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CHARITIES |
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CHARITABLE INCORPORATED ORGANISATIONS (CIOs) |
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¶9743-3 |
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Charities opting for a corporate structure must register with the Charity Commission and the Registrar of Companies, as well as submit annual accounts to both bodies. The problem is that the framework of company law was designed primarily for commercial entities and as such may not always be suitable for charities. To address this problem, a new legal form of incorporation designed specifically for charitable organisations, was sanctioned under the Charities Act 2006. The Charitable Incorporated Organisation (CIO) offers the advantages of a corporate structure and reduced risk of personal liability for trustees without the burden of dual regulation. Advantages of registering as a CIO over a company structure » Single registration. A CIO will have to register only with the Charity Commission; » Less onerous requirements for preparing accounts. Small CIOs can prepare receipts and payments accounts and larger charities accruals accounts; » CIOs are required to prepare an annual report only, and not a directors’ report; » One annual return. Charitable companies are currently required to prepare annual returns under company law and charity law; » Less onerous filing requirements. CIOs will only have to submit accounts, reports and returns to the Commission and not the Registrar of Companies; » Reduced compliance costs for charities as the Commission does not levy charges for registration or filing of information; » Simpler procedures for mergers and reconstructions. The Charities Act 2006 contains a number of provisions designed to facilitate mergers and reconstructions, which are not available to charitable companies; » EC company law directives do not apply to CIOs. When can charities register as CIOs? Although the Charities Act 2006 contains the proposed legal framework for CIOs, more detail will be included in secondary legislation in the form of Regulations, made by the Minister for the Third Sector. These Regulations will stipulate how CIOs can be established and how they should operate. The first stage in the process, planned for this summer, should see the Office of the Third Sector issue Draft CIO Regulations for consultation. Detailed guidance on how to set up a CIO and the process by which a charitable company, charitable industrial and provident society, or unincorporated association, can convert to a CIO will also be published. In effect 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 as such the conversion process does not affect the legal personality of the organisation or its business relationships.
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