Charitable incorporated organisation

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A charitable incorporated organisation (CIO) is a new form of legal entity designed for non-profit organisations in the United Kingdom.

The main intended benefits of the new entity are that it has legal personality, the ability to conduct business in its own name, and limited liability so that its members and trustees will not have to contribute in the event of financial loss. These are already available to limited companies; charities can be formed as companies, but then they must be registered with both Companies House and the Charity Commission. In contrast, the CIO only needs to register with the Charity Commission. This is expected to reduce bureaucracy for the charity.[1]

The CIO status became available to charities in England and Wales on 4 March 2013. In Scotland, the Office of the Scottish Charity Regulator began registering Scottish Charitable Incorporated Organisations (SCIOs) in April 2011.[2]

History

The idea originated with the Chief Executive of the National Council for Voluntary Organisations (NCVO), Judy Weleminsky, in 1992 and was taken forward by Lindsay Driscoll who was the Head of Legal and Governance at NCVO. A Charity Commission advisory group was set up in 2000 to look at incorporation of charities, and recommended a new form of legal entity. In 2001 the Department of Trade and Industry's company law review steering group likewise recommended a charitable incorporated organisation with a separate legal regime, as company law is aimed at the commercial sector, with corporate governance structured around the assumption that members of a company have a financial interest in it.[3]

Primary legislation to introduce the CIO as a new legal form of incorporation was included in the Charities Bill in 2004, and this aspect of the Bill was particularly welcomed by charities.[4] It was finally enacted in the Charities Act 2006.

The Charity Commission opened a consultation on draft documentation and regulations in 2008, raising a large number of difficulties and suggested improvements.[5]

The Scottish regulator began registering SCIOs in April 2011,[5] and a fifth of new Scottish charities registered by December of that year were SCIOs. To spread the workload for the regulator, existing charitable companies and industrial and provident societies were unable to convert to SCIOs until 2012; other forms of charity in Scotland were able to apply from April 2011. Implementation in England and Wales is likewise being phased, starting in January 2013 with brand new charities, followed by conversions of existing unincorporated charities according to income, to be followed by charitable companies.[6][7]

The Charity Commission in England and Wales began publishing guidance in May 2011. On 4 March 2013, for the first time, the Commission enabled an existing charity, "Challenge to Change", to convert from a Charitable Trust to a CIO.[8] It later reported some difficulties in transferring assets and long-term grant agreements to the new legal entity and subsequently closed due to reduced levels of funding.[9] Another charity converted but then reverted to its old status because of the cost and inconvenience of changing its registration number.[10]

References

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  6. Office of the Scottish Charity Regulator. Retrieved 14 October 2011.
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External links