Ending a charity - What to do with what's left
Posted on 14 February 2018
When a charity ends its operations for good, any surplus resources, funds and property should be applied to charitable purposes. How a charity winds up depends on the type of organisation. Charities can be incorporated as companies, trust boards or societies, or exist as unincorporated trusts or societies. More information on how to wind up each type of organisation is available on the CommunityNet website(external link).
For most charities, after the payment of all debts and liabilities, they will need to evaluate what is left. In general, any surplus should be given to charitable purposes, consistent with their rules. A non-charitable group can receive the funds, as long as it is clear the funds will be used for charitable purposes.
The most important point is for charities to read and follow their rules documents. Rules provisions might limit distributions to a particular organisation, or a particular area, or type of charity. If you need to find a charity in your area or sector, you can search the Charities Register.(external link)
Removal from the Charities Register itself doesn’t mean a charity needs to wind up – registration as a charity is voluntary – but if a charity does remove itself, it may face tax consequences(external link). It may also face other consequences, for example some funders may require the organisation to be registered as a charity.
Where a charity does wind up, and doesn’t apply the surplus funds to charitable purposes, we may make a referral to the Attorney General’s office to take further action. The Attorney General(external link) is the “protector of charities” and can inquire into any charity (whether registered with Charities Services or not).
For example, after a Charities Services’ investigation in 2015, the Glenn Family Foundation Charitable Trust removed itself from the Charities Register indicating it intended to wind up. As the Trust didn’t appear to follow the winding up provisions in its trust deed, we referred the issue to the Attorney General.
The Solicitor General (exercising the power of the Attorney General) disputed the winding up. After Sir Owen Glenn, the previous chair of the Trust, made a payment in excess of the disputed amount to a proposed new medical school at the University of Waikato, the Solicitor General accepted the dispute was resolved. More information is available on the Crown Law website(external link).
The important messages for charities thinking of winding up are that they should:
- follow the process for winding-up their particular type of organisation(external link); and
- read and follow their rules document carefully; and
- apply any surplus to a charitable purpose, consistent with their rules document; and
- let us know through removing the charity from the Charities Register through your charity's online account.