There are benefits to be gained from converting your charity to a charitable incorporated organisation (CIO), but you may need a solicitor’s help to do it properly.
There is no statutory conversion process for becoming a CIO, and the process of transformation is an intricate, multi-stage operation with numerous potential pitfalls which are that much harder to avoid without a legal professional’s insight.
If you want to know whether CIO status would be beneficial for your charity from a legal standpoint, or if you require legal assistance with the process of becoming a CIO, contact the specialists at First4lawyers.
Similarly, you might already be a CIO and need help solving a legal problem. Again, First4lawyers will do everything it can to advise you.
What is a charitable incorporated organisation?
Charitable incorporated organisation is a new legal status available to charities that incorporates the benefits of being a company without the burden of increased regulation.
CIOs are not companies in the eyes of the law, and as such they only have to register with the Charity Commission (whereas companies have to be registered with Companies House).
By becoming a CIO, your charity can benefit from being able to enter into contracts in its own right and hold property in its own name, while members and trustees will be protected from any personal liabilities that your new CIO might incur.
The net effect of converting an unincorporated charity to a CIO is that the burden of responsibility for debts, property, transactions and insurance shifts from the trustees and members to the CIO itself.
What are the advantages of becoming a charitable incorporated organisation?
When it becomes a CIO, your charity gains its own legal personality, and can conduct business in its own name rather than that of the trustees.
As well as alleviating the legal pressure that charities can put on their members and trustees, making the switch to CIO status brings with it various administrative advantages. CIOs can use simple receipts and payment accounts, and are only regulated by one regulator – the Charity Commission.
For small to medium sized organisations that employ staff and regularly enter into contracts with other businesses, CIO status offers a range of benefits and advantages. Charities of other sizes may also be able to gain from becoming CIOs.
A good starting point for understanding what becoming a CIO can do for your charity is to get access to a specialist business solicitor, such as those from First4lawyers.
What are the disadvantages to becoming a charitable incorporated organisation?
A potential disadvantage of obtaining CIO status is that if your charity’s gross annual income is more than £250,000 per year, you must use accruals accounting, which can be an involved, and time-consuming process.
Furthermore, it is possible that CIOs will encounter problems with banks due to there being no register of charges for CIOs. However, solicitors with experience of working with charity finance will be able to advice you on this matter, as well as those listed above.
I want to register my organisation as a CIO – what should I do?
There are a number of important steps that all charities must take before they can become CIOs, including registering with the Charity Commission, establishing a principal office in England or Wales that also must be registered with the commission, and becoming a registered charity.
Because CIO status was only introduced in 2012, with The Charitable Incorporated Organisations (General) Regulations 2012, it remains to be seen how the Charity Commission will handle approvals once a large number of charities apply to change status.
What can a solicitor do?
To become a CIO, there are various conditions that must be met, such as the creation of a constitution that contains particular provisions. Ensuring that your charity meets with the full range of CIO requirements can be difficult, but the specialist corporate and commercial solicitors at First4lawyers can assist you with each step of the process.
Additionally, insolvency law applies to CIOs, and you can speak to our team to discuss how this will impact upon your CIO, and we will be able to assist you with registration and the creation of a constitution.
If you would like to hear more about the benefits of becoming a CIO, or if you already are one and need legal guidance on a matter, contact First4lawyers.