Charity Commission announces new legal form for charities

For the first time in four hundred years a new legal form specifically for charities — the Charitable Incorporated Organisation (CIO) — has been made available.

The Charity Commission identifies the key characteristics of the CIO as follows:

  • It is an incorporated form of charity which is not a company
  • It only has to register with the Charity Commission and not Companies House
  • It is only created once it is registered by the Commission
  • It can enter into contracts in its own right and its trustees will normally have limited or no liability for the debts of the CIO

Deloitte has published its own guide to use of the new legal form, Charitable Incorporated Organisations: A Guide to Establishing your Charity as a CIO.

Deloitte, however, says it has identified significant drawbacks to the new legal form:

  • It is new and untested and it will be years before case law has evolved to clarify their use in practice.
  • Although CIOs are not supposed to fall within the regime of Companies law Deloitte believes they will prove to be subject to many of the same regulations.
  • Because charitable status is a prerequisite of registration as a CIO, any CIO which ceases to qualify as a charity will have to cease trading and distribute its assets to another charity. Charities registered as incorporated companies, however, can continue in these circumstances by transferring operations into a new non-charitable social enterprise or Community Interest Company.
  • Unlike a company, CIOs are unable to offer a charge on assets as security for borrowing.

The Development Trusts Association (which has since merged with BASAC to form Locality, the new national network body for community-led organisations), still has a very good briefing about CIOs on its website here.

There’s also more in this article at Third Sector Online.

 

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