Cathedrals Measure 2020 - how to wind up a cathedral

Cathedrals Measure 2020

Malcolm Niekirk, Frettens' resident Insolvency Guru, looks at an upcoming change to insolvency law concerning cathedrals. 

How to wind up a cathedral

I’ve put this briefing note together for three reasons. 

Firstly, there’s a new Cathedrals Measure 2020, which refreshes the constitutional arrangements for Church of England cathedrals, and which certainly you’d need to look at if ever you had to advise on one. 

Secondly, I have a long standing interest in how to deal with the solvent winding up, or other restructuring of organisations that are established as something other than a limited company. 

And, thirdly, just because it’s Christmas, and if we can’t look at this now, then when?

Your local cathedral; just who owns it?

Cathedrals have been part of the landscape, for hundreds of years.  Many have been built and re-built on the same site.  Winchester Cathedral may have been built on the site of a pre-Roman holy well.  Fortunately the ownership arrangements – rather than being lost in the mists of time – are well regulated. 

You might expect a cathedral to be owned by the Church of England.  But it’s not.  Nor is it owned by its bishop.  Instead it is a body corporate – a bit like a company – made up from the members of its Chapter, its Council and its College of Canons. 

But that’s about to change.

Cathedral ownership: What is changing?

The Cathedrals Measure

The governing law – the Cathedrals Measure 1999 – is being replaced, probably early next year.

For every cathedral, the existing trinity-like body corporate will change.  All assets, engagements and liabilities will belong to a single body corporate, the Chapter.  That won’t happen immediately.  Each cathedral will need time to reconstitute its Chapter. 

Now, this is the important bit.  The Chapter will contain a protective trust.  That’s to keep the cathedral building (and other treasures) safe from the cathedral’s creditors.

How will the protective trust work?

The Chapter will be a registered charity.  If you’ve been involved in winding up a charity – or even just its administration – you’ll probably have seen the protection that different classes of charitable funds can have within a charity.  Within a cathedral that has been established for scores, or even hundreds of years, you might expect to see assets protected as restricted and endowment funds.  You might also have come across the statutory protection for land owned by a charity.

On top of that, the Chapter will have the new, protective, charitable trust at its centre.  So, although the Chapter will be custodian and trustee of the cathedral buildings, it will never be the beneficial owner of them.  It cannot show them in its books as having any value.  It cannot mortgage them.  Nor can it sell them or give them away.

What if the Chapter is unable to continue to act as a trustee? 

Another body would then take its place.  It would take custody of the cathedral buildings as trustee, and keep them on the same protective, charitable trust.

This protective charitable trust is intended to put the cathedral buildings beyond the reach of the cathedral’s creditors.  It’s to stop a cathedral’s liquidator – should one ever be appointed – from selling it to the highest bidder.  It seems likely to be effective. 

It will also extend to ‘outstanding inventory items’; specifically identified items of particular value or significance in the cathedral’s possession.

Cathedrals and insolvency procedures – before they change

Under many current arrangements – due to end as each cathedral converts to the new form of corporate Chapter – the cathedral buildings (and other valuable items) are not currently protected.  There could be particular arrangements in any given cathedral’s constitutional statutes, of course.  However, on an insolvency, a liquidator might be duty-bound to realise them.

The range of insolvency procedures that apply to a cathedral’s body corporate are presently limited to compulsory liquidation and perhaps the new Part A1 moratorium (which could lead only into a Companies Act scheme or arrangement, either under Part 26, or the new Part 26A). 

Although Bradford Cathedral went into a CVA in 2005, the law changed soon afterwards.  It’s clear that cathedrals are not presently able to go into administration or CVA.

Cathedrals and insolvency procedures – after they change

The new Cathedrals Measure is likely to receive Royal Assent early in 2021.  It’s likely that individual cathedrals will have two or three years to complete the conversion to the new corporate Chapters.

The Church of England is reviewing for approval a model form of constitution for cathedral Chapters.  I have not yet seen them.  What follows is purely personal speculation.

Cathedral Chapters and administration

They may be based on a charitable incorporated organisation (CIO), established under the Charities Act 2011.  Although CIOs are not ‘Companies Act companies’, the insolvency legislation that applies to them does closely follow the corporate insolvency procedures. 

In this case, cathedral Chapters would be able to go into administration, or CVA, or either form of voluntary liquidation as well as compulsory liquidation.  They might not be eligible for Companies Act schemes or arrangements (under Part 26 or the new Part 26A).  They probably would not be eligible for a Part A1 moratorium.

Or they may be a unique type of body corporate, established by the authority of the Cathedrals Measure (which should be considered to be similar to an Act of Parliament) and their existing individual constitutional statutes. 

I think this may be more likely.  But, in this case, they probably will not be eligible for any different insolvency procedures than currently apply to cathedrals. 

They will be limited to compulsory liquidation and perhaps the new Part A1 moratorium (which could lead only into a Companies Act scheme or arrangement, either under Part 26, or the new Part 26A). 

It might be a missed opportunity if this were the case, as the discussions that led to the new Measure did suggest that cathedrals should be able to use the CVA procedure.  There may yet be scope to treat Chapters as if they were CIOs, in applying insolvency legislation.  But I didn’t see that in the Measure, and it may need a specific statutory instrument to do that.

Insolvency Law: Coffee Break Briefings

If you would like to stay up to date with the latest developments in insolvency law, you can sign up to our mailing list.  You will also receive invitations to all webinars, briefings and events.

Insolvency & Restructuring Solicitors near London, in Hampshire & Dorset, near Southampton and in Bournemouth, Poole, Christchurch and The New Forest

We hope you found the briefing useful. If you are an insolvency practitioner who would like to discuss the content of this article, please do not hesitate to get in touch.