VAST Vault – Charitable Incorporated Organisations

April 1, 2021 3:36 pm

A Charitable Incorporated Organisation, or CIO, is a legal form for a charity which:

  • is an incorporated form of charity which is not a company,
  • only has to register with the Charity Commission and not Companies House
  • is only created once it is registered by the Commission,
  • can enter into contracts in its own right and its trustees will normally have limited or no liability for the debts of the CIO.

The Charity Commission has identified the CIO to be most suitable for small to medium sized organisations which employ staff and / or enter into contracts. It is important to look at all the different legal structures available to determine which will be the best for your organisation.

The CIO structure has several benefits over unincorporated structures, such as:

  • the members and trustees are usually personally safeguarded from the financial liabilities the charity incurs, which is not normally the case for unincorporated charities,
  • the charity has a legal personality of its own, enabling it to conduct business in its own name, rather than the name of the trustees.

Many aspects of running a CIO will be the same as other forms of charity, but there are important differences and additional obligations on the trustees of a CIO:

  • all CIOs will have to register with the Commission, regardless of their income, even if they have an income of less than £5,000,
  • as all CIOs will have to register, a CIO cannot be an exempt charity,
  • a CIO does not come into existence until it has been registered with the charity commission,
  • a CIO will have to have a registered principal office situated in either England or Wales,
  • all CIOs will have to submit an annual return and accounts to the Charity Commission, regardless of the income of the CIO (within 10 months of the end of the organisation’s financial year),
  • CIOs will have to keep a register of members and a register of trustees – anyone can ask to see, or be provided with a copy of, the register of trustees
  • the constitution of a CIO must contain certain provisions – the Charity Commission has produced two model forms of constitution for use by a CIO; one for CIOs where the members are not necessarily trustees (the association model) and one for CIOs where the only members are the trustees (the foundation model)
  • amendments to a CIO’s constitution will not be valid until they have been registered with us – certain amendments will need our prior consent,
  • insolvency law applies to CIOs.

Registering A CIO

If you are an unincorporated charity (ie not a company limited by guarantee) you will have to follow a process to become a CIO:

  • Register the new CIO with the Charity Commission.
  • Transfer the assets and undertakings of the unincorporated charity to the CIO and settle any liabilities.
  • Dissolve the unincorporated charity in accordance with the provisions contained in its governing document.
  • Apply to the Charity Commission to have the unincorporated charity removed from the register of charities.

If you are a new organisations you can apply on-line to the Charity Commission. You will need to have a governing document. The Charity Commission has model documents for CIOs.

Model Constitutions

The Charity Commission has produced two model constitutions for CIOs:

  • the foundation model is for charities whose only voting members will be the charity trustees.
  • the association model is for charities that will have a wider membership, including voting members other than the trustees

In practice a CIO using the foundation model will be like an unincorporated charitable trust, run by a small group of people (the charity trustees) who will make all key decisions. There may be no time limit on how long charity trustees may serve and they will probably appoint new charity trustees.

A CIO using the ‘association’ model will have a wider voting membership who must make certain decisions (such as amending the constitution), will usually appoint some or all of the charity trustees (who will serve for fixed terms), and may be involved in the work of the CIO.

Like companies, which must have both members and company directors, all CIOs must have members and charity trustees. Depending on the CIO’s needs, the same individuals can be both members and charity trustees, or there can be a wider membership made up of people who are not the charity trustees.

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