Sector Matters - Redundancy and ‘Winding up’ advice

30 Mar 2012     Last updated: 11 Jun 2018

In the current climate organisations may be in the unfortunate position of having to make staff redundant or even go so far as closing down the organisation itself, known as ‘winding-up’.  Sector Matters has drafted some overview advice for th

 

Redundancy

  1. For redundancies involving fewer than 20 employees, make sure you follow a minimum three step dismissal process before making an employee redundant. For full details on how to follow a best practice redundancy consultation process, please see NICVA’s Redundancy Guidance
  2. Redundancy is legally classified as a form of dismissal so if your organisation has indemnity insurance which covers employment legal costs, you should notify your insurer prior to issuing formal redundancy notification letters.  
  3. Ensure that employees are given notice in line with their contractual notice period, do not rely on ‘protective notice’ letters issued at the start of the redundancy process to cover this.  An employee’s period of notice legally begins the day the official notification of redundancy/dismissal letter is issued.
 

Advice on winding up an organisation 

If you are facing the prospect of having to dissolve your organisation there are certain things that need to be considered in the winding up process. Care must be taken to ensure that all legal obligations and liabilities have been properly dealt with. Winding up an organisation takes time, good planning and may take specialist advice to help ensure that it is done properly. 
 
This advice provides a quick overview of what any organisation needs to consider to help it get started and make the correct contacts to find out more about its individual situation, thereby ensuring it complies with both statutory regulations and requirements.
 

What’s your rationale? 

Perhaps you have not secured funding or your main projects are finished. Whatever the reason, ensure that it has been thought out and talked through at the Board level in the first instance.
 

Governing document 

Check your governing document (constitution or Memorandum and Articles) for instruction on how you should wind up your organisation and what you do with any remaining assets.
 
You may have to organise an Extraordinary General Meeting (EGM) as your members may have to vote to close the organisation down – again the governing document will provide you with instruction about organising the EGM. 
 

Regulators and statutory bodies 

Identify your regulators and seek advice from them as to what they require you to do in winding up, eg Companies House, HMRC and CCNI (if required).
 

Finances 

Even though this may be the reason for closure get a handle on what monies you have left and what your current liabilities are and how you will settle these. 
 

Human Resources and staffing requirements 

See above for redundancy advice and get your HR files together; think about who will respond to requests for past employee references; what are your pension requirements and potential liability.
 

Funders requirements 

Consider Contracts of Funding in terms of claw back requirements, complete financial and project monitoring for the last period of operation, deliver any outstanding work as required under the contracts of funding and negotiation with other similar charitable institutions to deliver ongoing projects while ensuring ‘beneficiaries for whom the money was intended’ are targeted, draw up an inventory of equipment to be presented to the relevant funder. 
 

Utilities and lease 

Contact the lease and contract holders; advise of cancellation date and enquire about cancellation fees. Remember to do the latter as you may receive unexpected bills.
 

Members/beneficiaries 

Review contracts and agreements, refund membership fees on a pro rata basis, signpost to other services.
 

PAYE payments 

Ensure all final HMRC payments are made on the same to the last day of the project 
 

Assets 

If the organisation has assets determine who they should be distributed to or return to funder through consideration of dissolution clause of governing document, assets policy and funders’ contracts.
 

Storage of HR and finance records

Sift through all documentation to ensure appropriate records are kept for example Accounting records – six years, payroll documentation - seven years, and decide where these are to be stored.
 
These are the key areas you need to think about and draw up an action plan to deliver. For more information please see NICVA’s Advice Note: Winding up and dissolving an organisation 
 
If you require further information on the above issues please contact:
 

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