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Charities and Not For Profit

Charitable incorporated organisations

For the first time there is now a corporate vehicle designed specifically for charities. A Charitable Incorporated Organisation (CIO) is the new and bespoke corporate structure tailored specifically for charities regulated by the Charity Commission. A CIO will offer an alternative to other legal structures such as charitable companies or unincorporated associations and will be a suitable vehicle for many charities. The Charity Commission has started accepting applications for registration of “brand new” organisations with an annual income over £5,000 wishing to register, with existing organisations able to convert at a later date.

Is a CIO right for you?

When deciding whether a CIO is right for you, you should consider the following:

  • Advantages
      • The most obvious one is that it will have a separate personality and liability – the CIO is a separate legal entity and it can enter into contracts, hold property and employ staff in the name of the charity. The members and trustees of the CIO will generally be safeguarded from financial liabilities incurred by the CIO.
      • Single regulation and registration – CIOs will only need to be registered with the Charity Commission, not also with Companies House. A CIO will not be subject to the additional legal requirements governing companies.
      • Less onerous reporting and accounting requirements – CIOs do not need to prepare a Director’s Report under the Companies Act 2006, just an Annual Report under the Charities Act 2011. CIOs are subject to the accounting regime under the Charities Act. This regime is less onerous than the accounting regime applicable to companies which charitable companies are also governed by.
      • Membership – there is no minimum registration thresholds that will apply in relation to the registration of CIOs with the Charity Commission (unlike the current rules for registration of charities which must have a minimum of £5k income before they can apply)
      • Registered Charity Status – every CIO will have a registered charity number. This will assist an organisation with fundraising/donations and providing the public with confidence that the charity is appropriately regulated.
      • The structure is specifically designed for charities.
      • No fines will apply for administrative errors.
  • Disadvantages
      • The structure is not suitable for all types of charity – e.g. exempt charities cannot convert to CIO status.
      • A CIO cannot charge its property. Accordingly if a charity wishes to mortgage or charge its assets then a company structure should be used.
      • CIOs are required to register/file returns irrespective of size with the Charity Commission which will be publicly available on their site.
  • Setting up and registering a CIO

      To become a CIO, an existing unincorporated organisation will need to set up a CIO and register it with the Charity Commission. They will thereafter need to dissolve the unincorporated organisation in accordance with the provisions contained within the governing document and transfer the charity’s assets to the new CIO

      The current legislation governing CIOs does not make any provision for the conversion of existing incorporated bodies such as charitable companies limited by guarantee. However further regulations dealing with this process are expected in 2014.

  • Who will the CIO appeal to?

      The CIO will provide a useful vehicle for certain types of charities. It is generally thought that the new CIO structure will appeal to small or medium sized unincorporated charities which employ staff and/or enter into contracts. It will enable them to carry out these tasks in the name of the charity.

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