Understanding Charitable Incorporated Organisations

A charitable incorporated organisation (CIO) is a type of charity that offers a simpler and more flexible way to set up and run a charity.

CIOs were introduced by the Charities Act 2016, which provided a new way for charities to be set up and registered with the Charity Commission.

One of the key benefits of a CIO is that it provides a more streamlined and efficient process for setting up a charity, with fewer forms and less bureaucracy.

CIOs are governed by a board of trustees, who are responsible for making key decisions and ensuring the charity is run effectively.

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A CIO is a charitable incorporated organisation that is registered with the Charity Commission for England and Wales.

To become a CIO, an application must be made by the proposed members, who are usually also the proposed trustees, but this is not a requirement.

A CIO is a corporation with legal personality, allowing it to enter contracts, sue and be sued, and hold property in its own name.

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This gives CIOs the ability to enter contracts and own property independently, without needing to rely on their trustees.

A CIO is a corporation with limited liability, meaning that its members' liability in the event of insolvency is limited or nil.

This is a significant benefit for CIOs, as it protects their members from personal financial risk.

Historically, these benefits were only available to limited companies, which required registration and filing with both Companies House and the Charity Commission.

In contrast, a CIO only needs to register and file accounts and returns with the Charity Commission, reducing bureaucracy for the charity.

Smaller CIOs in England and Wales can opt to file receipts and payments accounts, rather than the accruals accounts usually required.

This is a unique advantage of the CIO form, but it's worth noting that larger charities may face some disadvantages when using this form.

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A charitable incorporated organisation comes into existence upon registration with the Charity Commission and is given a charitable incorporated organisation registration number. This registration number is essential for all official documents, including on formal communications and stationery, legal documents, fundraising materials, and on their website.

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To register a charitable incorporated organisation, you'll need to provide the address for service of the organisation, which can be the principal office or a different address where notices will be received by the organisation. This address will be used for the service of any notices, so it's essential to choose one that's suitable.

A charitable incorporated organisation must have a principal office in England or Wales and registers of members and trustees, and it must submit an annual return and accounts. Failure to comply with these requirements can result in a criminal sanction for the trustees, and contracts and conveyances by the charitable incorporated organisation may be unenforceable.

Here are the key documents you'll need to register a charitable incorporated organisation:

The concept of charitable incorporated organisations (CIOs) has been around since 1992, when the Chief Executive of the National Council for Voluntary Organisations (NCVO), Judy Weleminsky, first proposed the idea.

A Charity Commission advisory group was set up in 2000 to explore the incorporation of charities, and they recommended a new form of legal entity.

First Registration is a crucial step in the process of forming a Charitable Incorporated Organisation (CIO). It involves registering with the Charity Commission and obtaining a charitable incorporated organisation registration number.

To register a CIO, you'll need to submit an application to update the register in the Charity Commission's digital systems or fill out form FR1. You'll also need to provide the address for service of the CIO, which will be used for serving notices.

If your CIO is applying for first registration voluntarily, you won't need a deed containing the statement required by sections 122(2) and 125(1) of the Charities Act 2011. In this case, you'll need to submit an application using form RX1 for the entry of a restriction in Form E.

Here's a list of the documents/evidence required on registration of a charitable incorporated organisation:

Once your CIO is registered, you'll be given a new charity number, and you'll need to prepare amended stationery, including issuing new Gift Aid forms.

To register a charitable incorporated organisation as a proprietor or disposition, you'll need to provide certain documents and information.

You'll need to send certified copies of deeds or documents with your HM Land Registry application. Once we've made a scanned copy, the original documents will be destroyed.

When uploading documents, you can certify scanned copies by confirming they're a true copy of the original using the certification statements available.

To update the register in our digital systems or form FR1, you'll need to provide an application to register a charitable incorporated organisation. This should include the organisation's registration number, if it's not already supplied. If it's not supplied, you'll need to provide a certified copy (or screen print) of the Charity Commission's registration certificate.

The address for service of the charitable incorporated organisation is also crucial. This address will be used for serving notices, so make sure it's one where the organisation will receive these notices.

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Transfers of registered land in favour of a charitable incorporated organisation must be in one of the forms in Schedule 1 to the Land Registration Rules 2003. These forms include TR1, TR2, TR5, and AS1 for transfers of the whole of one or more titles.

A lease granted in favour of a charitable incorporated organisation must contain the prescribed clauses, as outlined in rule 58A and Schedule 1A to the Land Registration Rules 2003.

The disposition or application must state the charitable incorporated organisation's registered charity number. The organisation's status should also be described, stating it as a charitable incorporated organisation if its name doesn't clearly indicate this.

All dispositions in favour of a charitable incorporated organisation must contain a statement that the organisation is a non-exempt charity. This statement should refer to the restrictions on dispositions imposed by the Charities Act 2011.

When registering a disposition in favour of a charitable incorporated organisation, the registrar will enter a restriction that reflects the powers of the proprietor. This restriction is in Form E as set out in Schedule 4 to the Land Registration Rules 2003.

If land is vested in the Official Custodian for Charities, you'll need to lodge a certified copy of an order of the court or Charity Commission with your application. The address for service entered in the register will be that of the Official Custodian.

Here are the required forms for transfers of registered land in favour of a charitable incorporated organisation:

The initial review is a crucial step in the Charitable Incorporated Organisation process. It's where we'll take a close look at your charity's existing governing documents and structure to see how they'll affect the rest of the process.

We'll provide an estimate of costs for the initial review in our engagement letter, which for existing charities is likely to be in the region of £1,200 – £3,000 plus VAT. This cost can be higher if you have multiple properties, missing or incomplete documents, or if some of your trustees are paid and it's unclear whether those payments are authorised.

For new charities, we ask for an initial payment of £150 plus VAT, which may or may not require an initial review, depending on whether you've already started operating and have a constitutional document in place.

We'll ask questions or request further information during the initial review, which will help us progress to Phase 2. These questions will be identified separately and are not included in the initial review costs.

Here are some examples of issues that may increase the costs of the initial review:

Registration documents are essential for charitable incorporated organisations. To register, you'll need to provide an application to update the register in the digital systems or form FR1, which is the first registration form.

You'll also need to provide your charitable incorporated organisation's registration number, which can be found on the Charity Commission's registration certificate. If you don't have this number, a certified copy or screen print of the certificate will do.

The address for service of the charitable incorporated organisation is also crucial. This is the address where notices will be sent, so make sure it's accurate and up-to-date.

Here's a checklist of the documents you'll need:

Remember to include your registered charity number and name on all official documents, including stationery, legal documents, and fundraising materials.

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Charity statements and certificates are crucial documents that charitable incorporated organisations (CIOs) need to prepare when making dispositions, such as selling or transferring land.

If a CIO is making a disposition, it must contain a statement that the CIO is a non-exempt charity and referring to the restrictions on dispositions imposed by the Charities Act 2011.

This statement is necessary to enable the registrar to enter an appropriate restriction in the register, ensuring that the restriction has been complied with.

The statement must be included in the disposition, and depending on the date of the deed, it may also need to contain a certificate by the trustees.

A disposition by a CIO must also contain an appropriate statement, which enables the registrar to be satisfied that the restriction has been complied with.

Here is a summary of the requirements:

By including these statements and certificates, CIOs can ensure that their dispositions are properly registered and compliant with the Charities Act 2011.

For a disposition in favour of a charitable incorporated organisation, you'll need to use one of the forms in Schedule 1 to the Land Registration Rules 2003.

Transfers of the whole of one or more titles should be made on form TR1, form TR2, form TR5, or form AS1, while transfers of part should be made on form TP1, form TP2, form TR5, or form AS3.

A lease granted in favour of a charitable incorporated organisation must contain the clauses prescribed by rule 58A and Schedule 1A to the Land Registration Rules 2003.

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A table of the required forms is as follows:

If you're setting up a charitable incorporated organisation, you'll need to be aware of the restrictions and requirements that come with it.

All dispositions in favour of a charitable incorporated organisation must contain a statement that the charitable incorporated organisation is a non-exempt charity.

When registering a charitable incorporated organisation as proprietor of land, the registrar will enter an appropriate restriction, as per section 123(2) of the Charities Act 2011.

This restriction will be in the form of a statement, which will state that the charitable incorporated organisation is a non-exempt charity and that the restrictions on dispositions imposed by sections 117-121 of the Charities Act 2011 will apply.

The registrar will also enter a restriction in Form E, as set out in Schedule 4 to the Land Registration Rules 2003 (rule 176 of the Land Registration Rules 2003), which will state that no disposition by the proprietor of the registered estate to which sections 117 to 121 of the Charities Act 2011 apply is to be registered unless the instrument contains a statement complying with section 122(2A) or section 125(1A) of that Act.

If there are any other limitations on the powers of a particular charitable incorporated organisation, you should consider applying for an appropriate restriction to be entered in the register using form RX1.

However, it's worth noting that the Charitable Incorporated Organisations (General) Regulations 2012 provide that a charitable incorporated organisation's constitution cannot include any provision that would restrict its ability to dispose of its property.

The Official Custodian for Charities may also be required to lodge certain documents with the application, such as a certified copy of an order of the court or the Charity Commission.

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In addition to the Form E restriction, a further restriction may be required when the Official Custodian is being registered as proprietor as a result of a vesting order made by the Charity Commission under section 76(3) of the Charities Act 2011.

Here are the key restrictions and requirements to be aware of:

A Charitable Incorporated Organisation's governance structure is built around its governing document, the constitution, which outlines how the CIO will operate.

The constitution sets the framework for the CIO's decision-making processes, and it's a crucial document that requires careful consideration.

The CIO's constitution must contain certain provisions, as required by the Charities Act 2011, and there are two model forms of constitution available: the foundation model and the association model.

In a "foundation" CIO, the charity trustees are the members, whereas in an "association" CIO, there are separate voting members other than the charity trustees.

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A charitable incorporated organisation (CIO) is a corporate body that's not a company incorporated under the Companies Acts. It's a unique legal structure for charities that offers flexibility and benefits.

The CIO is created under Part 11 of the Charities Act 2011, with supporting regulations in 2012. This framework allows charities to register as a CIO, which is not subject to company regulation.

A CIO can buy, sell, lease, mortgage, or charge property in its own name, just like a limited company. Its members may have no liability at all or only limited liability for its debts.

There are now four main legal structures available for charities: trusts, unincorporated associations, companies limited by guarantee, and charitable incorporated organisations.

Here's a quick rundown of the four main legal structures:

If you're considering changing your existing unincorporated association or charitable trust to a CIO, the process involves registering a new CIO with the Charity Commission, transferring assets and undertakings, settling liabilities, and closing down the old charity.

A charitable incorporated organisation's constitution is its governing document, setting out how the CIO will operate, similar to a company's Articles of Association.

The constitution must contain certain provisions, as required by the Charities Act 2011, and can be one of two model forms: the foundation model or the association model.

A "foundation" CIO has no separate members from its charity trustees, while an "association" CIO has separate voting members other than its charity trustees.

Charity Commission consent is required for some amendments to the constitution, including changes to the voluntary winding up/dissolution clause or provisions authorising a benefit to the charity trustees or members.

A charitable incorporated organisation must have at least one trustee, who must be an individual over 16 years old, and corporate trustees are not recommended.

A person cannot be a trustee while disqualified by virtue of a conviction for an offence involving dishonesty or deception, or bankruptcy, or removal from office as trustee for misconduct or mismanagement.

The Charity Commission has created two types of Charitable Incorporated Organisation, varying according to who the CIO members are.

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The Official Custodian for Charities plays a crucial role in the governance and structure of charitable organizations. This entity is responsible for holding land on behalf of charities, and there are specific requirements for registering land in their name.

To register land in the Official Custodian's name, you must lodge a certified copy of an order made under section 90(1) of the Charities Act 2011 or an order made under sections 69(1)(c) or 76(3) of the Charities Act 2011. This is a critical step in the process.

The registration will be completed with the following entry: "Proprietor: The Official Custodian for Charities on behalf of (name of charitable incorporated organisation) of (address of charitable incorporated organisation)." This ensures that the land is accurately recorded as being held by the Official Custodian.

In some cases, a further restriction is required when the Official Custodian is registered as proprietor as a result of a vesting order made by the Charity Commission under section 76(3) of the Charities Act 2011. This restriction is entered in Form F and prevents the trustees of the charitable organization from registering dispositions without authorization from the court or the Charity Commission.

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Here are the key requirements for registering land in the Official Custodian's name:

These requirements are essential for ensuring that the Official Custodian's role in holding land on behalf of charities is accurately recorded and respected.

To operate as a Charitable Incorporated Organisation, you need to consider which type of CIO is right for you. There are two sets of decision makers in every CIO.

One type of CIO is the Association CIO, which has a wider voting membership. Some CIO members in this type are not trustees.

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The Foundation CIO is a type of Charitable Incorporated Organisation where the voting members and charity trustees are the same group of people. This means they'll be responsible for making key decisions.

In this type of CIO, the charity trustees will be making decisions, but they'll also be acting in their capacity as Charitable Incorporated Organisation members for some decisions.

The key takeaway is that the Foundation CIO has a unified decision-making process, where the lines between voting members and charity trustees are blurred.

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An Association CIO is a type of Charitable Incorporated Organisation that has a wider voting membership, with some CIO members who are not trustees. This structure allows for a more inclusive decision-making process.

To register as an Association CIO, you'll need to follow the same process as changing an existing unincorporated association or charitable trust to a CIO. This involves registering a new CIO with the Charity Commission and choosing the type of CIO that's right for your charity.

The process of changing to a CIO involves four key steps: registering a new CIO, transferring assets and undertakings to the CIO, closing down the unincorporated association or charitable trust, and removing it from the register of charities.

Here are the key characteristics of an Association CIO:

Overall, an Association CIO offers a flexible and inclusive structure for charities.

Choosing the right type of CIO can be a bit overwhelming, but don't worry, I'm here to help you navigate the options.

A CIO may be right for your charity if you want the benefits of incorporation but don't want to be a charitable company, especially if you want to own land, control substantial funds or assets, or employ staff.

There are two types of CIOs to consider: association or foundation. You can register a new CIO with the Charity Commission, choosing the type that's right for your charity.

If you're looking to change your existing unincorporated association or charitable trust to a CIO, the process is similar to changing to a charitable company. You'll need to transfer assets and undertakings, settle liabilities, and close down the old organization.

Here are the main differences between a CIO and a company limited by guarantee (CLG):

A CLG has the potential advantage of continuing to exist even if it's no longer charitable, but it's also subject to additional legal requirements under company law.

Converting an unincorporated association or charitable trust to a CIO involves four key steps.

To begin, you'll need to register a new CIO with the Charity Commission, choosing the type that's right for your charity.

The process is similar to changing to a charitable company, which is not surprising given the overlap between the two.

You'll need to transfer assets and undertakings of the unincorporated association or charitable trust to the CIO and settle any liabilities.

Closing down the unincorporated association or charitable trust is a crucial step in the process.

To complete the conversion, you'll need to remove the unincorporated association or charitable trust from the register of charities.

Here are the four steps in summary:

Liability and ownership are two key areas where a Charitable Incorporated Organisation (CIO) offers significant advantages over traditional charitable structures.

One of the main benefits of a CIO is that it provides limited liability for its trustees and members, meaning they are not personally responsible for the charity's actions or debts.

This is in contrast to charities operating through an unincorporated structure, where all trustees are potentially personally liable for the charity's actions.

As a result, a CIO can enter into contracts and agreements without putting its trustees or members at risk of personal liability.

In addition, a CIO can own property in its own name, eliminating the need for property trustees or trust corporations.

This simplifies the process of buying, selling, or mortgaging property, and avoids the complexities that can arise when individual property trustees are involved.

For example, if a charity uses individual property trustees, it may need to go through a conveyancing process every time those individuals need to be changed, which can lead to difficulties with property registration and management.

As a Charitable Incorporated Organisation, you have the ability to own property in your own name, which is a significant advantage over other types of charities.

This means you can hold property directly, without the need for property trustees or trust corporations. This simplifies the process of managing property and eliminates the complexities that can arise from using external parties.

One of the key benefits of owning property in your own name is that you don't need to deal with the appointment and resignation of property trustees whenever there is a change in the trustee body. This saves time and effort, and ensures that your property is always properly managed.

The restrictions on disposition imposed by sections 117-121 of the Charities Act 2011 will apply to the land, subject to section 117(3) of that Act, when a disposition is made to a Charitable Incorporated Organisation.

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Having a Charitable Incorporated Organisation (CIO) can provide significant protection for your trustees and members from personal liability.

The liability of charity trustees and members for the actions of the charity is a major concern for many charities, and CIOs offer a solution to this problem.

Unlike unincorporated charities, CIOs are regarded as a single legal entity, meaning that the charity itself is liable for its actions, rather than the trustees or members personally.

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This means that if the charity's assets are insufficient to meet contractual obligations, only the CIO's assets are at risk, not the personal assets of the trustees or members.

The benefit of limited liability for CIOs is not just limited to contractual obligations, but also covers other kinds of liabilities, such as personal injury claims or claims under discrimination laws.

For unincorporated charities, all the charity trustees are potentially personally liable for the actions of the charity in relation to these kinds of claims, which can be a significant burden.

By having a CIO, the trustees can clarify that contracts and obligations rest with the CIO, rather than with them personally, making it easier to manage the charity's commitments over time.

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Becoming a CIO can be a significant project for a charity, requiring a substantial commitment of time and money. This process can take anywhere from 12 to 18 months for established charities, and around 3 to 8 months for new ones.

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The amount of work required to achieve this will vary greatly depending on the circumstances of your charity. You'll need to think of it as a long-term investment to put your charity's governance and constitutional arrangements on a sound footing for the future.

A CIO may be right for your charity if you want the benefits of incorporation but don't want to be a charitable company. This type of organisation is suitable for charities that want to own land, control substantial funds or assets, hold contracts, employ staff, or run charitable activities with financial risks.

You should consider the cost savings of converting to a CIO if your charity has an annual income of less than £250,000. This is because a CIO with annual income below this amount can prepare accounts on the basis of the receipts and payments method, which may be cheaper than the accruals method required for companies.

It's worth noting that the process will be more complex if your charity wants to review some key parts of its constitution, such as its charitable purposes or the benefits that trustees are allowed to receive.

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