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A New Corporate Form for Charities

Later this month, the Office of the Third Sector will be publishing a summary of the responses they received to their consultation on the introduction of the Charitable Incorporated Organisation (CIO), a new corporate structure designed specifically for charities.

The Charities Act 2006 has made and continues to implement many changes to existing charity legislation since it became law in November 2006, with the aim of making life simpler for trustees and providing new safeguards to uphold public trust in the charitable sector. One of the most significant changes is the CIO.

The proposed CIO has some advantages over the existing corporate model (generally a company limited by guarantee) such as:

  • A single registration requirement (with the Charity Commission).
  • Simpler reporting and filing requirements.
  • A single annual return.
  • Greater constitutional flexibility and simpler requirements relating to the reporting of constitutional changes.
  • Lower costs.
  • A clear set of duties for charity trustees and members.

Note, however, that CIOs will still be required (amongst other things) to:

  • Keep registers of trustees and members (which must be available for public inspection);
  • Submit accounts and annual returns to the Commission (regardless of income levels); and
  • Adopt a certain specified form of constitution (still to be finalised).

An unincorporated association may still be simpler to set up and run and so the CIO is not necessarily a model which will appeal to all charities. Charitable trustees of both CIOs and unincorporated associations should, however, be subject to the same duties and responsibilities.

CIOs may be viewed by many existing charities as a welcome development; clearly the Charity Commission, in developing the CIO specifically to appeal to charitable companies, intends the structure to be user-friendly for trustees in a way that the current corporate structure is not.

What next?

CIOs are unlikely to become operational until 2010, by which time regulations governing the establishment and operation of CIOs should have been finalised and detailed guidance have been made available by the Office of the Third Sector as to, amongst other things, how to set up a CIO, the process for a charitable company or charitable industrial and provident society to convert to a CIO and the process for an unincorporated association to change to a CIO structure.

For further information (or to be kept updated) please contact Caroline Redhead on 01228 552222. 

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Published: Tuesday 9th June 2009
Categorised: Corporate Law

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