There are several reasons why a charitable organisation may wish to transfer operations and assets to another charity: perhaps you’re an unincorporated organisation or charitable trust and want to incorporate, so you’ve set up a brand new charity to which you now need to transfer your assets; or possibly you’re a charity that may be considering an amalgamation with another organisation. Whatever the reason, the process of transferring a charity can be a major project, especially for smaller organisations. Some key considerations are:
- Culture, communication and engagement: Arguably the most important step of all is to ensure that you engage with all of the stakeholders of the charity at an early stage. From funders to employees to service users, each will bring their own perspective and it’s important that they feel listened to and that any concerns are addressed. If you are considering an amalgamation, consider the cultures of both organisations as often a clash of cultures can be more of a bar to success than any legal issues.
- Remember to get OSCR’s consent: Under the Charities and Trustee Investment (Scotland) Act 2005 certain actions require OSCR’s consent before the charity can implement certain changes. This includes prior consent to amalgamating with another body or winding up or dissolving, so it is likely that you’ll need OSCR to be involved in any transfer in advance.
- Think about existing contracts: All contracts in place with your existing organisation should be reviewed to see what will happen to them if you cease to formally exist. This includes all grant and funding agreements – are they capable of being transferred? It might be the case that third parties need to agree or consent to the transfer. You’ll also need to consider what will happen to any legacies that are left to the existing organisation.
- Consider land and property: Does your existing organisation own land, or do they lease any premises? Similarly, to any existing contracts, you’ll need to consider how to properly transfer any property.
- Do your due diligence: In the case of an amalgamation, one of the first steps should be to perform a due diligence exercise on the other charity to ensure both parties understand what they are agreeing to, what assets the other charity owns, and what liabilities they are responsible for.
- Think about employees: If your existing organisation has any employees then the Transfer of Undertakings Regulations will need to be considered, together with the appropriate treatment of any pensions.
- Don’t underestimate timescale: Be prepared for the process to take a few months. Where you need OSCR’s consent, the charity should seek this not less than 42 days before the date on which the action is to be taken. Make sure OSCR’s turnaround times have been factored into the timetable.
- Remember member authorisations: Depending on your existing legal structure, you might require formal consent to the transfer from members or from the board. Your constitution should set out how and when meetings can be called for these purposes and it’s important that these processes are follow.
There are many considerations when transferring a charity and it is important to get the right advice for your circumstances. If you would like to discuss anything mentioned in this article please get in touch.