Many out of school clubs and pre-schools that are registered as charities go through a period where they struggle to recruit members for their committee. One of the biggest problems is that members of the committee are personally responsible for any financial losses of the charity, which is very off-putting for many people. In an ideal world, this would not be an issue, but with constantly fluctuating numbers, even the most successful setting will struggle financially when a large year group moves on to secondary school.
In response to requests for a new charity structure that would enable an organisation to have the benefits of being a company, whilst removing some of the common burdens that this entails, the Charity Commission has introduced a new charitable status: a Charitable Incorporated Organisation (CIO).
A Charitable Incorporated Organisation (CIO):
- 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 benefits of registering your charity as a CIO are:
- 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.
The Charity Commission thinks that the structure of CIO will be most suitable for small to medium sized organisations which employ staff, therefore very suitable for out of school clubs.
In many aspects a CIO is similar to the conventional charitable structure, but there are some significant differences and additional requirements:
- Trustees have to register the CIO with the Charity Commission, regardless of its income, even if the income is less than £5,000.
- As all CIOs have to register, a CIO cannot be an exempt charity.
- A CIO does not come into existence until it has been registered by the Charity Commission.
- A CIO must have a registered principal office situated in either England or Wales.
- All CIOs must submit an annual return and accounts to the Charity Commission, regardless of the income of the CIO.
- CIOs must 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. Amendments to a CIO’s constitution are not valid until they have been registered with the Charity Commission and certain amendments require its prior consent.
- Insolvency law applies to CIOs.