Is selling a charity as daunting as it seems?
With approximately 50% of private and independent schools being operated by charitable organisations, there is a need for professional advice and guidance on how to manage the impact of that charitable status, and its implications for schools.
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We find that there is a common misconception that a potential sales process can either be particularly difficult or indeed not even possible. However, that is not the case. In reality, businesses with a charitable status can very much be sold if that is deemed to be the best route forward and there are in fact very few differences between the process of selling a charitable business or a ‘for profit’ business. It is simply a case of being aware of the additional legal considerations surrounding the process and ensuring the correct advice and guidance is sought throughout.
It is important to note that before a decision is made with regards to a sale, it is essential that the trustees ensure that:
• they have permission to sell or lease the property – either in the governing document or in the law
• there is nothing in the governing document that prevents the trustees from selling or leasing the property
• the charity actually owns the title to the property
• the sale or lease is in the charity’s best interests
• if the property is designated for a particular purpose, that the sale or lease doesn’t go against this
As part of the process, the law also states that you must:
• try to get the best deal for your charity
• take written advice, including a valuation, from a qualified surveyor before you agree a sale or lease (although you don’t need one for a short lease)
• advertise the sale or lease, unless the surveyor says otherwise
The Charity Commission may also need to be involved, either by ensuring compliance with the requirements ahead of entering into an agreement, or by applying to the Commission during the process, which can lead to some delays on timescale.
However, the Charity Commission is not always required to provide approval of a sale, such as when sold or leased to another charity with similar aims. The reasons for approval being required include, but are not limited to, selling against the advice of a surveyor, intending to sell for less than market value or wanting to sell to someone connected to the charity in some form.
Ultimately, taking early, professional advice is always the best course of action to ensure that the trustees can be comfortable in the knowledge that the correct route and outcomes can be achieved for everyone concerned.