If your charity, club or society is running out of money, the key is to act early, protect creditors and make sure the trustees understand their options.

The quick answer

Start with two questions:

1. Is the charity insolvent, or likely to become insolvent? This usually means either liabilities are greater than assets, or the charity cannot pay creditors such as suppliers, HMRC, landlords and staff when payments fall due.
2. What legal structure do you have? Your options are very different depending on whether you are incorporated, such as a charitable company, CIO, CIC or company limited by guarantee, or unincorporated, such as a trust, club or association.

If your charity is incorporated, trustees and members are usually protected from personal liability for the charity’s debts, provided they act properly. Insolvent incorporated charities can often be closed in an orderly way through liquidation or, in some cases, administration.

How we can help

• Review your latest annual accounts, management accounts or balance sheet.
• Help you work out whether the charity is insolvent or at serious risk of insolvency.
• Explain the options available to the trustees, including liquidation or administration where appropriate.
• Provide a draft agenda for the next trustees’ meeting.
• Meet the trustees online or in person.
• If liquidation is needed, deal with the formal process, staff, creditors, assets, premises and records.

Free initial advice

Send us your latest annual accounts and any questions you have. We will give you up to two hours’ free initial advice so the trustees can understand the position before deciding what to do next.

If the charity does need to go into liquidation, our fixed fee is usually £5,000 plus VAT.

David Kirk, Licensed Insolvency Practitioner – 9 June 2026

More detail for trustees

1. Is the charity insolvent?

There are two practical insolvency tests trustees should consider.

The balance sheet test

Do the charity’s total liabilities exceed its total assets? You can start with the most recent balance sheet or prepare a simple list of assets and liabilities.

Take care with book values. Some assets may be worth less on a forced sale than they appear in the accounts, while others, such as freehold property, may be worth more. You should also include costs that may not yet be in the accounts, such as redundancy, closure costs, professional fees and lease liabilities.

The cash flow test

Can the charity pay its debts as they fall due? A charity may appear solvent on paper because it owns a property or other assets, but still be unable to pay wages, rent, HMRC, suppliers or essential running costs.

You should also look ahead. If the charity can pay everyone today but has lost grant funding, is using up reserves, or is trading at a continuing loss, insolvency may be inevitable unless urgent action is taken.

If either test is failed, or looks likely to be failed soon, trustees should take professional advice sooner rather than later.

2. What type of charity or organisation are you?

Incorporated charities and organisations

You may be able to use a formal insolvency process if you are one of the following:

• Charitable company limited by guarantee
• Charitable Incorporated Organisation (CIO)
• Community Interest Company (CIC)
• Company limited by guarantee
• Club, society or community benefit society registered with Companies House or the FCA

For these organisations, liquidation can usually bring the charity to an orderly close. We can prepare the paperwork, contact creditors, help with redundancies, deal with premises, arrange the sale or removal of assets, and help sort records into what must be kept and what can be destroyed.

Unincorporated charities, clubs and associations

Unincorporated charities or organisations are different because they do not normally have a separate legal identity from the trustees and members. They cannot usually be placed into a standard liquidation in the same way as a company.

This can create a risk of personal liability for trustees or members, particularly where contracts, leases, employment liabilities, tax or supplier debts cannot be paid from the charity’s assets. If you are unincorporated, it is especially important to take advice before just closing the organisation down or making staff redundant.

What trustees should do now

• Hold a trustees’ meeting and record the financial position clearly.
• Prepare a short cash flow forecast and list of assets and liabilities.
• Do not take on new liabilities unless the trustees are satisfied they can be paid.
• Avoid paying connected parties or associated creditors without advice.
• Keep employees, landlords, funders and key creditors under review.
• Take professional advice early, especially if insolvency is likely.

Speak to us

We specialise in charity, club and society insolvency. We can help trustees understand their duties, choose the right route and, where necessary, close the charity in an organised and legally compliant way.

Send us your latest accounts and questions for up to two hours’ free initial advice. If liquidation is the right option, our fixed fee is usually £5,000 plus VAT.

David Kirk, Licensed Insolvency Practitioner – 9 June 2026