The Regulator for Charities in England and Wales

Charitable Incorporated Organisation (CIO)

(Version May 2008)

What is a CIO and why is it being introduced?

The Charities Act 2006 introduces a new legal form of incorporation which is designed specifically for charities, the Charitable Incorporated Organisation (CIO).

At present charities can be set up with a corporate structure but this means that they normally fall within the requirements of company law as well as charity law. In particular, they have to register both with the Charity Commission and the Registrar of Companies at Companies House and provide accounts and returns to both. As the framework of company was designed primarily for commercial organisations this may mean that it is not always suitable for charities.

The CIO will combine the advantages of a corporate structure such as reduced risk of personal liability without the burden of dual regulation.

What are the advantages of being a CIO?

For charities that decide that a corporate structure is right for them, the CIO will have the following advantages over a company structure:

  • A single registration – a charitable company has to register with the Registrar of Companies at Companies House and the Charity Commission. A CIO will only need to register with the Commission
  • Less onerous requirements for preparing accounts – the general regime in the Charities Act 1993 will apply, so small CIOs will be able to prepare receipts and payments accounts, whilst larger charities will prepare accruals accounts
  • Less onerous reporting requirements – CIOs will only prepare an annual report under the Charities Act 1993. Under company law, companies have to prepare a directors’ report as well
  • One annual return – charitable companies have to prepare an annual return under company law and, normally, a separate return under charity law
  • Less onerous filing requirements – CIOs will only have to send accounts, reports and returns to the Commission. Charitable companies have to send these to us and the Registrar of Companies
  • Less onerous requirements relating to reporting of constitutional and governance changes – CIOs will be subject to a less extensive range of reporting requirements than charitable companies and will only have to report to us
  • Lower costs for charities – the Commission make no charges for registration and filing of information
  • Simpler constitutional form – the Commission will produce model forms of constitution which will include fewer fixed governance provisions than is the case with companies
  • More straightforward arrangements for merger and reconstruction – the Charities Act 2006 contains a number of provisions designed to facilitate merger and reconstruction which are not available to charitable companies
  • An enforcement regime which does not penalise the charity for the conduct of its directors
  • Codified duties for directors and members which reflect the charitable nature of the CIO
  • EC company law directives will not apply to CIOs

When will the CIO structure be available for charities?

Although the Charities Act 2006 sets out part of the proposed legal framework for CIOs, more detail will be included in secondary legislation in the form of Regulations which will be made by the Minister for the Third Sector. These Regulations will set out how CIOs must be established and operate.

Before the Regulations are made, the Office of the Third Sector will issue draft Regulations for consultation. At the same time, the Commission will issue draft model constitutions for CIOs for consultation. It is important that we get these right and we expect the consultation will begin mid summer 2008. Further details about this and when the CIO will be available for charities to use will appear on our website.

What other information and guidance will be available?

We will be producing detailed guidance which will include 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.

We will issue draft guidance alongside the consultation on the draft regulations and the model constitutions.

Frequently asked questions

  • We want to set up a new charity, how do we decide what is the right structure for us?

If you are considering setting up a charity it is worth thinking about what is the most appropriate structure for the charity. Do you want it to be an incorporated or an unincorporated charity? Our publication “Choosing and preparing a governing document” (CC22) provides information on the current structures open to charities.

  • We are a charitable company and we want to convert to a CIO structure. How do we do this?

The Charities Act 2006 contains provisions to enable existing charitable companies and charitable industrial and provident societies to convert to CIOs. The new CIO will not be a new corporate body to which the undertaking of the company or industrial and provident society is transferred. The existing corporate body is simply re-registered as a CIO and the conversion process will not affect the legal personality of the organisation or its business relationships.

  • We are a community interest company but want to become a charity. How do we do this?

You will be able to convert directly into either a charitable company or a CIO.

  • We are an unincorporated association and we want to change our structure to a CIO. How do we do this?

The procedure that you will need to follow will be similar to that of an unincorporated charity that wants to change to a charitable company. You will firstly need to register the new CIO with the Commission and then wind up the existing unincorporated charity, in accordance with the provisions of the governing document. Once all the assets of the unincorporated charity have been transferred to the CIO, you must notify us and we will remove the unincorporated charity from the Central Register of Charities

As the CIO will be a new legal entity it will have a new registered charity number and you will need to inform banks, funders and suppliers of the transfer. You will need to ensure that any existing contracts are assigned to the CIO.

If the charity has a defined benefit pension scheme it is likely that the transfer to the CIO may be regarded as a notifiable event by the Pensions Regulator. More information on this is included in our guidance on Defined Benefit Pensions Schemes.

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