Charity mergers: On the rise?
The charitable sector has become increasingly competitive, with nearly 170,000 charities registered in the UK alone*. With these high numbers and a difficult economic climate, fighting for donations and standing out in the crowd can be hard work.
Although still a relatively small figure, a number of charities with similar aims and values have decided to merge to try and alleviate these issues. A merger can take a number of forms, including:
- One charity taking over another’s work and assets
- Forming a completely new charity to take over the work and assets of all charities involved
- One charity taking over the management of another charity but keeping it as a separate entity or brand within a group
Joining forces in an official capacity can have a number of benefits including:
- More effective use of charitable funds – one office, one set of accounts, less staff required, shared marketing practices and costs
- Succession – some charity founders worry what will happen when they step down or retire, merging allows their hard work to be continued by another party with the same values
- Doubling a database of contacts and supporters for an increased reach
- Duplication – a duplication of efforts can sometimes be a hindrance, a unanimous voice can be stronger and have more impact
- Reducing competition – if two charities in the same area are undertaking similar work and competing for funding and donations, merging may increase chances of securing funding and increase donations
- Strengths and weaknesses – one charity may find they have a very strong web presence and social media following, whereas another may have a low digital presence but a very profitable retail outlet and local voice
If you are considering a merger then the Charity Commission has put together a helpful checklist to allow you to identify if the move will meet the needs of the beneficiaries and make best use of charitable resources. You can view this here.
If the checklist suggests that the merger would be beneficial, there are still several steps you need to undertake and consider before it can be progressed.
What do your governing documents say?
The governing documents of your charity are incredibly important and work as a rulebook to set out exactly how the charity should run, who can run it and any limitations or restrictions, including how to close the charity.
Your governing document will need to be carefully checked to ensure they allow for any merger.
Do all charities involved have similar aims?
All the charities need to have objectives which align and similar aims to make the merger possible.
Do you need permission from the Charity Commission?
You do not usually have to seek permission unless it is specifically required in your governing document, or if the charities have different aims. However, consent may be required from the Commission to effect certain processes to complete the merger, for example, a scheme may be necessary to transfer assets.
Who can notify the commission of a merger?
The notification form may be completed by a charity trustee, staff member or volunteer, or by someone acting on behalf of the charity, such as a solicitor or an accountant.
It is anticipated that the notification will usually be received from the charity into which others have merged, however it will also accept notification from any of the charities involved.
It remains the responsibility of the trustees to ensure that the Commission is properly notified.
Do I need a vesting declaration?
A vesting declaration is a formal document that transfers the legal title of one charity’s property to another charity as part of a merger. It can be a useful tool to transfer the assets in a simple manner.
Your solicitor will advise on the necessity for any such document and what needs to be included within it.
Whether to merge, who to merge with, and finding out if you legally can merge, can prove to be a minefield. Obtaining professional legal advice early on in the process can save a lot of stress, time and confusion.
If you are considering merging with another charity then please contact me directly via james.peterson@GAsolicitors.com or call 01752 203500.
James Peterson, partner
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