What should trustees do if a charity is insolvent?
Trustees should establish the charity’s legal structure, assess its ability to pay debts and obtain specialist advice promptly. A charitable company or CIO is different from an unincorporated trust or association. Duties to creditors and restrictions on charitable funds can affect what happens next.
Business Insolvency Helpline • Checked 1 November 2026
General guidance, with procedural detail focused on England and Wales. Rules and routes can differ in Scotland and Northern Ireland.
Why does the legal structure matter?
Charitable companies and CIOs have their own legal identity. Unincorporated charities do not, which can create personal exposure for trustees entering obligations. Check the governing document and registrations rather than assuming charitable status gives limited liability.
This guide concerns England and Wales. Charities operating or registered elsewhere need advice on the relevant regulator and legal framework.
Can restricted funds pay ordinary bills?
Not automatically. Permanent endowment, designated land and special trusts can carry restrictions that prevent their use for general debts. A healthy total bank balance may therefore overstate the funds available to pay payroll or suppliers.
Prepare a fund-by-fund cash position and obtain charity-law advice before moving restricted money or transferring assets to another organisation.
What should the trustees do now?
Meet promptly, preserve minutes, review financial information and record the reasons for decisions. Plan how to protect beneficiaries without taking commitments the charity cannot fund. Identify employee, landlord and grant obligations, including possible repayment conditions.
Rescue, restructuring or closure may be appropriate depending on the structure and facts. Follow the relevant Charity Commission reporting requirements and seek advice about any serious incident or closure notification.
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Related questions
No. The structure, contracts and conduct matter. Unincorporated charities create different risks from charitable companies and CIOs.
Not without assessing creditors, restrictions and the legal powers to transfer. A shared charitable purpose does not override those requirements.
Some incorporated charities can, with applicable modifications and requirements. The appropriate route depends on the charity’s legal form.
Sources checked for this guide
- What to do if your charitable company or cio is insolvent or at risk of insolvency (www.gov.uk)
- What to do if your unincorporated association or trust is insolvent or at risk of insolvency (www.gov.uk)
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