on paper, but two separate funds in practice, for good. Here, a special trust is a fund the receiving charity holds apart. It is for your narrower purposes only, for as long as the assets last.

Its accounts would show the fund apart from its general funds, much like restricted funds. Record your first restricted grant correctly shows how those are kept.

One way round it lies in your own documents. Your dissolution clause may say your assets can go to a charity with wider purposes. If it does, the special trust does not arise. Agree your powers, membership and dissolution clauses shows what those clauses often say.

So read your dissolution clause before anything else. If the clause does not help, your options are to change purposes first, accept the special trust, or not merge.

Two powers, and two decisions

Your power to transfer assets into a merger comes from one of two sources:

• the general power, available where the transfer furthers your purposes
• an express power in your governing document

And the merger needs two decisions, not one. The Commission’s guidance says, word for word: “The trustees of each charity must make their own decision to merge. This decision must comply with your trustee duties, such as the duty to act in your charity’s best interests.”

The two boards will have been planning together for months. That is why this point gets missed. The boards have no joint decision to minute. Each board decides whether the merger is right for its own charity. It decides on its own evidence, and records it.

What the decision has to show

A merger is a transfer of assets from one charity to another. It is not a change of legal form. Nothing about it is automatic. A good decision record answers five things:

1. Whether the purposes are the same or substantially the same. Set out both, side by side.
2. Which power you will use — the general power or an express one.
3. What your dissolution clause says about a wider-purpose recipient.
4. The alternatives: changing purposes first, accepting a special trust, working together without merging, or not merging.
5. How much checking comes next. The Commission says the rigour “will depend on the circumstances of the charities merging”. It sets out a 27-item checklist for the whole merger. Due diligence is one line of it.

The checking itself is the next step, carry out merger due diligence. The mechanics and the register come after it, in How do we actually do the merger, and do we have to register it?.

Scotland: OSCR consents, and one question is open

In Scotland, amalgamating with another body needs OSCR’s consent under section 16(2)(b) of the Charities and Trustee Investment (Scotland) Act 2005. The charity gives notice. If OSCR does not refuse, or direct a delay, within the statutory period, consent is taken as given. SCIOs are outside section 16. They have their own amalgamation route under the 2005 Act.

OSCR’s “Amalgamation” page covers the application only. Its checking content sits under “A guide to incorporation”. There OSCR says you should think about TUPE, pensions, legacies, leases and endowments.

Since 30 June 2025, Chapter 7A of the 2005 Act lets a Scottish merger be registered. Registration unlocks the Scottish section 64D legacy test. This guide’s research reads that test as the strongest of the three UK nations’. That is a reading of the statute, not a finding by a court or OSCR.

One question is open. England and Wales has the “same or substantially the same purposes” gate. Whether OSCR’s amalgamation consent carries a similar purposes test has not been established.

Section 16 of the 2005 Act is silent on it. No OSCR guidance was found that treats it as a legal test. Do not assume the Scottish test is the same. Ask OSCR before you rely on it.

Northern Ireland: a statutory power for small charities

Northern Ireland has no CIO form, but it does have a register of mergers. The register has been in force under the Charities Act (Northern Ireland) 2008 since 24 June 2013.

Section 123 of the Northern Ireland 2008 Act gives a small unincorporated charity its own power to transfer all its property to another charity. The power has three conditions:

• the charity’s gross income in its last financial year was not above a set limit
• any designated land it holds is worth no more than a set cap
• it is not a company or other body corporate

The purposes test is written into the Act. Trustees must be satisfied that the recipient’s purposes are “substantially similar” to their own. The resolution needs a special majority of the trustees.

The procedure is notify-and-wait, not prior consent. The trustees send the resolution and reasons to the Charity Commission for Northern Ireland. The Commission can require public notice, with a window for representations. The resolution takes effect after a fixed period from when the Commission gets it.

Restrictions on the property travel with it. Section 123(9)(b) says transferred property stays “subject to any restrictions on expenditure to which it was subject”. That is Northern Ireland’s version of the special trust point in England and Wales.

Above the income or land limit, or for a company, trustees rely on their own governing document’s power. A company also needs the Charity Commission for Northern Ireland’s consent for any regulated change to its constitution.

The income limit, the land cap, the majority and the periods are all set in the Northern Ireland Act’s section 123 itself. None is yet a figure this guide can print from its own data. Read them at legislation.gov.uk.

Wherever you are, once each board has decided in principle, the next step is to carry out merger due diligence.

Common mistake: merging into a charity with wider purposes without reading your own dissolution clause

Almost nobody reads the dissolution clause before starting. Say the receiving charity’s purposes are wider than yours and include yours. The general power is available. But the receiving charity “cannot merge your charity’s assets with its own”, and your assets become a special trust.

Your dissolution clause can prevent that, if it permits merger into a wider-purpose body. A merger on paper, two separate funds in practice, for good.

Common mistake: starting due diligence before the purposes test

Purpose fit feels like part of the checking. It is not. It is the gate. In most cases charities can only merge where purposes are the same or substantially the same. If they are not close enough, you change your purposes first. That needs the Commission’s authority before the general power to merge can be used.

Common mistake: treating the decision as a joint one

The two boards have planned it together, so it feels like one decision. The Commission’s guidance says the trustees of each charity must make their own decision. They make it in line with their own duties, such as the duty to act in their own charity’s best interests. You minute two decisions, not one joint one.

Worked example

Tollgate Youth CIO is thinking about merging into a county-wide youth charity. The county charity’s purposes include Tollgate’s, and go further.

The trustees start with the purposes. The county charity’s are wider, so the general power is available. But without more, Tollgate’s assets would become a special trust of the county charity. They would be kept apart for Tollgate’s narrower purposes, not merged.

So the chair reads Tollgate’s dissolution clause. If it allowed assets to go to a charity with wider purposes, the special trust would not arise. Here, suppose it does not.

The trustees set out the alternatives:

• change Tollgate’s purposes first, with the Commission’s authority
• accept a special trust
• work alongside the county charity without merging
• not merge

They decide to look into a purposes change before going further.

The outcome: a minuted decision. It records how the purposes compare, what the dissolution clause says, the alternatives weighed and the route chosen. The county charity’s board makes its own decision.