The Charitable Incorporated Organisation (CIO) – high hopes?
As from 2 January 2013 the legal framework for CIOs (initially created by the Charities Act 2006, set out in the 2011 Charities Act and since supplemented by regulations and an Order) allows the Charity Commission to enter CIOs on to the register of charities. The introduction of the CIO is an attempt to reduce the regulatory burden for charities. Having been initially suggested some 20 odd years ago, many in the charity sector have been waiting for it for long enough.
But it remains to be seen whether the CIO will turn out to be the all singing all dancing vehicle for charities many have wanted. As an incorporated charity with legal personality, and limited liability for its members and (usually) its charity trustees, it should be simpler to set up and run than a charitable company. It will be registered and regulated by the Charity Commission alone.But there are limitations: unlike a charitable company a CIO can’t issue debentures.
A CIO won’t be simpler to set up and run necessarily than unincorporated charities. CIOs will have to submit annual returns and accounts to the Charity Commission regardless of income for instance. And unlike other charities a CIO only comes into existence when it is registered by the Charity Commission (requiring registration regardless of income).
For those charity trustees for whom this structure might appear an attractive option (as the recipient of the assets of an unincorporated charity say) you need to know that until 1 March 2013 only new set up CIO applications will be considered. Existing unincorporated charities looking to set up and transfer assets to a CIO can apply to register the proposed recipient CIO after that time. But, when exactly, depends on the income levels of the unincorporated charity, starting with those in excess of £250,000, and in phases between 1 May 2013 and 1 January 2014. On the plus side that timetable might encourage charity trustees to take time to consider whether this option -and its implications -are right for their charity.
Conversion of a charitable company to a CIO will involve re registration with a constitution and uninterrupted legal personality. But CIO registrations involving conversion of charitable companies (or Community Interest Companies) won’t likely be an option until 2014.