What happens to our assets after we close?

At Law-Call, we have been receiving an increasing number of questions about what happens to the assets owned by a charitable pre-school when the business is closing, including “Can we give our assets away?”, “Can the trustees have the assets?”, and “Can we give them to the staff?”.

What happens to the assets depends on the type and nature of the setting and the reason for its closure. Here, we answer these questions and clarify what a setting needs to do when dealing with the dissolution of a setting.

Firstly, the setting must agree to dissolve the charity in accordance with its constitution. Once dissolution has been agreed, any outstanding debts, contracts or liabilities will need to be settled. This includes any outstanding wages and redundancy payments. Equipment and resources that are owned by the charity can be sold at a reasonable rate to raise any further funds needed to settle outstanding debts.

Once all payments have been made, the remaining funds and assets (including equipment and resources) must be transferred to a charitable organisation with similar objects to ensure they continue to meet the original charity's aims. Eligible organisations include:

• registered charities that provide care and education for children primarily under statutory school age
• schools and academies with charitable status and early years provision, including independent, foundation and voluntary schools
  

Advance approval to transfer your assets to another organisation must be sought from the Early Years Alliance or the Charity Commission. To request this from the Alliance, you will need to email connect@eyalliance.org.uk and include the following documents:

• A copy of the minutes from an annual/ extraordinary general meeting, signed by the chair and secretary, showing the agreement of your members to dissolve the charity.
• Confirmation of the receiving organisation’s charitable status and charity registration number (if applicable).
  
• Where the provision of education for children undFer five years is not the organisation’s primary purpose (e.g. a school), a copy of their governing document containing aims or objects covering early years education.
  
• Written confirmation from the organisation that the assets will be ringfenced for use with children under statutory school age.
  

When transferring assets to an academy, a voluntary aided or a controlled school, you may need to get a letter, signed by the school’s trustees, guaranteeing that any transferred assets will be used for the benefit of children under five only. It is helpful to ask for the current objects of the pre-school charity to be quoted in the letter.

Transferring assets to a maintained school can be challenging. The Alliance may approve a transfer to a school’s parent teacher association (PTA), but because PTAs will not have similar aims of the original charity, they may not be able to receive assets.

In this case, one option is for the governors to set up a trust with similar objects to the transferring pre-school. The school should take legal advice when setting up a trust and if approved the trust can then receive the assets. Alternatively, the assets can be transferred to the Alliance, who will ensure that they are used to support charitable providers in the local area.

You can access expert advice on what to do when dissolving a charity by calling Law-Call.

As an Alliance member, you have access to Law-Call's 24-hour legal advice telephone service. Details can be found in the Alliance member benefit overview section of EYA Central: bit.ly/U5Law-Call.