How do we decide to close a charity properly?

England and Wales: This page sets out the position in full, for a CIO, a charitable company and an unincorporated charity, including the offences in the CIO route. Scotland: covered, and fundamentally different — OSCR’s consent is needed before any winding-up step, and a SCIO follows its own regulations; set out below. Northern Ireland: covered — there is no CIO; a charitable company closes under Northern Ireland’s own insolvency Order or the Companies Act, an unincorporated charity under its governing document, and the Charity Commission for Northern Ireland must then be told.

First: solvent or insolvent?

Whether you close a charity in England and Wales, Scotland or Northern Ireland, it is two decisions, not one. The law treats closing while solvent and closing while insolvent differently.

• Solvent: the charity can pay all its debts and has assets left over. The trustees choose a route, settle everything, and pass on what remains under the governing document.
• Insolvent: it cannot, on either test in recognise financial distress early. Then the route runs through a licensed insolvency practitioner. Take formal insolvency advice and know when to stop applies, not this page’s solvent sequences.

For a CIO, the statute sets the dividing line, and backs it with an offence. Applying to the Charity Commission to dissolve a CIO while any debt or other liability is not settled or provided for in full is a criminal offence (SI 2012/3013 reg. 8). The Regulations give a defence where the trustee reasonably believed it had been. So the solvency question is not a formality to tick off at the end. Answer it first, with your accountant or insolvency practitioner, and minute the answer.

Three structures, three routes

In England and Wales, the route depends on the charity’s structure.

	CIO	Charitable company	Unincorporated association or trust
Who decides	Trustees propose; members resolve	Directors (trustees), and members for a liquidation	Trustees, under the dissolution clause
Where the rules are	SI 2012/3013, Part 3	Companies Act 2006 (strike-off) or insolvency law (liquidation)	The governing document
Companies House?	Never — a CIO is not on the companies register	Yes, and first	No
Who ends it	The Charity Commission, by removing it from the register	The registrar of companies	The trustees; then they tell the Commission
Statutory cost	No fee was found	The strike-off fee, or the cost of a liquidation	No fee was found in the Commission’s guidance

Closing a solvent CIO: the sequence is in regulations

The CIO closure sequence is set by regulations, not guidance. For years it has circulated as “the Commission’s guidance”. Every element is in the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012 (SI 2012/3013, England and Wales), Part 3. A reader who thinks a step is guidance will treat it as a courtesy.

1. Members’ resolution. The CIO’s members resolve to dissolve. One way is a general meeting, by a majority of 75 per cent of those voting, including proxy and postal votes where allowed (reg. 6(1)(a)(i)). Where the constitution lets members decide without a vote, a meeting can decide without a vote and with no one dissenting (reg. 6(1)(a)(ii)). The other way is a unanimous decision of the members outside a general meeting (reg. 6(1)(b)). How a members’ meeting is called and run is covered in hold your AGM or members’ meeting.
2. Notice of the meeting. At least 14 clear days. That does not count the day notice is given or the day of the meeting (reg. 6(2)–(3)). Shorter notice needs a qualifying majority: a majority in number of the members entitled to attend and vote, together holding at least 90 per cent of the voting rights. If the constitution says so, the figure is higher, up to 95 per cent (reg. 6(4), (6)). Shorter notice is not a trustee decision.
3. Declaration. The trustees declare “that any debts and other liabilities of the CIO have been settled or otherwise provided for in full” (reg. 5(b)(ii)).
4. Application to the Charity Commission, by the trustees or a majority of them. It includes the resolution, the declaration and a statement of how the CIO’s property is to be applied under its constitution (reg. 5).
5. Notice after applying. The trustees who applied must secure that notice is given to every member, employee and trustee, apart from the trustees who made the application (reg. 12(1)–(2)). They have 7 days, beginning with the day of the application. Under reg. 13(2), notice counts only if it is delivered to the person, left at their proper address, or sent by post. Email is not a listed method.
6. Removal. The Commission publishes notice of the application. It must not dissolve the CIO until 3 months after that (reg. 7(1)), and must not dissolve it at all if anyone shows cause in that time (reg. 7(2)). If no one does, the CIO is removed from the register and ceases to exist. There is no Companies House step.

Where does what’s left actually go? covers any property left in the CIO. It also explains why a properly executed dissolution clause keeps that property out of the Official Custodian’s hands.

The offences in the CIO route

Four steps in the sequence are backed by criminal offences under SI 2012/3013 (England and Wales). Each borrows a section of the Companies Act 2006. Every offence is triable in either court. In each case the defence is for the accused trustee to prove.

Provision	What it requires	The offence	Who commits it	Penalty	Defence
reg. 8(2), applying CA 2006 s.1004(5)–(7)	Do not apply while any debt or liability is unsettled, or a decision needed under the constitution’s directions has not been taken (reg. 8(1))	Applying anyway	The trustees who apply	A fine only	The trustee “reasonably believed” the debts were settled or provided for, or the decision properly taken (reg. 8(3)). No intent is needed for the offence itself
reg. 9(3), applying CA 2006 s.1005(4)–(6)	Do not apply while a moratorium, voluntary arrangement, administration, winding up or receivership is live (reg. 9(1))	Applying anyway	The trustees who apply	A fine only	The trustee “did not know, and could not reasonably have known” of the facts (s.1005(5)). No intent is needed for the offence itself
reg. 12(5), applying CA 2006 s.1006(4)–(7)	Give the post-application notice in time (reg. 12(1))	Failing to give it	Each trustee who made the application — not the CIO, and not the board as a whole	Two limbs: a basic and an aggravated offence	The trustee “took all reasonable steps to perform the duty” (s.1006(5))
reg. 14(3), applying CA 2006 s.1009(5)–(7)	Tell the Commission and withdraw the application at once if an administration, winding-up or receivership event arises, or the CIO takes on a liability or activity that reg. 10 forbids once the application is made (reg. 14(1)–(2))	Failing to do so	Each trustee in office at the end of the day the event arises	A fine only	The trustee was “not aware” that an application had been made, or “took all reasonable steps to perform the duty” (s.1009(6), as reg. 14(4) modifies it)

The notice offence has two limbs.

• Basic offence — failing to give the notice, with no intent needed: a fine, in either court.
• Aggravated offence — failing to give it “with the intention of concealing the making of the application”. On indictment: prison for up to 7 years, a fine, or both. In the magistrates’ court: prison for up to 12 months, a fine, or both.

A trustee who thinks the post-application notice is a courtesy may skip it or send an email. The regulation’s methods are delivery to the person, leaving it at their proper address, or post, within the time it sets, to everyone it names.

A charitable company: Companies House first, the Commission last

A solvent charitable company in England and Wales has two routes.

• Voluntary strike-off under Companies Act 2006 s.1003. It needs form DS01, made by the directors or a majority of them. The company must not have traded, changed its name or carried on other non-excepted activity for a set period beforehand (s.1004). Then a notice goes in the Gazette before the registrar can strike the company off. The fee is £13 online or £18 on paper. The Companies House guidance sets out both periods. They are not repeated here.
• A members’ voluntary liquidation: a statutory declaration of solvency, a special resolution, and a licensed insolvency practitioner as liquidator.

The order is the thing people get wrong. Deal with assets and liabilities first. Then remove the company from the companies register. Only then tell the Charity Commission.

The Commission’s guidance explains why: a company “automatically ceases to exist when it is removed from the companies register”. The last step in this hub, Who do we tell, and in what order?, covers the notifications in full.

Strike-off does not end personal liability. Section 1003(6)(a) says “the liability (if any) of every director, managing officer and member of the company continues and may be enforced as if the company had not been dissolved”. Separately, the court may relieve an officer who “acted honestly and reasonably” and “ought fairly to be excused” (Companies Act 2006 s.1157). That power applies in proceedings for negligence, default, breach of duty or breach of trust.

The Act names “managing officer” alongside the directors; whether that reaches a particular chief executive is a question for a solicitor.

An unincorporated charity: the trustees decide

An unincorporated charity in England and Wales has no companies register and no formal insolvency process. The trustees:

1. check the dissolution clause and any other powers in the governing document (what such a clause usually says is in agree powers, membership and dissolution)
2. decide at a properly called and minuted meeting, following that document’s own rules
3. settle the debts
4. apply what remains as the dissolution clause says
5. deal separately with any permanent endowment or designated land
6. tell the Commission, using its online closure form

The Commission’s guidance says, verbatim, “You must tell the Commission you have closed your charity”. It names no fee for doing so. And as understand what you are personally liable for explains, until the debts are paid, the trustees can be personally liable for them.

Can a charity go dormant instead of closing?

No. England and Wales has no dormant status, however tempting it is to “go dormant” instead of closing.

Section 34(1) of the Charities Act 2011 says the Commission “must remove from the register … any charity which has ceased to exist or does not operate”. That duty is the Commission’s. It now runs a programme to find inactive charities. A charity that stops work keeps all its normal duties until it is closed or removed. The choices that remain are set out in diagnose what actually needs to change.

Scotland and Northern Ireland

Scotland reverses the order, with OSCR’s consent before the charity is wound up. In Northern Ireland the existing company and insolvency law already provides the route.

Scotland: consent before winding up

In England and Wales the regulator is told at the end. In Scotland, winding up or dissolving a charity needs the Office of the Scottish Charity Regulator’s consent first.

Section 16(1) of the Charities and Trustee Investment (Scotland) Act 2005 says a charity may wind itself up or dissolve “only with OSCR’s consent”. The charity gives OSCR notice of the proposal. Consent is treated as given unless OSCR refuses, or directs the charity not to act, within a set period after notice (s.16(4), (6)). A solvent SCIO follows its own regulations instead, set out below.

OSCR’s guidance sets out four steps, in order:

1. Assess the charity’s assets and liabilities.
2. Check the governing document gives the power to wind up or dissolve. Check the law for your legal form allows it too.
3. Decide what happens to the assets left over, under the dissolution clause.
4. Then apply to OSCR for consent — “before distributing the remaining assets and before taking action to wind up or dissolve”.

OSCR then consents, refuses, or directs the charity to take no action for a set time while it finds out more. It will refuse on one of three grounds:

• there is no power to dissolve
• the proposal is not allowed by the governing document
• the assets will not be used only for charitable purposes

A refusal can be reviewed. Once consent is granted and acted on, the charity tells OSCR. Only then does OSCR remove it from the Register. In OSCR’s words, “having OSCR’s consent is not what makes the dissolution happen”.

The date the charity legally ends differs by form, according to OSCR:

Legal form	Date of dissolution
Unincorporated association	The date the trustees formally agree to dissolve
SCIO	The date OSCR removes it from the Register
Company	The date Companies House dissolves it
Trust	The date the charity’s capital is spent

A solvent SCIO follows SSI 2011/237, regulation 3, not section 16. Its members pass the resolution, subject to OSCR’s consent, by the majority and within the window the regulation sets.

The resolution itself must name the body or bodies that will receive the surplus assets, before the application is made. A declaration of solvency and a statement of assets and liabilities go with the application, and the SCIO must write to every creditor it knows of (reg. 3(4)–(5)). OSCR publishes the application, takes representations, and decides. It removes the SCIO once the assets have been transferred.

Northern Ireland: no CIO, and the route already works

Section 95 of the Charities Act (Northern Ireland) 2008 has never been brought into force. But it was never the gateway to closing: it only adds who may petition. Northern Ireland has no CIO form. So:

• A charitable company can be struck off under the Companies Act 2006 ss.1003–1006 if solvent. That is the same Act, applying directly. The other route is winding up, voluntary or compulsory, under the Insolvency (Northern Ireland) Order 1989.
• An unincorporated charity dissolves under its own governing document. A small enough one has another option: the transfer power in section 123 of the 2008 Act. The income and land-value gateway for that power is not reproduced here.

The Charity Commission for Northern Ireland must then be told. That is the trustees’ duty under section 17(3)(a) of the 2008 Act. The Commission’s own duty to remove a charity that has ceased to exist is at section 16(5)(b). Remove the charity from the register, file final returns covers the notification. Transfer or distribute the remaining assets covers what happens to the assets.

The decision, step by step

1. Minute the solvency answer first, on both tests from the distress step, with advice.
2. Work out the structure and the route from the three-routes table — or, in Scotland, OSCR’s process.
3. Read the governing document’s dissolution procedure and follow it exactly: who calls the meeting, what notice, what majority.
4. Record where the assets left over will go, as the dissolution clause says. In Scotland, a SCIO names the recipient in the resolution.
5. Put each statutory step in the diary — for a CIO, the notice period, the post-application notice and the method of serving it.
6. Minute the decision, with the vote, the date and who will carry out each step.

Once the decision is minuted, the next step is to settle liabilities and deal with restricted funds.

Common mistake: deciding to close without first establishing whether the charity is solvent

“Close” sounds like one decision. A CIO’s solvent route needs a trustee declaration that all debts are settled or provided for (SI 2012/3013 reg. 5(b)(ii)). Applying while any debt is neither settled nor provided for is an offence, subject to a defence of reasonable belief (reg. 8). A company’s strike-off needs no recent trading. A members’ voluntary liquidation needs a statutory declaration of solvency.

If either insolvency test is failed, you are in steps 12 and 13, not here.

Common mistake: a charitable company telling the Charity Commission before Companies House

The Commission is the regulator trustees know, so they tell it first. The order is: assets and liabilities, then removal from the companies register, then the Commission. A company “automatically ceases to exist when it is removed from the companies register”.

Common mistake: giving a CIO’s post-application notice by email

Everything else is done by email. Regulation 13(2) of SI 2012/3013 lists delivery, leaving it at the proper address, or post. Email is not on the list. Failing to give notice in time is an offence by each trustee who applied. The offence carries prison if the failure is meant to conceal the application.

Common mistake: treating the CIO sequence as “the Commission’s guidance”

It has circulated without regulation numbers. Every element is in SI 2012/3013 Part 3, regs. 5 to 9, 12 and 13. That covers the majority, the clear-days notice and the declaration. It also covers the post-application notice, the method of service and the wait before removal.

Common mistake: deciding to “go dormant” instead of deciding to close

No such status exists in England and Wales. The Commission must remove a charity that does not operate (Charities Act 2011 s.34). Scotland now has its own removal power for charities that fail to file accounts.

Worked example

Tollgate Youth CIO, in England, decides to close while solvent. Its treasurer and accountant confirm all debts are paid or provided for. The board minutes that answer first.

The trustees call a general meeting of members, giving 14 clear days’ notice. The members pass the resolution by more than 75 per cent of those voting. The trustees sign the declaration that all debts are settled or provided for. Then they apply to the Commission.

The trustees who applied then post notice to every member, the youth worker and every trustee. They do it the same week, within 7 days of applying. They keep proof of posting and do not email it.

The Commission publishes the application. 3 months later, with no objections, it removes Tollgate from the register. The CIO ceases to exist. There is no Companies House step.

If Tollgate were a SCIO in Scotland, it would follow SSI 2011/237 instead. It would name the receiving charity in the members’ resolution, with OSCR as gatekeeper.

The outcome: a minuted, properly constituted decision to close, with the solvency declaration and the governing document’s procedure followed.