The Charitable Incorporated Organisation - To Use Or Not To Use?

 
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Introduction

The statutory framework for this new form of incorporated organisation having been created by the Charities Act 2006, the necessary Regulations to bring those provisions into operation were only approved by Parliament at the end of 2012.

The Charitable Incorporated Organisation is like a company limited by guarantee (the form of organisation hitherto most frequently used by charities) in that it affords the protection of limited liability to its members and directors and is a legal entity in its own right separate from its members and directors, but is differentiated from them in requiring only to be registered with the Charity Commission ("the CC"), and not also with Companies House. The dual filing obligation in relation to Annual Returns and Accounts is therefore avoided; all and any documents that need to be filed have only to be filed with the CC.

Implementation

In order to manage anticipated workloads, the CC has agreed an implementation timetable with the Cabinet Office. The CC can adjust the dates depending on demand but at the moment:

The CC will now accept applications for registration of new CIOs with an anticipated annual income of over £5,000. As from 1st March 2013, the CC will accept applications from existing unincorporated charities with annual income over £250,000 to set up a CIO and transfer assets to it. As from 1st May 2013, existing unincorporated charities with annual incomes between £100,000 and £250,000 can set up a CIO and transfer assets to it. As from 1st July 2013 the band for such applications is reduced to £25,000 and to £100,000. As from 1st October 2013 the band for such applications is reduced to £5,000 and £25,000. As from 1st January 2014 unincorporated charities with an annual income of less that £5,000 will be able to set up a CIO and transfer assets to it, and brand new charities with an anticipated annual income of less that £5,000 will be able to set up a CIO. It is hoped that, subject to the passing of the necessary secondary legislation in Parliament, in the course of 2014 it will be possible for charitable companies limited by guarantee, Community Interest Companies and Charitable Industrial and Provident Societies to convert into CIOs. This too may need to be phased.

The Advantages

The most obvious advantages are:

Limited liability, so that normally the trustees and members will be protected from personal liability. If (for example) the charity does not have enough resources to meet...

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