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Empathy and professional help when you need it.
Charities come in many forms, including:
No matter the structure, all charities must follow strict legal and ethical obligations when facing financial distress.
It can be an emotional and deeply personal challenge for trustees, staff, and beneficiaries of a charity when the money simply isn't there to pay the bills anymore and insolvency is the likely outcome. Our experienced team approaches every case with empathy, professionalism, and a commitment to finding the best solution, ensuring that the charity’s insolvency and mission are both handled with care and respect.
Charities, like any other organisation, can face financial difficulties due to factors such as declining donations, increased costs, or loss of grant funding.
Charity insolvency occurs when:
Because charities exist for the public benefit, insolvency must be managed in a way that protects donors, beneficiaries, and the charity’s legacy.
The Charity Commission, Companies House (if applicable), and creditors must be informed, and trustees must ensure they are complying with their legal duties to avoid personal liability.
If insolvency cannot be avoided, the charity will need to follow a structured process to settle debts, protect stakeholders, and close responsibly.
The charity must review its financial position, considering:
A licensed insolvency practitioner (IP), like Smart Business Recovery, will explore:
Trustees must inform employees, donors, grant providers, and creditors, ensuring transparency while preventing financial misconduct.
Depending on the charity’s structure and financial position, insolvency may involve:
If liquidation is necessary, the charity’s:
For trustees, ensuring the charity closes ethically and legally will be the first priority, so the sooner we can start to help, the better for everyone.
If your charity is struggling financially, don’t face it without guidance. Contact us for confidential, expert insolvency advice. Your first consultation is free.
We will help you find the best solution for your charity, its trustees, and its beneficiaries.
At Smart Business Recovery, we recognise that closing a charity is not just a financial decision; it is an emotional one. Charities have often been built over years of dedication, and trustees will feel a deep sense of responsibility to their beneficiaries and supporters. We get that, we understand, so we will do everything we can to make the process as clear and stress-free as possible.
Our expert team provides:
Compassionate, Professional Guidance – We handle insolvency with empathy, ensuring you have the support you need.
Specialist Charity Insolvency Advice – We help trustees understand their legal responsibilities and available options.
Rescue & Restructuring Solutions – If possible, we explore ways to keep the charity running.
Creditors’ Voluntary Liquidation (CVL) – Managing the charity’s closure ethically and legally.
Company Voluntary Arrangements (CVA) – Helping viable charities restructure debts.
Regulatory Compliance Support – Ensuring all Charity Commission and Companies House requirements are met.
When a charity becomes insolvent, trustees must ensure they act in the best interests of creditors while complying with UK charity and insolvency law.
The key legal requirements are below:
It is vital that you take the right steps if insolvency is unavoidable. Taking early action and working with an insolvency practitioner, means trustees can reduce personal risk and ensure compliance with legal obligations.
1. Trustees' Duties - Under the Charities Act 2011 and Companies Act 2006 (for charitable companies), trustees must:
Stop trading if insolvency is likely, unless advised otherwise by an insolvency practitioner.
Seek professional advice to ensure compliance with legal responsibilities.
Prioritise creditors over the charity’s ongoing activities, as failing to do so may result in personal liability.
2. Informing the Charity Commission and Other Authorities - If the charity is registered, the Charity Commission must be informed if:
The charity cannot meet its financial obligations.
There is a serious risk to beneficiaries or public trust.
The charity needs to enter liquidation or administration.
For charitable companies, Companies House must also be notified.
3. Avoiding Wrongful Trading and Personal Liability - Trustees and directors who continue operating while knowing the charity is insolvent could be held personally responsible for debts under the Insolvency Act 1986. If misconduct is suspected, they could face director disqualification or financial penalties.