By Geldards at WCVA's Charity Law Conference 2013.

1. The CIO: Is it the right choice for you?
Catherine Nightingale, Senior Associate
Tuesday 21 May 2013

2. What this session will cover
• What is a CIO?
• Key features of a CIO
• Unincorporated bodies v CIO
• Charitable companies v CIO
• How to achieve CIO status

3. What is a CIO?
• New legal form only for charities
• Included in Charities Act 2006, in force in 2013
• Corporate body not unlike a company
• Automatically charitable
• Attracts same tax treatments as charitable
companies

4. Advantages of CIO
• “Does what it says on the tin” – CIO
• It’s Charitable – know it’s a charity
• It’s Incorporated – know it’s trustees have less
liability
• It’s an Organisation – know its got own legal
personality
• No-one other than charities can use it
• Magic registered charity number

5. Advantages of CIO
• Charity Commission (not Companies House)
simultaneously grants
• Incorporated status AND
• Charitable status
• Absence of Companies House involvement
means:
• Only 1 regulator – Charity Commission
• No knowledge of company law needed
• No fines / penalties for late filing

6. Disadvantages of CIO
• Set up time – 40 working day turnaround
• Lack of awareness outside sector
• Applicable legislation not gathered in one place
• No charges register – how will funder’s be
satisfied?
• Requirement to file regardless of size
• Loss of charity status means organisation
immediately ceases to exist

7. Why would a new charity be a CIO?
• Model constitutions available
• Free registration at Charity Commission
• Liability protection for trustees
• Own legal identity
• It can contract, employ, own property
• Don’t need to understand “company” law
• Possible lighter touch regulation

8. Reasons why existing unincorporated
charity might “convert” to a CIO
• Secure some protection from personal liability
• Obtain a legal personality in which to
contract / employ staff, own property
• Modernise
• Provide certainty on structure

9. Reasons why existing charitable company
might “convert” to a CIO
• Avoid additional regulation by Companies House
• Avoid fee/ penalties for late filing
• Remove need to comply with company law
• Potentially make trustee recruitment easier
• Potentially to encourage donations

10. Reasons why an existing Industrial &
Provident Society might “convert” to a CIO
• Possible perception that CIO is less old-fashioned
than I&P
• If non RSL I&P, no “tradition” to remain as I&P
• Remove annual expense of maintaining I&P
• Remove confusing language of I&Ps
• Avoid need for knowledge of specialist I&P
legislation

11. Model CIO Constitutions
• Two versions available:
• Foundation model
• Association model
• See Charity Commission website
• No interactive model available
• Use of model recommended by Commission
• Language determined by principle office
• No Welsh translation available (yet)

12. Which model Constitution to use
Foundation model
•Akin to trust or company where all members =
directors
•Use where trustees = members
•Run by small group of people
•Trustees will make key decisions
•No time limit on length time trustees serve
•Trustees will appoint trustees

13. Foundation Model
Constitution
& Dissolution
Trustees
Management
Function
Members
CIO
=

14. Which model Constitution to use
Association model
•Akin to unincorporated association or company
with wide membership
•Use where charity wants a wider voting
membership
•Members will make certain decisions
•Members will appoint some / all trustees
•Trustees serve for fixed terms

15. Association Model
Constitution
& Dissolution
Trustees
Management
Function
Members
CIO
≠
Appoint / Elect

16. Both Constitutions must include
• Name of CIO
• Name of 1st
trustees
• Exclusively charitable objects for public benefit
• “Standard charity trustee provisions”
• (retirement, removal from office, meeting procedure,
personal benefit)
• “Standard member provisions”
• (retirement, termination of membership, general meeting
procedure)
• If to have a seal, how it is applied

17. Both Constitutions must include
• If proxy appointment allowed, detail on
appointment, rights and termination
• If postal voting allowed, details as to how operates
• If alternatives to decision at GM or resolutions at
GM, detail alternatives
• If alternatives to decision at trustee meeting or
resolution at trustee meetings, detail alternatives
• If weighted voting, what weighting is
• Whether electronic communications are permitted

18. Main differences between two
Constitutions
• Foundation: members = trustees
• Association: not all members are trustees
• No membership fees in Foundation
• No requirement for AGM in Foundation

19. When can you be or become a CIO?
• January 2013 – new CIO (income £5,000)
• 1 March 2013 – new CIO + transfer
from unincorporated charity
existing income £250k +
• 1 May 2013 – as above but income
between £100k - £250k
• 1 July 2013 – as above but income between
£25k - £100k

20. When can you be or become a CIO?
• 1 October 2013 – as above but income between
£5k - £25k
• 1 January 2014 – as above but income less
than £5,000 and new CIO less
than £5,000
• During 2014 – conversions from companies
etc (provisional date)

21. Creation of new CIO
• Check income exceeds £5,000pa (until end
December 2013)
• Select constitution type
• Draft constitution
• Check proposed name is available:
• Draft trustee declaration
• Draft online application form

22. Creation of new CIO
• Undertake any necessary CRB/DBS checks
• Complete other trustee appointment
requirements (bankruptcy search / references)
• Sign constitution & trustee declaration
• Submit online application to Commission (no fee)
with documents / proof of income / details of
changes to model used

23. Result of application
• Allow 40 working days to complete
• AND time to deal with queries
• Incorporated status granted on completion of
registration
• Will result in registered charity number
• No suffix/prefix to denote CIO status
• No separate register of CIO’s

24. How to get CIO status for an UA or Trust
• No statutory conversion process in CA 2011
• Lord Hodgson review did not recommend
introduction of conversion process
• But – back door “conversion” possible?
• Yes, but not quick, easy or cheap
• Potentially easy to get wrong

25. “Conversion” UA / Trust to CIO
• Register a new CIO
• Draft agreement to transfer from UA to CIO
• All assets
• Undertakings
• Staff
• Liabilities

26. “Conversion” UA / Trust to CIO
• Contact funders for consent
• Consider using S.310 CA 210 vesting declaration
to transfer property
• Landlord’s consent obtained?
• Deal with TUPE issues – consultation?
• Consider pension crystallisation

27. “Conversion” UA / Trust to CIO
• Complete resolutions of UA & CIO to transfer /
accept transfer / dissolve UA
• Arrange execution of transfer agreement, any
ancillary property documents & any novations of
contracts / SLAs
• Formally complete all documentation

28. “Conversion” UA / Trust to CIO
• Register any land transfers at Land Registry
• Apply to HMRC for new VAT no
• Apply to HMRC for recognition of CIO as charity
• Dissolve UA as per governing document
• Apply to Charity Commission to remove UA from
register of charities
• Notify funders / creditors / stakeholders of
conversion

29. Practical changes on conversion
• New registered charity number
• Must describe entity as “CIO” not “Charity”
• New VAT number
• New tax reference number
• New GD – will always be constitution
• Possibly different accounting treatment

30. Conversion from other entities
• Statutory process but not yet in force for:
• Charitable companies – s.228 CA 2011
• I&Ps – s.229 CA 2011
• Envisaged statutory process for CICs – s.234 CA
2011
• Enactment and detail of statutory processes
expected 2014

31. Anticipated conversion process
For charitable companies / I & P’s
•Prepare new constitution
•Pass resolution to:
• Approve constitution
• Adopt new constitution
•Commission will consult with Companies House/
FCA

32. Anticipated conversion process
• Commission makes provisional registration
• Companies House / FCA cancel original registration
• Cancellation = award CIO status
• No transfer agreement needed as true conversion –
one continuing body
• CC entry will include name of existing company /
I & P

33. Practical changes on conversion
• Same registered charity number
• For existing companies, loss of Companies House
number
• HMRC - VAT / tax reference numbers will be
same
• Update Land Registry details (name etc)
• Change name, number & description on all
paperwork / website
• Possibly different accounting treatment

34. Conversion from CIC
• S.234 Charities Act 2011
• Not yet in force, expected 2014
• Statutory process may be created along the lines
of requirements for company / I & P society
conversion
• If so, likely to be complicated process to convert
as CIC’s are not charitable – so don’t necessarily
have suitable objects & activities

35. Cardiff Derby Nottingham
Thank You
Any Questions?

36. Contact Details
Catherine Nightingale
DD : 029 2039 1751
catherine.nightingale@geldards.com
www.geldards.com