Andrew Hind explains the new mergers register...
The recent turbulence in the financial markets can only have added to charities’ concerns about the need to secure reliable future funding. These uncertainties may well cause many organisations to look again at different ways of ensuring future funding, whether by re-thinking their investment strategy or finding new sources of funding by direct debit, membership fees or attracting gifts through wills and legacies.
To the uninitiated, the likelihood of being left a significant bequest must be every struggling charity’s dream. But to those in the know, it can sometimes be an extremely mixed blessing. Imagine you’re the finance director of a charity and you know that there is a strong possibility that your charity will receive a sizeable legacy. You subsequently decide to merge with another charity. The legacy you were given stipulated the money was for your charity’s use and in your charity’s name. The charity you’re merging with has a different name. Even if you come up with a joint name for the new merged charity it’s still unlikely to be the same as your charity’s current name. You’ll have to keep the old charity running as a ‘shell’ just to receive any legacies it is left. This is going to take time, trouble and definitely cash. And you’ll have to keep running your shell charity for the foreseeable future.
You could be forgiven for thinking your possible blessing is now starting to look like it has significant strings attached.
That’s where the new register of mergers comes in. The Charities Act 2006 is full of useful nuts and bolts provisions to resolve long-standing issues like this, but this register is surely one of the most useful – both for charities who want to merge and for those which have already done so.
The register’s main advantage is that gifts to a charity – particularly legacies and wills - will now transfer automatically to any other charity that it has merged with as long as the merger has been registered with us. So, there’s no need to set up and keep running shell charities or for the Commission to make a scheme to authorise the transfer of the gift from one charity to another.
At a stroke, the creation of the register of mergers will save trustees money, simplify structures and remove a whole layer of unnecessary administration.
Its existence will also help to reassure potential donors that they can leave a bequest to a charity secure in the knowledge that it will be used as they intended.
So, how can trustees in this position get the merger listed on the register? Essentially, it’s for the trustees of the charity which has taken over the property of one or more others to provide the Commission with the details.
Bear in mind this also applies to mergers which have already taken place.
The Commission has now set up the register which holds the details of mergers and transfers of property between charities. The register is publicly available through our website at www.charitycommission.gov.uk and it shows:
- the names and registered numbers of the transferor and transferee charities;
- the date the merger was registered with the Commission;
- the date or dates when the transfer or transfers of property involved took place;
- the details of any vesting declaration that was made in connection with the merger.
A ‘vesting declaration’ is a deed used to make the process of transferring the title of property from one charity to another much easier. It’s made by the trustees of the transferring charity and specifies the date when the title to its property is transferred to (vested in) the receiving charity.
Letting the Commission know when a merger has happened isn’t compulsory unless a vesting declaration was made at the time of the merger – but the register has so much going for it from a charity’s point of view that’s it hard to see why trustees wouldn’t take advantage of it.
After we’ve been notified, no further documentation or paperwork will be required and trustees will be swiftly notified that the details are on the register.
A notification form is available through the Commission’s website and can be found under ‘apply for it’ frequently used forms. It’s designed to help the trustees of charities that have taken over the property of another charity which is winding up provide us with the information which needs to appear on the register, without us having to ask for more.
Like so many of the provisions in this Act, the register of mergers is a common-sense solution whose time has come. I encourage every charity merging, as well as those which already have, to take advantage of it.