Tag: CIO

When to Change Charity Structure

How to change an unincorporated association or trust to a charitable company or CIO, plus other types of conversion.

Your charity’s legal structure sets out what type your charity is. There are four common types of charity structure:

Charitable Incorporated Organisation (CIO) – there are 2 structures: association CIO and foundation CIO
charitable company (limited by guarantee)
unincorporated association
trust

Your charity’s legal structure determines:

who will run it and whether it will have a wider membership
whether it can enter into contracts or employ staff in its own name
whether its trustees are personally liable for what it does

Changing to a different charitable structure usually involves:

setting up a new charity in the new structure, with purposes that are the same as or similar enough to those of the original charity
transferring your original charity’s assets and liabilities to the new charity, then
closing your original charity

This can be complex, particularly if your charity has assets which are permanent endowment and you should take appropriate professional advice. For example, on the transferring of assets, contracts or liabilities, or where your charity has permanent endowment.

Read Charity types: how to choose a structure (CC22a) for more information on the advantages and disadvantages of the different types of charity structure.

There is useful checklist available here

How To Convert a Community Interest Company to a CIO

If you are a Community Interest Company (CIC) you can apply to the Charity Commission to convert directly to a Charitable Incorporated Organisation (CIO).

Step 1: Prepare a conversion resolution

The directors of the CIC will need to produce a conversion resolution which confirms that the members of the CIC wish to convert the CIC into a CIO under the Charitable Incorporated Organisations (Conversion) Regulations which came into force on 1 September 2018.

Step 2: Adopt Charity Commission model CIO constitution

Adopt and complete one of the model CIO constitutions found here

Replace ‘CIC’ with ‘CIO’ in the name to reflect that the organisation has converted.

Section 8 of the model CIO constitution covers if members would be liable to contribute to the assets of the CIO if it is wound up.

If the amount each member would be liable for is more than £10, you must select option 2 to confirm:

the CIO’s members will be liable to contribute to its assets if it is wound up
the amount up to which they will be liable for

The amount you enter in section 2(i) must not be less than the amount up to which the CIC’s members were liable to contribute to the assets of the CIC if it were wound up.

If the amount each member of the CIC is liable to contribute to its assets if it winds up is £10 or less, you can select option 1.

Step 3: Prepare a resolution adopting the CIO constitution

Prepare a resolution adopting the proposed constitution of the CIO. The resolution must confirm that the members of the CIC have adopted the proposed constitution of the CIO.

Step 4: Apply for charitable status

To apply for charitable status as a CIO, you will need to apply to register as a charity and also submit:

the resolution of conversion of the CIC to a CIO
the proposed constitution of the CIO
the resolution of the CIC adopting the proposed constitution of the CIO
a completed Trustee Declaration Form

In the ‘Special Circumstances’ section of your application, write that you are a CIC wishing to apply for charitable status as a CIO. Tell us the name of the CIC.

More help can be found here

After you have applied

The Charity Commission will check that you can register as a charity.

If you can they will give Companies House what they need to confirm to the Regulator of Community Interest Companies that you wish to convert your CIC to a CIO.

Once approved, Companies House will cancel the registration of the CIC and the Charity Commission will then register the CIO as a charity and let the trustees know.

Changing Your Charity’s Financial Year

You cannot change your charity’s financial year or period if your latest annual return and accounts (if required) are overdue.

Rules for charities that are not companies

If your charity is a charitable incorporated organisation (CIO) or unincorporated (not a company) you can change the financial year or period to run for more or less than 12 months.

It needs to be a minimum of 6 months, and no longer than 18 months.

You can only:

change the dates for your current financial year
make a change once every 3 years

Changing your financial year or period will also change your deadline for filing the annual return and accounts.

Rules for charities that are companies

If your charity is incorporated (a company) you can shorten your financial year or period as often as you’d like.

The minimum period you can shorten it to is 1 day.

You can lengthen your company’s financial year to a maximum of 18 months, but this can only be done once every 5 financial periods.

Rules for newly registered charities

If your charity is newly registered, and you have not submitted an annual return you will need to request permission to change your financial year.

To sign in and change your financial year you will need your:

charity registration number
charity’s online services password, you can request a new password if needed

This password gives people in your charity access to detailed information about your charity and individuals connected with it.

When giving access to this password you need to have measures in place to make sure the system is only used for proper purposes, and that the information accessed through the Commission’s services will be treated carefully and sensitively and in accordance with legal requirements including the General Data Protection Regulations (GDPR).

Read the privacy notice before you use the service.

Converting A Charitable Company To A Charitable Incorporated Organisation (CIO)

We're now a Charitable Incorporated Organisation (CIO) - Raising Futures Kenya The main advantage of CIOs over charitable companies is that CIOs don’t have to register with and send accounts to Companies House as well as the Charity Commission.

Changing to a different charitable structure usually involves setting up a new charity, transferring your original charity’s assets and liabilities to it then closing your original charity.

The conversion process should be simple and straightforward in most cases. As part of this process, the new CIO Constitution and Special Resolution will need to be included before submission to the Commission.

Using this process means that the charity continues to exist but in a different form. This means you’ll be able to keep the charity’s existing name and charity number.

You should also be able to keep the charity’s existing bank accounts and in most cases the new CIO should receive any legacies left to the original charitable company.

To change a company into a CIO you need to apply to the Charity Commission here.

The Commission will liaise with Companies House to ensure that necessary records are updated correctly. This will mean that the date of conversion of the charitable company to a CIO – as shown on the public register of charities – will match the date of removal of the charitable company at Companies House.

Please note that due to limited resources, your application may be rejected if:

complete documentation is not sent or received
your charity is not in compliance with its reporting requirements to the Charity Commission and Companies House
your charity has made any changes to the new CIO governing document that would require the Charity Commission’s approval including:
- name change, except a minor change such as removing limited or company and replacing it with CIO and also if the name is not one that is regulated on the business register and no approval has been submitted with the application
- any additional trustee benefits especially if there is an express prohibition in the company’s governing document
- amendments to the dissolution clause that will change the spirit of the intention of who receives the funds on dissolution

More information about changing your charity’s structure can be found here

Charity Registration

When to apply to register your charity

Usually, you must register with the Charity Commission if your charity is based in England or Wales and has over £5,000 income per year. The commission will take action to secure compliance if it identifies a charity which isn’t registered but should be.

If your charity is a charitable incorporated organisation (CIO) it must register whatever its income.

Charities that don’t have to register

Small unincorporated charities

If your charity is based in England and Wales and isn’t a CIO, you don’t have to apply to register it if its annual income is less than £5,000. But you can still apply to HM Revenue and Customs for recognition as a charity to get charity tax breaks and claim gift aid.

You can apply to the commission to register this sort of charity voluntarily, but the commission will only consider applications in exceptional circumstances. For example, if you can prove that your charity has been offered significant funds but has to provide a registered charity number before it can receive the funds.

More details can be found here

Changing Your Charity’s Structure