Winding up and insolvency of charities : including rescue mechanisms.
This study aims broadly to explore the legal and practical problems of winding up
and insolvency for charities that are, or ought to be, registered with the Charity
Commissioners for England and Wales and to explore possible 'rescue
mechanisms.' It seeks to identify common underlying factors or trends associated
with charities becoming insolvent or being wound up.
The methodology consisted of book work and practical research in which a detailed
study was made of 130 charitable companies and the experiences of legal and
accountancy practitioners were sought. Twenty case studies were put together from
information provided by the practitioners and from the author's own experience.
The areas of legal complexity explored include problems associated with land and
endowments, and the augmentation principle in respect of bequests to a corporate
charity that has been dissolved. Some issues such as property holding and personal
liability are more complex in an unincorporated association. Practical difficulties
such as disputes between trustees, between staff and trustees, or between members
are significant as are the legal and practical complexities associated with the contract
Charities represent an important sector of the economy, collectively being worth
£19.7bn in 1998, and their success or failure is of public concern. The research
indicates that charities are affected by societal changes, legislative change and
changes in the attitudes of beneficiaries. Their dissolution or winding up is often a
result of a combination of factors, both internal and external and service providing
charities appear to be particularly vulnerable.
The quality, cost, and availability of professional advice is considered. It is
suggested that the role of local intermediary bodies could be enhanced and that a
means be found for accrediting the competence of charity advisors, whether
professional or lay.