Charitable Incorporated Organisations (CIOs) - what's next?

What is a charitable incorporated organisation (CIO)?

Charitable incorporated organisations (CIOs) are a new corporate structure designed specifically and exclusively for charities.

They will be an alternative to the current legal structures for charities, such as charitable companies (usually companies limited by guarantee), charitable trusts and charitable unincorporated associations.

CIOs will be registered with and regulated by the Charity Commission but, unlike charitable companies, CIOs will not also be required to register with, or be regulated by, the Registrar of Companies.

Like all corporate structures, CIOs will have a separate legal personality allowing them to contract and hold property in their own name and, like limited companies, their charity trustees and members will benefit from limited personal liability.

Who will the CIO appeal to?

It is generally thought that the new CIO structure will appeal to medium-sized unincorporated charities (that is a charitable trust or charitable unincorporated association) which employ staff and/or enter into contracts, although the new structure will impose more regulation and registration requirements on them. Charitable companies may wish to convert to a CIO to benefit from the reduced regulation and administration.

CIO Regulations and Order made

On 5 December 2012, the following statutory instruments necessary to complete the legal framework for the CIO were signed (or "made") by Nick Hurd, Minister for Civil Society:

The next step in implementing the CIO will be for the Minister for Civil Society to make the Charities Act 2011 (Commencement No.1) Order 2012 to bring into force most of the relevant provisions of ChA 2011.

However, the provisions that enable existing charitable companies limited by guarantee, community interest companies and charitable industrial and provident societies to convert into CIOs will not be brought into force until later

Key characteristics of a CIO

The key characteristics of a CIO are:

  • Single regulation and registration. CIOs are regulated by charity law and not by company law. They only need to register with the Commission, and not with Companies House.
  • Registered charity status. All CIOs are registered charities and an exempt charity cannot be a CIO (regulation 5, General Regulations). At the same time as an organisation is accepted by the Commission for registration as a CIO, its details are entered in the register of charities.
  • Separate legal personality and limited liability. Like any corporate vehicle, CIOs have a separate legal personality and can contract and hold property in their own name. The liability of its charity trustees and members is limited.
  • Membership. CIOs must have one or more members. A CIO's members are either liable to contribute up to a specified amount to the assets of the CIO if it is wound up or not liable to make any contribution at all (section 205(2)-(3), ChA 2011). A charity trustee can (but is not required to) be a member and the members and the charity trustees can be the same people (section 206(6), ChA 2011).
  • Less onerous reporting and accounting requirements. CIOs do not need to prepare a directors' report under the Companies Act 2006, just an annual report under ChA 2011 (sections 162-166). The accounting regime in ChA 2011 applies to CIOs. This regime is less onerous than the accounting regime applicable to companies under the Companies Act 2006.
  • One annual return. CIOs must prepare an annual return under ChA 2011 (section 169) but they do not have to prepare an annual return under the Companies Act 2006. They only need to send reports and accounts to the Commission and not to Companies House.
  • Simple and cheap to set up. The CIO's governing document must be in a form specified by regulations to be made by the Commission or as near to that form as the circumstances permit (section 206(5), ChA 2011). The Commission has produced two forms of model constitution. Seeking to register a CIO with a tailor-made constitution is therefore likely to delay registration (see Model constitutions). Unlike Companies House, the Commission does not (and currently has no plans to) charge for registration or the filing of information.
  • Situated in England or Wales. The principal office of a CIO must be in either England or Wales (section 206(1)(c), ChA 2011).
  • Limited transparency.The register of charities will contain details of CIOs including the date they are registered, details of their governing document and financial information. The registers of trustees and members will also be open to public inspection.However, the Commission does not currently plan to provide a publicly accessible register of details of charges over the property of a CIO and particulars of debentures issued by a CIO. This may well impact on the popularity of the CIO in practice (see Who will the CIO appeal to?).

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