How a Cy-Près Application Could Help with a Tricky Fund

Charity law contains a useful mechanism to change the terms of funds, such as trusts or legacies, that cannot be carried out in the way that they were originally intended. This change can be made by submitting a cy-près application to the Charities Regulator. Historically, these submissions were made where the purpose specified in a will or trust was “impossible” to fulfil. However, under modern charity law, there are many more grounds to submit an application, including where the specified purpose is not the most “suitable or effective” use of the funds.

What is a cy-près application?

A cy-près application allows the Charities Regulator to review the terms of a will or trust, and a proposal to change it. The Charities Regulator may then make an order which sanctions the change.

When would an organisation make an application?

We find that cy-près applications are particularly helpful in the following circumstances:

• Where a will or trust states that only the income of a fund can be used towards a particular purpose, but not the capital. Sometimes, this can result in a “pot” of capital being held under the trust, with very little income to be distributed. A cy-près application can free up the capital, to be used towards the purposes of the will or trust, in certain circumstances.
• Where a specified purpose in the terms of a will or trust is no longer possible to carry out or is no longer relevant to modern times. We frequently see this arise where a will or trust refers to an educational or healthcare institution which no longer exists, or to a purpose which is not relevant to the current day.
• Where a charity would like to merge with another charity, but the terms of its governing document do not give it the power to transfer assets to that charity or to merge with it. An application can be made to effect the merger, where otherwise the trust would not have that power.

How is an application made?

It is important that the text of a cy-pres application to the Charities Regulator is drafted very carefully. This is because the application must:

• Explain the problem
• Show how a cy-près ruling would assist, and
• Request changes that assist with the problem but do not tie the organisation in knots for the future.

An application is submitted online, but there are several additional steps to be aware of, including signing a statutory declaration. There are also various time periods that applicants should bear in mind, including a requirement to display the draft cy-près document for a one-month period in a public place which has been sanctioned by the Charities Regulator. It is the “Charity Services Committee” of the Charities Regulator that deliberates on cy-près applications. As this Committee meets nine times per year, it is important to be aware of the dates of their meetings, and work towards those dates.

Conclusion

A cy-près application should be considered if you are dealing with, or administering, a trust which has a restriction or problem which prevents your organisation from effectively using it.

If you are wondering whether a cy-près application could be made in relation to a particular trust that you work with, please contact a member of our Charity and Not-for-Profit team and we would be happy to discuss it with you.

The content of this article is provided for information purposes only and does not constitute legal or other advice.