The latest Good Merger Index shows that a record number of charity mergers took place between May 2024 and April 2025 - revealing a 49% increase compared to the previous financial year.
Charity mergers are often presented as a way to achieve greater efficiency and impact or to build long-term resilience and financial stability. However, for unincorporated charities, the process can require a little more care than the headlines sometimes suggest. This is not because the legal framework is defective, but because it is carefully designed to do something valuable: protect charitable assets and safeguard the intentions of those who gave them. The result is a merger process that demands careful planning, strong trustee engagement, and, most of all, expert legal structuring.
Why unincorporated status complicates mergers
Unincorporated charities don't have a separate legal personality, which has two immediate consequences:
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First, assets are held by the trustees personally, not by the charity. This means that these assets cannot be transferred in a single transaction from one incorporated entity to the other, rather, each trustee must take part in transferring title to each item. Unlike incorporated charities, this makes mergers more administratively complex and burdensome for trustees.
- Liabilities also sit with the trustees personally. Even if the trustees have trustee indemnity insurance, the fact that liabilities attach to them personally impacts on how they perceive and how they approach risks during a complex merger process - which in turn may delay decision-making and slow the process down.
Same mission, different century
A further complication is the legal requirement that merging charities must have sufficiently aligned charitable objects. While this may seem like a straightforward requirement at first - the need for merging entities to be doing roughly similar things - it may complicate the process when dealing with older unincorporated trusts.
Older unincorporated trusts may have charitable objects that are very narrow, highly specific, or just simply out of date - what made perfect sense a century ago, may not reflect the needs of society today. This makes it surprisingly hard to show that two charities are pursuing the same object - unless they happen to be oddly specific in the exact same way.
Where the objects of the merging charities are not fully compatible, trustees may need to seek Charity Commission approval to amend their objects - which in turn, again, may delay the merger process.
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Old trust deeds also tend to be silent on modern restructuring methods, unless they have been modified or updated by the trustees recently. Where they haven't, trustees may find themselves constrained by old governing documents that authorise little more than the day-to-day management of the charity. This may mean, again, that the trustee board is required to regularise this before any merger steps can be taken - another issue, that can potentially slow down the merger process.
All of the above creates a practical reality: the merger is not one act, but a bundle of carefully coordinated legal steps, some of which might take longer than originally anticipated.
So why the complexity?
Why is the process so complex? While from a trustee perspective, the multiple asset transfers, alignment of objects, possible applications to the Regulator, or the sequencing of steps may look like an elaborate obstacle course, this complexity reflects three underlying aims:
- Protection of charitable assets
The law aims to prevent charitable assets from being diverted, diluted or misapplied as part of a restructuring exercise. Trustees must be able to show that each transfer is lawful, authorised, and consistent with the purposes for which the assets were originally given. While this makes transfers more difficult where a charity is unincorporated, it also prevents assets from being misapplied. - Honouring the intention of donors
A second priority is honouring and preserving the intentions of those who gave property, assets or other forms of donations to a charity. They gave their donations with the charity's purpose in mind, and even after the charity merges with another, it's important to honour the donor's intent. Mergers and restructuring cannot be used as a mechanism to sidestep the original intention of the donors. Instead, trustees must be able to demonstrate that donor intent is still being honoured post-merger, by demonstrating that the charity they are merging with has sufficiently similar charitable objects. - Ensures trustees act within their powers:
A further priority supporting the complexity of the legal framework is trustee accountability. Trustees are fiduciaries meaning they must act strictly within the powers conferred on them. Each decision in the merger process - whether to transfer assets, amend a governing document or wind up a charity - must fall within the trustees' legal powers and be taken in the proper exercise of their duties. Where powers are unclear, trustees are required to seek regulatory approval before proceeding. This insistence on staying within powers ensures that charitable property and the charities themselves are not exposed to any risks, through unauthorised actions taken by the board of trustees.
The merger of unincorporated charities is a legally complex process. However, if handled properly, the legal and regulatory framework provides assurance to the public that charitable assets remain protected, donor intentions are respected, and the resulting merged entity is a legally sound structure.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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