Charitable incorporated organisation
A Charitable Incorporated Organisation (CIO) is a corporate form of business designed for (and only available to) charitable organisations in the United Kingdom. CIO status is conferred by the Charity Commission on application by a charity, whether new or existing.
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The main benefits of the form are that the charity has legal personality (the ability to enter contracts, sue and be sued, and to hold property in its own name - rather than in the name of its trustees), and its members have limited liability (their liability in the event the charity becomes insolvent is limited or nil).
Historically these benefits were only available to limited companies, and many charities chose to incorporate as charitable companies limited by guarantee. However, this requires registration and filings with both Companies House and the Charity Commission, each of which has its own regulations and requirements. In contrast a CIO only needs to register and file accounts and returns with the Charity Commission. This aims to reduce bureaucracy for the charity.
Uniquely among limited liability corporations in the UK, smaller CIOs can opt to file receipts and payments accounts, rather than the accruals accounts usually required. But one disadvantage of the form for larger charities is that, unlike for charitable companies, there is no public register of lenders' charges over the corporation's assets, and this can make it harder to arrange finance.
Almost any existing charity, including charitable companies, can convert to a CIO. Once a CIO there is currently no means of converting to any other legal form.
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.
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.
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. It was finally enacted in the Charities Act 2006.
The Scottish regulator began registering SCIOs in April 2011, 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 has likewise been phased, starting in 2013 with brand new charities, followed by conversions of existing unincorporated charities according to income, and then followed by charitable companies.
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. 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. Another charity converted but then reverted to its old status because of the cost and inconvenience of changing its registration number. As of May 2019, there were over 17,000 CIOs registered with the Charity Commission for England and Wales.
- Shrifin, Tash (2 June 2004). "Q&A: what's in the draft charities bill". The Guardian. Retrieved 14 October 2011.
- "The Scottish Charitable Incorporated Organisations (SCIOs)". Scottish Government. Retrieved 14 October 2011.
- McCurry, Patrick (19 September 2001). "New guidelines to benefit the voluntary sector". The Guardian. Retrieved 14 October 2011.
- FitzHerbert, Luke (21 December 2004). "All to play for". The Guardian. Retrieved 14 October 2011.
- Mason, Tania (12 October 2011). "Charitable Incorporated Organisation delayed until next year". Civil Society. Retrieved 13 January 2019.
- Office of the Scottish Charity Regulator. Retrieved 14 October 2011.
- Young, Niki May (31 October 2012). "Hurd takes CIO legislation to Parliament". Civil Society. Retrieved 31 October 2012.
- Ricketts, Andy (5 March 2013). "Challenge to Change is the first existing charity to use CIO legal form". Third Sector. Retrieved 17 November 2014.
- "Closure of Challenge to Change". Challenge to Change. 5 December 2014. Retrieved 2 March 2015.
- Mason, Tania (31 May 2013). "New CIO applies to revert to charity status". Civil Society. Retrieved 1 January 2019.
- "Advanced search for "charitable incorporated organisation"". Charity Commission for England and Wales.
- Charity types: how to choose a structure, Government guidance for England and Wales, The Charity Commission
- Change your charity structure: Checklist, Charity Commission for England and Wales
- Guidance from the Scottish Charity Regulator on setting up a SCIO in Scotland