Is your charity’s corporate structure working for you?

Charitable Incorporated Organisations (CIOs) are a charitable structure which effectively makes provision for charities and not-for-profit organisations to incorporate their charitable activities, but also enjoy reduced reporting obligations and other significant administrative and legal benefits compared to limited companies.

This structure was introduced by the Charities Act 2006 but charities were only able to apply from December 2012.The CIO, set out in the Charities Act 2011, further allowed these charities to become a separate legal entity and thus be able to enter contracts in its own right, i.e. not the individual trustees jointly and severally.

On the administrative front, whereas charities incorporated as limited by guarantee are required to submit two annual returns and sets of accounts to both Companies House and the Charity Commission, CIOs will only need to submit one annual return and one set of accounts each year.

Furthermore, as CIOs are considered a separate legal entity, members and trustees of such organisations will – in most cases – be protected from being held personally liable for any liabilities which may be incurred by the CIO itself.

This relatively new legal structure also enables charities that have become CIOs to enter into contracts in their own right, or even hold property in the name of the CIO – which can be advantageous for the charity later on in terms of succession planning.

Those interested in setting up a new CIO must apply to the Charity Commission online.

For existing companies wishing to convert to CIO status, there is no current framework available to allow for transition under the Charities Act 2011 – meaning that the charity will effectively need to set up a new CIO to be registered with the Charity Commission and then transfer all relevant matters over to the new charity.

However, CIO status will not suit every charity and it is important to seek specialist advice dependent on your specific goals and circumstances.

At Moore Thompson, our specialist team can advise on the formation of new CIOs. For more information about our services, or to find out if a CIO structure might suit you, please contact us.

Posted in Charities News.