The Government has announced details of a £16.5 million fund aimed at encouraging voluntary sector organisations to merge and modernise.

The move forms part of the larger £42.5 million action plan, ‘Real Help for Communities: Volunteers, Charities and Social Enterprises’, to assist third sector organisations struggling in the current economic climate. It also follows on from speculation that provisions in the Charities Act 2006 facilitating charity mergers are aimed at reducing the number of small charities on the register. Current figures show that the number of registered charities falls just short of 189,000, amongst whom almost 95 % have an annual income of under £500,000 (figures obtained from the Charity Commission website and valid as at 2 March 2009).

Effective mergers can bring substantial savings in cost, time and administration as well as offering synergies in service delivery to organisations operating in similar areas.

Awards from £30,000 up to £500,000 are to be made available to charities, voluntary organisations and social enterprises with an annual turnover of £750,000 or more, primarily for assistance with mergers and related advice. Loans may be offered at 0% interest for up to five years, with an initial 12-month repayment holiday in appropriate circumstances. The scheme is being administered by the Office of the Third Sector, which will distribute the loans via Futurebuilders.

A grants programme providing assistance with the purchase of business support to third sector organisations with an annual turnover of less than £1 million is concurrently to be put into effect by Capacitybuilders later this year.

The move to help charities keep up-to-date is especially welcome in the context of wide-ranging changes through the Companies Act 2006, Charities Act 2006 and expected further changes to the charitable SORP following the conclusion of the current consultation procedure.

From summer 2009, the modernisation fund will be open for applications and is expected to remain available for one year.

Further details are available at the website of the Office for the Third Sector: http://www.cabinetoffice.gov.uk/third_sector/real_help_for_communities.aspx

Disclaimer: This note is a general update only and should not be relied upon as specific legal advice.

Posted: March 12th, 2009 under Charities and Social Enterprises Group, Corporate Finance.
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