Thinking of converting your charity in to a CIO?
Regulations that came in to force in 2018 mean that it is now possible to convert a charitable organisation into a Charitable Incorporated Organisation, or in its abbreviated form, a CIO. Should this be something you consider? And if so, how do you do it?
A CIO is a specially designed corporate vehicle which is only to be used by charities. It is answerable only to the Charity Commission and, unlike commercial enterprises, is not regulated by Companies House. All charitable organisations should at least consider converting to a CIO, however, it will not be the right step for all. Below we have set out just some of the possible pros and cons to take into consideration:
- As a CIO you must always be registered with the Charity Commission. If for any reason you are de-registered, your entity will no longer exist
- The Charity Commission does not hold a public register of charges in the same way as Companies House
- As CIOs operate under a constitution, a new governing document has to be created to ‘replace’ your current articles of association. There are template documents available to keep costs down, but they must be suitable for your organisation’s bespoke set up and needs
- Reporting procedures are (or at least should be) simplified as accounts, reports and annual returns only need to be filed with the Charity Commission and not Companies House
- In most situations you will be able to keep the same name and charity number. This is because you don’t need to set up a new CIO structure, you just convert your current company in to a CIO
- Most contracts and bank accounts will transfer automatically
- The new CIO structures are designed specifically for charities and so should be more user friendly
- The conversion process is relatively straightforward and can be done for minimal cost
So how do you convert? To give you an indication of the key steps involved, we have set out below the five main stages:
Stage 1: All of your admin and ‘house-keeping’ needs to be up to date (the conversion process can act as a useful prompt to force you to do this). All filings need to be up to date and the register of members needs to be accurate.
Stage 2: Review your current articles and prepare your new constitution (again a great prompt to do something you probably should be doing in any event).
Stage 3: Members pass resolutions (a 75% majority is required, or unanimous if done by writing) approving the new constitution and the conversion.
Stage 4: All relevant documents and trustee declarations are filed with the Charity Commission.
Stage 5: The Charity Commission and Companies House then liaise and undertake various checks. Once satisfied the CIO will be registered and the organisation removed from Companies House.
If you are planning to convert to a CIO, or simply want to consider the possibility further, the best thing to do is to talk it through with one of our company commercial solicitors. They will be able to discuss the pros and cons in more detail and guide you through the conversion process itself.
You can contact me directly via james.peterson@GAsolicitors.com or by calling 01752 203500 and I will be happy to answer any questions you may have. Recognised by The Legal 500 and Chambers & Partners UK, you can be assured you will receive the highest quality legal advice.
James Peterson, partner