Pothecary Witham Weld Solicitors

We are a charity which manages and has close links with another charity. In order to ease the administrative burden we would like to merge the two charities.  In the past this has not been possible due to legal complexities; are there any provisions in the new Act that will allow us to do this?

Answer

The Charities Act 2006 (‘the Act’) has introduced some measures to facilitate mergers and ensure that they occur smoothly. Merging any organisation is generally considered to be complex and involve a lot of cost and effort. For charities in particular, there is also the concern that legacies might be lost as a consequence of the merger or the change in name of the charity. In the past this was dealt with by allowing the transferor charity to exist as a shell charity just to continue receiving legacies but this was often an administrative burden and could lead to confusion arising.

The Act introduces a ‘Register of Mergers’ and a document known as a ‘Vesting Declaration’. The document automatically vests property on changes of trustees. The document relates to registered land and avoids the need for numerous transfer documents. If the document is used, the transfer must still be noted at Land Registry. The documents do not apply to certain other assets such as stocks, shares and annuities.

If the Vesting Declaration is used then the merged charity must register on the ‘Register of Mergers’. If such a document is not used then registration is voluntary.

If the merger is registered on the Register of Mergers, any legacies or gifts to the merged charities do not fail. This avoids the need to maintain shell charities purely for the acceptance of legacies and gifts.