Legal helps with charitable incorporated organisations (CIOs)

What is a charitable incorporated organisation?

Charitable incorporated organisation is a legal status available to charities that incorporates the benefits of being a company without the burden of increased regulation.

CIOs are not companies in the eyes of the law, and as such they only have to register with the Charity Commission (whereas companies have to be registered with Companies House).

By becoming a CIO, your charity will be a corporate body, and will be able to enter into contracts in its own right and hold property in its own name. Generally members and trustees are protected from any personal liabilities incurred by a CIO.

The net effect of converting an unincorporated charity to a CIO is that the burden of responsibility for debts, property, transactions and insurance shifts from the trustees and members to the CIO itself.

There is no statutory conversion process for becoming a CIO, and the process of transformation is an intricate, multi-stage operation which are that much easier with a legal professional’s insight and experience.

What are the advantages of becoming a charitable incorporated organisation?

When it becomes a charitable incorporated organisation, your charity gains its own legal personality and can conduct business in its own name rather than that of the trustees.

As well as alleviating the legal pressure that charities can put on their members and trustees, making the switch to CIO status brings with it various administrative advantages.

CIOs can use simple receipts and payment accounts, and are only regulated by one regulator – the Charity Commission.

For small to medium sized organisations that employ staff and regularly enter into contracts with other businesses, CIO status offers a range of benefits and advantages. Charities of other sizes may also be able to gain from becoming CIOs.

What are the disadvantages to becoming a charitable incorporated organisation?

A potential disadvantage of obtaining CIO status is that if your charity’s gross annual income is more than £250,000 per year, you must use accruals accounting.

This can be an involved and time-consuming process, and should consist of a balance sheet, a statement of financial activities and explanatory notes.

Also, there is a possibility that CIOs will encounter problems with banks due to there being no register of charges for CIOs.

However, solicitors with experience of working with charity finance will be able to advice you on this matter, as well as those listed above.

I want to register my organisation as a CIO – what should I do?

There are a number of important steps that all charities must take before they can become CIOs, including:

• having a constitution as your governing document - as defined by the Charity Commission
• registering with the Charity Commission
• recording all members and trustees

Once registered you will have to submit annual accounts and returns to the commission.

Why do I need a solicitor?

To become a CIO there are various conditions that must be met, such as the creation of a constitution that contains particular provisions.

Ensuring that your charity meets with the full range of CIO requirements can get complicated. Our corporate and commercial solicitors can assist you with each step of the process, including registration and the creation of a constitution.

If you would like to hear more about the benefits of becoming a CIO, or if you already are one and need legal guidance on a matter, contact us for a free review of your requirements.