Setting up a Charitable Incorporation Organisation

Interest in Charitable Incorporation Organisations (CIO’s) has grown in recent months, we explain how these could be considered an appropriate structure for a reorganisation or setting up a new activity.  

CIO’s have been around for some time, following their introduction into law through Part 11 of the Charities Act 2011. The CIO structure is also regulated by the operative provisions of the Charitable Incorporated Organisations (General) Regulations 2012, the Charities Act 2011 (Charitable Incorporated Organisations) (Constitutions) Regulations 2012 and the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012. 

What are they? 

The CIO is a form of body corporate, that like a regular corporate structure can own property, hold title to real property, enter into contracts – it is its own legal entity.  Until now, the conventional structure for a charity was either through an unincorporated trust or, a company limited by guarantee which was then registered at the Charities Commission to qualify for charitable status.   

The core advantages of a CIO over the conventional corporate structure are that duplicity of administration is removed.  There is no need to file accounts and annual information at Companies House as well as with the Charities Commission and there is no need to hold separate board and trustee meetings.  

Financial benefits 

CIO’s have the following financial benefits:  

• Gift Aid Relief on donations;  
• Stamp Duty Land Tax exemptions on buying or leasing property; 
•  Rate Relief; and  

• No charges to tax on income as long as this relates to the CIO’s charitable objects (or exemption rules apply). 

Incorporation  

A CIO is created through two routes: 

• An application to convert an existing charity into a CIO structure; or  
• A new application  

Converting an existing Charity  

The regulations permit an existing charity to convert, through adapting its existing constitution and making an application to the Charities Commission.   

Once the CIO is set up, trustees are able to transfer the existing charity, including its assets and undertaking into the CIO.  Care needs to be taken to ensure legal and beneficial ownership and benefits are transferred over and due process complied with – for example,   advice should be taken in respect of the application of TUPE in respect of any employees being transferred to a new entity.

Creating a new CIO  

A CIO is incorporated through application to the Charities Commission.  Initial trustee appointments will need to be agreed and an application will need to be submitted with a constitutional document, regulating the meeting and order of the CIO.  This will need to follow one of two models – a foundation CIO where the CIO will be run exclusively by trustees or an association CIO where membership will have a function in the running and management of the CIO. 

Typically applications are heard within 40 – 50 business days.  A CIO does not ‘exist‘ until its application has been accepted by the Charities Commission. 

For more information on CIO’s, or legal structures generally please do not hesitate to contact us.