After many years of waiting Charitable Incorporated Organisations (CIOs), a new legal structure for charities, are finally now available. Legislation relating to the establishment and running of CIOs came into force on 2 January 2013 and the first CIOs have now been registered.
Currently applications to become a CIO are only available for brand new charities with an income of over £5,000. From 1 March 2013 unincorporated associations with an income above £250,000 will be able to convert to a CIO by setting up a CIO and transferring their assets to the CIO.
As 2013 and 2014 progress, smaller unincorporated associations and brand new charities with incomes below £5,000 will in stages be able to apply to become CIOs.
What is a CIO?
A CIO is similar to a company limited by guarantee, but CIOs will be solely regulated by the Charity Commission and there is no need to register with Companies House. This should reduce some of the administrative burden of company law and regulation. The other principal attraction of a CIO, as opposed to an unincorporated association, is that the CIO will have a separate legal personality and can therefore hold property and enter into contracts in its own name, without having to act through its trustees in their personal capacity. The trustees and members will also benefit from limited liability.
Unlike Companies House, the Charity Commission will not be maintaining a register of charges to publicly record lending secured against business assets. That means that CIOs may find that some banks may be less willing to lend to them.
Nevertheless it is expected that CIOs will be a popular vehicle for smaller and medium-sized charities. This is why the Charity Commission is staging the implementation of new CIOs. At this moment it is not certain whether there will be any teething problems or if uptake will meet expectations.
If your organisation is interested in becoming a CIO, please contact Joanne Davison on 0191 211 7958 to discuss the advantages and disadvantages and to help you what is most suitable