On 1 January 2018, new rules came into force allowing charitable companies to convert into charitable incorporated organisations, or CIOs. 

The CIO is a legal form designed especially for charities.  Like charitable companies, CIOs are incorporated, but they only need to register with the Charity Commission and not with Companies House.  The CIO was introduced as a legal form in 2013 and now accounts for over half of new charity registrations.  

Up until now, charitable companies wishing to convert to CIO status have needed to go through a cumbersome process involving the creation of a completely new legal vehicle.  The new conversion mechanism allows charitable companies to change their legal status to that of a CIO using a relatively straightforward procedure, involving two members’ resolutions and an application to the Charity Commission.  Following conversion, the charity retains its legal personality.  This means it keeps its registered charity number, and generally speaking its legal relationships will be unaffected.  Its registration with Companies House is cancelled and it will no longer be governed by company law.

Since CIOs are not registered as companies with Companies House, they are generally considered to be easier to administer than charitable companies.  However, the CIO is a relatively new and untested vehicle, which may be unfamiliar to third parties.  Charitable companies considering conversion will need to consider the pros and cons of the CIO as compared with the charitable company carefully.

The conversion programme is being staggered, with only the smallest charitable companies able to convert initially.  Larger charitable companies will be able to convert in stages throughout 2018, according to their annual income, in line with the following timetable issued by the Charity Commission. 

Date from which charitable company may convert

Annual income

1 January 2018

Less than £12,500

1 March 2018

Between £12,500 and £25,000

1 May 2018

Between £25,000 and £100,000

1 June 2018

Between £100,000 and £250,000

1 July 2018

Between £250,000 and £500,000

1 August 2018

Greater than £500,000

Under the new rules, community interest companies will also be able to convert to CIOs, from 1 September 2018.

Charity Commission guidance on the process is available here.

For more information on conversion, including the advantages and disadvantages of CIO status, please contact Thea Longley or your usual BWB contact. 

BWB will be holding a seminar on CIO conversion on 17 April 2017, please click here for more information. 


Thea Longley photo

Thea Longley

Partner

T
+44(0)20 7551 7796

E
t.longley@bwbllp.com
View full information about Thea Longley
Alice Faure Walker photo

Alice Faure Walker

Senior Consultant

T
+44(0)20 7551 7813

E
a.faurewalker@bwbllp.com
View full information about Alice Faure Walker

Posted on 27/12/2017 in Legal Updates

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