• Date

    01 Jun 2022
  • Category

    Advisory

Managing mergers: Is it in the best interests of your beneficiaries to close your charity?

A strange question perhaps, but as charities plan their future, merging may be an option. While there may be a long list of considerations for merging, we list a few of them below:

Beneficiaries’ interests

The best interests of your beneficiaries should be a starting point, by making better use of charitable funds or increasing your impact. However, such a decision should not be taken lightly as the process can be complex, time consuming and costly.

Legal structure

There are three main methods of merging:

  • One charity transfers their activities to another and then closes.
  • Both charities transfer their activities to a new charity, and then close.
  • One charity becomes the sole legal member of another charity but retaining the separate entities.

Governing documents

Governing documents will need reviewing for any clauses relevant to mergers and whether they are suitable for the combined operation. Permission may be required from The Charity Commission. Trustees will need to be heavily involved, and if your legal members are separate to the Trustees, they too may need to approve the process.

Understanding the proposed partner charities

The vision, culture and values of each charity need to be assessed. This is often assessed between the respective chief executives, but understanding the impact at all levels of an organisation is important.

Leadership and governance

Agreeing early in the process who will, and therefore who will not take key roles in the merged organisation is important and may, for some, be painful and controversial.

Understanding the risks

Any merger is unlikely to be risk free and therefore trustees will need to assess what level of risk they are willing to accept. For example, the new combined charity might go in a different direction, or they might use unrestricted funds to cover activities you would not have prioritised.

Understanding the risks

Any merger is unlikely to be risk free and therefore trustees will need to assess what level of risk they are willing to accept. For example, the new combined charity might go in a different direction, or they might use unrestricted funds to cover activities you would not have prioritised.

Download issue four of our 'Revive, Refocus, Rebuild – The journey back to better' guide to find out more…

Would you like to know more?

If you have any queries regarding what we cover in our guide, please get in touch with your usual contact or email charities@azets.co.uk.

About the author

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Mark Jackson

Partner Peterborough
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