The new Charitable Incorporated Organisations
Whoever said,
“every charitable act is a stepping stone towards heaven” probably didn’t contemplate
the Charities Act 2006!
We will
shortly have a new form of incorporated body: the Charitable Incorporated
Organisation, or CIO, expected to be
with us in the spring of 2012. It joins a very select band of forms of
incorporation with limited liability. For years we had only the Companies Act
company, industrial and provident societies, and companies incorporated by
statute or Royal Charter; in recent years they have been joined by the open-ended
investment company (OEIC), the LLP, the community interest company (CIC), the
European EEIG and SE, and now the CIO.
For many
years it has been common for charities to be registered as companies, not least
to get limited liability for the trustees. The relationship between charity and
company law has always been a little tense, and it started to become necessary
for the Companies Act to make special provision for charitable companies. Now
it has been realised that it makes more sense to have an entirely separate form
of incorporation for charities, overseen by the Charity Commission rather than
Companies House and the BIS.
There have
been long delays in bringing the new legislation into force, but the latest
information is that should be in by the spring – though there is some
scepticism about whether this timetable will be kept to. To avoid a logjam of
applications, existing charitable companies may not be allowed to apply until
later. There will be a procedure for converting existing companies to CIOs, so there
will be no need to transfer assets from the old company to the new CIO – though
that will still be needed to turn an unincorporated charity into a CIO.
Charities
with complicated governance structures or membership schemes would be well
advised to start drafting their new constitutions now, if they want to take up
the new format as soon as it becomes available. More information is on the Charity
Commission’s website. The
legislation setting out much of the detail on how CIO’s will work (which is not
yet in force) is in Schedule 7 to the
Charities Act 2006.
