The CIO or Charitable Incorporated Organisation was a brand new legal structure introduced in December 2012 enabling charities to register in an incorporated form without having to register as a Company. The benefits of registering as a CIO are that the trustees enjoy a limited liability and the charity has its own legal form (which are benefits not enjoyed by traditional charity structures).
The benefits of a CIO in comparison to registering as a charitable company are that you escape the administration and costs associated with being registered at Companies House and having to comply with the 2006 Companies Act.
Converting from CICs to CIOs
Previously, the only way to form a CIO was to register a new charity, so if you had an existing charity, charitable company or community interest company (“CIC”), the only way to ‘convert’ into a CIO was to set up a new charity and transfer the existing assets into the new charity. The obvious downsides to this being that you lost your existing charity number and could incur significant administration costs to enact the set-up and transfer to the new CIO as well as the administration of setting up new bank accounts/new stationery etc. The government has, however, now finalised a consultation on allowing a direct conversion of charitable companies and CICs to CIO form.
Key dates for CIOs conversion
The process will be phased in with smaller entities being allowed to convert first (it was deemed that smaller entities were harder hit by the costs of having dual registration so would benefit more). The timetable is as follows: –
- 1 January 2018 – Charitable companies with income <£12,500
- 1 March 2018 – Charitable companies with income between £12,500-£25,000
- 1 May 2018 – Charitable companies with income between £25,000-£100,000
- 1 June 2018 – Charitable companies with income between £100,000-£250,000
- 1 July 2018 – Charitable companies with income between £250,000-£500,000
- 1 August 2018 – Charitable companies with income >£500,000
- 1 September 2018 – Community Interest Companies
This timetable differed from the originally proposed timetable in that initially larger charities were initially phased in first. The changes have now been through parliament and the above options are now available. The Charity Commission is expecting that between 20-35% of existing incorporated charities will look to convert which would equal between 7,200 and 12,600 charities taking up the new form.
Should you wish to discuss the legal form of your charity or CIC and how the CIOs option may be of benefit to your organisation please do get in touch with your Menzies representative.
Andrew Roberts is a member of Menzies Not for profit (NFP) sector team who provide compliance and advisory services to charities and the wider not for profit sector. Contact Andrew by phone on 01372 226308 or via email at ARoberts@menzies.co.uk.