A charitable incorporated organisation (or CIO) is a corporate structure designed specifically for charities in England and Wales. As it was only introduced in January 2013, it is still a relatively new concept and you may be considering if incorporating as a CIO is right for your charity.
Many charities in England and Wales are set up as charitable trusts or charitable unincorporated associations. Such an unincorporated structure may be adequate if your charity is small and simple with minimal assets and no employees. However, if your charity is, or may be, entering into significant commercial contracts and funding arrangements, employing staff or holding property, you should consider incorporating as a CIO to prevent exposing trustees to unnecessary risk.
The key advantages of incorporating your charity as a CIO are:
- Separate legal personality
A CIO has a separate legal personality which means that it can contract and hold property and other assets in its own name. With unincorporated charities, property and other assets must be held and contracts entered into by the individual trustees. This exposes them to unnecessary risk and can create practical difficulties, particularly when trustees retire or change.
- Limited liability for trustees
A CIO provides limited liability for trustees which means that, provided that the trustees have acted lawfully, they are not personally liable for the charity’s debts. In contrast, trustees of unincorporated charities can face unlimited personal liability if the charity incurs debts or becomes involved in litigation.
- Streamlined regulation
Before January 2013, incorporation meant being both a charity and a company limited by guarantee and therefore being regulated by both the Charity Commission and Companies House. CIOs are registered with and regulated solely by the Charity Commission, avoiding the dual regulation of the Charity Commission and Companies House which reduces the complexity and administrative burden.
- Increased credibility
Incorporating as a CIO can enhance your charity’s standing with donors, funders and partners. Clear governance and a separate legal personality can instil greater confidence in your charity’s longevity and professionalism.
If you are setting up a new charity, adopting a CIO structure can often be beneficial, particularly if you are setting up a smaller charity as you will not have to wait until your charity’s annual income exceeds £5,000 before you can register, or if you intend, whether at the outset or later, to engage in activities involving a level of complexity or risk, such as owning substantial assets or land, employing staff or entering into significant contracts.
If you are a trustee of an existing charity, the decision to incorporate is more intricate. The most appropriate structure will depend on your charity’s size, activities and long-term goals. A CIO is particularly suitable if your charity intends to engage in activities involving a level of complexity or risk, such as the ones mentioned above.