There are normally significant restrictions on Permanent Endowment funds with frequently the asset itself or the income from the asset only being available for the use as set out in the governing document.
Charity companies (including CIOs) cannot hold Permanent Endowment funds but they are able to transfer such funds to a ‘shell’ charity they own. Such transfers must be used for the original purpose of the fund. They must be kept separate from general or corporate assets.
There may be circumstances when the trustees may wish to spend a Permanent Endowment, but there are requirements which must be fulfilled. The reasons for spending the endowment must be:
• It is necessary to enable the charity to carry out its purpose
• The charity needs the money to set up a new project
• The charity has outgrown its existing premises and needs to sell
Charity Commission consent is needed if:
• The charities annual income is over £1000
• The whole of the Permanent Endowment fund is worth more than £10,000.
• Permission can be obtained by an online form providing basic information such as details of the decision making process, the resolutions proposed including the
reasons, the current market value of the endowment.
There will be requirements to hold quorate trustees meetings; vote with 2/3 of trustees voting to be in favour; and to ask the charity commission to agree.
In short despite the restrictions on them, it is possible to make use of the Permanent Endowment Funds and on occasions to transfer to a similar minded charity, provided the procedures are applied and Charity Commission permission is obtained.
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