What are the steps for closing down a charity? Stone King Consultant, Clive Vergnaud, outlines the key steps involved in formally closing down a charity, including an example of how a strategic merger can preserve charitable impact despite insolvency.
Charities may close for various reasons – merging with another organisation, transitioning to a new legal structure like a CIO, or due to financial pressures, loss of members, or a shift in relevance of their original purpose.
Whatever the reason, trustees must understand the formal process, potential costs, and liability risks. While the exact steps vary depending on the charity’s legal structure, four key stages apply to most closures.
We also explore early warning signs in our article: What are the signs your charity may need to close.
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Trustee resolutions
The first step is to consult the charity’s governing document, which should outline the dissolution or winding-up process. Trustees must pass formal resolutions at a board meeting to initiate closure. These may require more than a simple majority, reflecting the significance of the decision.
If the charity is a membership organisation, members may need to approve the closure, or at least be notified.
Key resolutions include:
- Approval to begin the winding-up process
- Arrangements to settle debts and liabilities
- Authorisation for filings with the relevant regulator (e.g. the Charity Commission, Companies House, or the Financial Conduct Authority for charitable community benefit societies)
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Settling finances
Trustees must ensure all debts and liabilities are cleared, including property-related costs and professional fees. Remaining funds must be used in line with the charity’s purposes or restrictions, such as:
- Returning unspent grant money
- Complying with appeal fund conditions
- Transferring assets/funds to another charity with similar aims (this could be as part of a merger or a final grant of net assets – perhaps to hold as an endowment to provide a legacy for the future)
Final accounts should be prepared to show a zero balance, and bank accounts closed.
If insolvency is a risk, trustees must act promptly and seek legal and financial advice. The implications vary depending on the charity’s structure:
- Charitable companies follow company law insolvency rules
- CIOs follow CIO-specific regulations
- Unincorporated charities may expose trustees to personal liability
In all cases, trustees should secure run-off insurance to ensure the closure does not leave them more exposed to liabilities than if the charity had continued in existence. In the case of a merger, it may also be appropriate to seek to negotiate an indemnity from the continuing charity, to ensure trustees are not left worse off as a result of the merger.
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Restrictions on closure
Trustees must ensure no restrictions prevent closure. This includes:
- Selling or transferring land and property
- Managing permanent endowments (which may require Charity Commission approval)
- Checking for any other obligations in the governing document (e.g. notifying a local authority)
Charitable companies face additional restrictions in the three months before closure, such as:
- No name changes
- No trading (except for winding-up activities)
- No disposal of assets used for trading
- No unrelated activity
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Applying to close the charity
Once all requirements are met, trustees can apply to remove the charity from the Charity Commission register.
The process depends on the charity’s structure:
- Charitable companies must first dissolve and be struck off at Companies House
- CIOs must pass a resolution confirming finances are settled and assets dealt with
- Unincorporated charities must meet any express restrictions in their governing documents
Trustees should also:
- Notify stakeholders (members, employees, funders)
- Inform HMRC for tax purposes
- Retain accounting records for at least six years.
Communications
Throughout the process, trustees will need to consider carefully how they communicate about the merger. Initial, confidential trustee discussions will at some point need to be extended to senior management, and then in time more broadly to staff and stakeholders (funders, donors, volunteers, partners, supporters, etc). Communications should be timed sensitively based on the audience, and trustees should aim to put forward as positive a message as possible, drawing on what has been achieved and the legacy to be taken forward.
Timing & insolvency
As discussed in a recent panel session at the Festival of Trusteeship (recordings will be available for non ticket holders sometime in 2026 or you can buy early access to recordings here), charities should consider closure options (including merger) well in advance of running out of funds. Being able to hold merger or wind-up negotiations from a position of relative strength enables trustees and senior managers to consider how best to support beneficiaries through the closure process and preserve the charity’s legacy in the long-term, and allows time to manage the wind down and put forward a positive narrative around the closure.
Charities that leave it too late to initiate closure protocols may find that they have too few assets remaining to meet their liabilities. At this stage, for corporate charities, insolvency practitioners will become involved and their primary function will be to ensure that creditors get their money back. Charity-specialist insolvency practitioners will try to do what is best for beneficiaries as well but that aspect will be subordinate to protecting creditors’ interests. Necessarily, from that point, the range of possible outcomes is limited and the likelihood of positive outcomes for beneficiaries is reduced. That is not necessarily always true, however.
Case study: Relate and Family Action Merger
In 2024, Stone King was proud to support Family Action in its acquisition of Relate, the national counselling charity, which had entered administration in late 2024 following the loss of key government contracts.
The merger, completed in January 2025, secured 185 jobs and ensured continuity of Relate’s vital relationship support services. Relate now operates under its own brand within Family Action, with clear mission alignment between the two charities. Stone King continues to support the integration of services, helping both organisations navigate the legal and operational complexities of merger and transformation.
This case highlights how strategic collaboration — even in the face of insolvency — can preserve impact and strengthen the sector.
You can hear Sir David Holmes, Chief Executive of Family Action discuss their merger processes in our Good Merger Index launch webinar recording here.
Conclusion
The complexity and duration of closing a charity depend on its structure and circumstances. While closure can often be completed within three to six months, trustees should not underestimate the potential challenges and costs involved.
About Clive Vergnaud
Clive Vergnaud is a Consultant at Stone King LLP and an experienced charity and social enterprise lawyer. He advises charities, social enterprises, purpose-led businesses, and other public benefit organisations on a wide range of operational, governance, regulatory, constitutional and transactional matters.
Stone King were sponsors of the governance strand at the 2025 Festival of Trusteeship.
