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Planning for closure

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Use this page to understand how you should plan the closure of your voluntary organisation. It gives you questions you will need to answer to help you understand what needs to be in a closure plan.

Depending on your route to closure and your legal structure, you may have different legal duties and wider responsibilities. You need to adapt our advice to your context and take specialist advice when needed. 

Set a closure plan 

You should set a closure plan which includes details of: 

  • what tasks must be completed before closure. 
  • how will the tasks be completed.
  • when and in what order tasks are completed. When developing this timeline remember that some tasks must be completed before others can be started. This timeline should include an intended closure date. 
  • who is responsible for delivering each task.
  • who is monitoring or approves that the task has been completed.

For a small organisation, the plan may be as simple as a checklist of tasks. 

For larger organisations, it may be a much more in depth set of linked documents with specific working groups or different plans for different areas of closure. If you have a Business Continuity Plan this may include some useful pointers for what tasks to consider. 

Things to check before drafting a plan 

You will need to confirm some details before you set your plan:

  • Your legal form: Unincorporated associations or trusts, charitable companies and Community Interest Organisations are all governed by different legal rules and requirements when closing. Read the Charity Commission guidance How to close a charity for details of what information is needed. Use this to develop your timeline for closing. You may have additional considerations if you are a linked charity
  • Whether you have a relationship with a non-charity: in these circumstances, when closing your organisation you should identify and act on any risks which come from the disconnection so that your charity’s resources or activities do not fund or support non-charitable purposes. You should review the Charity Commission guidance on relationships with a non-charity and seek additional advice as needed.
  • Whether you are solvent: if your organisation is unable to pay its debts and does not have assets sufficient to cover the costs it faces, you may be insolvent. This may affect whether you can close voluntarily or whether you need to enter administration. See further details on our serious financial difficulties and insolvency pages
  • Your closure team: You will need to decide which people will be available when to assist with the closure. Some initial timelines for different members of staff and volunteers leaving the organisation will help you consider what capacity will be available for specific tasks. Use this information to consider who may complete what tasks and whether you require additional interim support to help you close. Some organisations may appoint interim managers to give them additional capacity or skills during the closure period. Learn more in our guide to appointing interim managers
  • Who will hold any final records: Depending on your activities and legal form you may be required to retain records. This may be due to: 
    • a legal requirement (for example, a charitable company must retain accounting records at least three years after the year they were produced)
    • a grant or contractual record (for example, previous statutory funders may require records to be available for seven years)
    • active legal proceedings or if your organisation is responding to a safeguarding concern. 
  • Whether there will be any legacy events or activities: Do you want to have an event to mark the closure of the organisation? Some organisations will produce a book of memories or a new, standing legacy webpage which gives details of what the organisation achieved. This decision will affect what tasks and budget is needed. 
  • Update your asset register: You should ideally have an organisational Asset Register listing all physical assets - items like computers, cameras, furniture. If you do not have an Asset Register, your latest statutory accounts will have included details of assets in the organisation. Update the Asset Register and include any recent items and their current value. This decision will affect your closure budget and decisions on transferring assets. 
  • Who will be impacted by your closure: If you work with people who will be vulnerable or put at risk by the closure of the organisation, carefully consider what arrangements can be made to support them going forward and provide details. You may need to consider informing other like minded charities or statutory services in advance and consider how they will respond to the change. 

Planning communications about closure

Once the decision has been made to close, you will also need to decide who to inform and how to inform them. Closing any organisation can create uncertainty for those affected by its work.

By keeping people affected by your closure informed of relevant and accessible information, you can reduce their concerns and avoid any misunderstandings. This can also provide an opportunity for you to involve them in the closure and seek additional support or assistance. 

It is helpful to have a plan for your communications. Details to consider include:

  • Who needs to be informed: Consider the main audiences you need to keep informed. This might include service users, members of the public, funders, likeminded or partner organisations, organisations which refer people to you and any relevant statutory bodies.
  • When they need to be informed: News of closure may travel fast and no one will want to hear second hand. Carefully prepare and schedule your communications making sure those most affected by the closure hearing the news first - for example, volunteers and service users. 
  • Your key messages: explain the key reasons for the closure. Try and keep a few short, simple statements which explain why you are closing and the next steps in the process. You need to communicate why you are closing as well as what the process of closure will look like. 
  • How you will inform people: While you may want to tailor what you say to different groups, there should be commonality between what all groups are told. For those most invested in your organisation, make face to face or direct contact the main communication channel.
  • What tone to take: Be empathetic and give people the chance to reflect on the impact you’ve had. Be honest about the implications of closure for your cause or the people you seek to serve and explain what you will do to ease the impact of closure through the process. While additional details on the context may be useful; try to avoid being defensive or regretful. Be clear about the finality of the decision and when and how your board made the decision. 
  • Be clear about future involvement: What role can people play in closing the organisation. Can people’s memories of the organisation be compiled as part of any closure event or process? Will you be seeking volunteers to assist with the closure? 
  • When will updates be available: If you can, give timescales and how they will be kept informed. 

Responding to others reactions to closure can itself be a time-consuming task. Every situation will be different, but after the news is announced it is important to monitor and engage with people’s responses.

Try to understand their perspectives and needs and talk openly with them about the decision. Give thought to appropriate answers to common questions and evolve your initial communication and key messages. 

Thing to consider include: 

  • Some may be shocked and worried. Prepare information on likely timelines, next steps and how the organisation can refer or signpost them to another organisation. If decisions on this have not yet been made, give a likely timeline for when this can be provided. 
  • Some may be hostile to the decision. Where possible focus on the common ground you all share and explaining why trustees or members have made the decision. 
  • Some may try to 'save' the organisation. Consider how to balance being open to new suggestions but also the limited capacity you have to engage in further developments. Hold a face-to-face discussion with trustees early to avoid any future conflict. 

Planning finances during closure

Understand what money you have to spend on closure

You will need to have an accurate understanding of cash you hold  available to pay for the costs of closure. 

You should: 

  • Identify known future income and expenditure: You should get an accurate and up to date list of which organisations, suppliers or individuals you owe money to (known as a creditor) and anyone who owes you money (known as a debtor). These will need to be resolved before you close any bank accounts in your organisation's name. You should consider how likely it is that you will receive all money owed to you before your closure date. Trustees should be cautious of ‘writing off’ any funds owed to the charity. 
  • Decide what to do with any designated funds: Trustees can designate part of their unrestricted funds for a particular project or use, without restricting or committing the funds legally. For example, it might create a ‘pot’ for a future project. This ‘pot’ will be presented in your year-end accounts as a transfer from general funds to designated funds during the period. As you are closing, a decision can be made by trustees to change the use of these funds back to general funds again or it might seek to transfer the funds to another organisation for a connected purpose (see below). These decisions should be clearly recorded. 
  • Consider previous years income recognition: There are accounting rules about when charities can recognise the income they have been pledged by donors. You may have recorded income in your annual accounts which you will now not receive as you are closing.
  • Confirm the status of any restricted funds: Restricted funds can only be used for particular purposes of a charity that are narrower than the overall charitable purposes of the charity. Unlike designated funds, the charity is subject to liabilities arising from being in breach of trust as a result of not adhering to the restrictions on the use of the funds. When closing, you should check that you have an accurate record of the status of any restricted funds held by the organisation. You should confirm that they are truly restricted rather than simply recorded as restricted - sometimes it may have been a ‘request’ from a donor that they be spent in a particular way rather than a legal requirement. In some circumstances you can use processes under the Charities Act 2011 to change the use of restricted funds; see this article by Bates Wells for details on changing the use of restricted funds
  • Consider the use of restricted funds during the closure period: Many charities will use restricted funds to pay towards its staffing or activities. You should consider whether you will be able to demonstrate that this apportionment will be used during the closure period. And be able to justify to the donor how this use of funds met any restriction imposed. 
  • Assess what funds can meet the costs of closure: Reserves are that part of a charity’s unrestricted funds that is freely available to spend on any of the charity’s purposes. You should consider what reserves you hold, whether these will be used to fund the closure process and what you plan to do with any remaining funds. 

Set a closure budget

You may have decided to sell any assets - like computers or furniture - and have expectations of this income. 

There will be costs involved in the closure of the organisation. You will need to consider how your income and expenditure will change from the point of deciding to close and the final closure date.

You may have little or no more income as donors stop giving whilst also having continuing recurring fixed costs - for salaries, rent or utilities.

One off costs which you may incur include: 

  • being liable for redundancy costs
  • additional legal support 
  • paying for disposal of waste and recycling or to destroy data
  • ‘make do’ costs associated with any property or land you rent; this may be a contractual obligation
  • penalties for finishing contracts and leases early 
  • a final audit
  • stock held by the organisation may be written off or disposed of at a lower value than recorded. 

Decide whether you will produce a final set of annual accounts

It is good practice to have a final set of accounts showing where the organisation's assets have gone and that there is a nil balance upon closure. This provides public accountability to your supporters and donors.

Beyond this, requirements to produce a final set of annual accounts can depend on the legal form of your organisation, its turnover and whether you are insolvent. If unsure, always seek professional advice. 

  • Check your organisations governing documents on whether there is an obligation to produce a final set of annual accounts. 
  • Depending on your activities, you may need to produce final accounts to provide to HMRC.
  • The Charity Commission generally does not require final accounts but may request these if it is a requirement of the charity's governing document or if they have other concerns. 
  • Companies House does not require final accounts to strike off a limited company from the Companies Register.

If you are VAT registered 

When you stop trading or making VAT taxable supplies, you will no longer be eligible to be VAT registered. You must inform HMRC and cancel your registration. If you are closing over a period of time and your VAT taxable turnover falls below the registration threshold you may also seek earlier deregistration.

You may need to account for VAT on any held stock and submit a final return. From the date of cancellation you must stop charging VAT and keep your VAT records for six years.

Transfer any remaining assets 

Your organisation may have some remaining assets - including money held in your bank accounts or investments - of which you will need to dispose. Depending on your legal form and turnover, there are rules that you may need to follow to pass these assets on to another organisation.

In addition, your governing documents may include provisions about when and how you can transfer assets. You may also need the permission of a regulator to undertake the transfer. 

Close all bank accounts 

You need to ensure that the signatories on any bank accounts remain employed in the organisation or that additional signatories are added if they are leaving the organisation. Ensure that there are enough people to be able to safely access your funds easily. 

If you are a charitable company, it is the responsibility of the trustees (acting as Directors) to deal with the property and assets of a company before it is dissolved; such as by transferring to another organisation as explained above.

You should ensure all bank accounts are empty before you seek removal from Companies House. Property, cash and any other assets owned by a Charitable Company when it is dissolved automatically pass to the Crown. This is a process known as ‘bona vacantia’. 

Reduce the risk of your materials being misused

Unused organisation’s materials can be used by others to commit crimes like fraud. Whilst you may need to keep some financial records, make sure that you identify, collect and destroy any cheque and paying-in books, credit and debit cards and other banking information. 

Page last edited Oct 09, 2020

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