Charitable Incorporated Organisations

A guide to establishing your charity as a CIO

Up until now charities in England and Wales have had to make do with legal structures that were originally intended for other purposes, such as trusts and limited companies.

For the first time in 400 years there is now a legal structure designed exclusively for registered charities. The “Charitable Incorporated Organisation” or “CIO” is intended to provide charities with a practical and effective incorporated vehicle.

As charity trustees become increasingly concerned about the personal financial risks associated with running charities there has been a growing trend towards the use of limited liability companies to try and mitigate personal liability not only for the trustees, but also for any members that a charity may have.

Charities that have adopted the limited company structure have, however, discovered that the legal framework within which companies operate was never intended for charitable organisations, and there is a constant tension between the regulations which charities face under the Charities Acts, and the obligations which are imposed on companies by company law.

Under these two legal regimes charities are required to file separate sets of annual returns and accounts with the Charity Commission and Companies House. Although this dual regulatory burden has generally not proved problematic for larger charities, for some smaller charities it has been an unwelcomed additional burden.

The CIO is intended to provide the benefits of incorporation to registered charities within a more attractive legal framework that is regulated purely by the Charity Commission.

Many charities that have held back from incorporating will now wish to adopt the CIO structure in order to take advantage of the benefits of incorporation, while some existing incorporated charities will also wish to become CIOs in order to simplify their regulation and save costs.

Although CIOs enjoy a simplified regulatory regime, the process by which existing charities can convert to becoming CIOs can be quite complex. This guide is intended to provide individuals and organisations that are looking to either set up a new charity as a CIO, or wishing to convert an existing charity to a CIO, with a basic understanding of what is involved.

Inevitably this guide cannot go into all of the different options and permutations that may be involved, and at the time of writing this guide the Charity Commission has yet to finalise the regulations that will apply to CIOs. We therefore recommend that you obtain specialist legal and accounting advice before setting up your new charity or converting your existing charity to a CIO structure.

This Guide is intended for charities in England and Wales only, and any reference to the “Charity Commission” means the Charity Commission for England and Wales. Charities operating in Scotland and Northern Ireland are subject to separate legislation and should contact the Office of the Scottish Charity Regulator (OSCR) or Charity Commission for Northern Ireland.  

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