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Chapter 11
COLLABORATIVE WORKING, PARTNERSHIPS AND MERGERS

HODGSON RECOMMENDATIONS ON MERGERS AND CHANGING LEGAL FORM

Added 9/8/12. This information updates chapter 10 & s.11.5.4 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
In his review of the Charities Acts presented to Parliament on 16 July 2012, Lord Hodgson made the following recommendations in relation to mergers and changing legal form. The government did not comment on these in its interim response on 3 November 2013. The government's full response will include consideration of the Commons public administration select committee's report on its inquiry into the Charities Act 2006 and the regulation of charities, which was published on 6 June 2013.

• The Charities Act merger provisions should be modified to provide that all bequests shall be treated as a gift to the new, merged or incorporated charity where a will may otherwise cause a gift to fail if the original charity has ceased to exist. This should include safeguards around the relevance of the new charity’s objects to ensure that the intentions of the testator are respectfully considered [Chapter 10 mergers and winding up recommendation 1].
  Sandy's comment: Bates, Wells & Braithwaite Solicitors comment, "This is not the 'quick fix' the sector was hoping for — having to apply a test comparing objects of the original and successor charity, and second-guessing the intentions of the testator will, we think, lead to uncertainty — but ultimately we think Lord Hodgson is right to recognise the importance of testators' wishes."


• Professional advisers should work to identify a standard form of wording for a charitable bequest that can be used easily by will drafters and members of the public [Chapter 10 mergers and winding up recommendation 2].


• The Charity Commission and HMRC should revise registration practices to allow newly incorporated organisations to continue to be registered under their original charity number where there has not been a material change to the organisation’s objects [Chapter 10 mergers and winding up recommendation 3].


• The banking industry should allow charitable organisations that have incorporated or merged to maintain and rename their existing accounts in the name of the new body [Chapter 10 mergers and winding up recommendation 4].


• Reforms should be considered which would simplify the transfer of permanent endowment by charities considering merger, without the Commission having to make a scheme to appoint the recipient charity or its trustees as trustee of the endowment [Appendix A recommendation 16].


• An anomaly affecting the transfer of some leaseholds and other covenants as part of a merger should be clarified [Appendix A recommendation 17].

Go back to list of all of Lord Hodgson's recommendations
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