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WCVA Charity Law Conference: Charitable Incorporated Organisation (CIO) / Sefydliad Elusennol Corfforedig (SEC). Ben Harrison Policy Manager Office of the Third Sector. What we will cover today. Introduction, background and context

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WCVA Charity Law Conference: Charitable Incorporated Organisation (CIO) /Sefydliad Elusennol Corfforedig (SEC)

Ben Harrison

Policy Manager

Office of the Third Sector


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What we will cover today

  • Introduction, background and context

  • What is a CIO? How does it fit with other forms available to charities?

  • What are some of the advantages and disadvantages of CIOs over other forms?

  • Some key consultation issues

  • The model constitutions of CIOs

  • Next steps in the process, and implementation of the provisions

  • A chance for you to ask questions or give us your comments


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The Office of the Third Sector

  • Created in Cabinet Office in May 2006

  • Charged with working across government

  • “Minister for the Third Sector”

  • Third Sector Review – July 2007

  • Funding and support for the sector – England only

  • Legal and Regulatory responsibilities – England and Wales


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Private Action ; Public Benefit

  • Improve range of legal forms & enable organisations to become more effective

    • Community Interest Companies – introduced for social enterprises in 2005

    • Companies Act 2006 – modernising company law

    • Charitable Incorporated Organisation – designed specifically for charities, due in 2009/10

    • Other Charities Act 2006 provisions

    • HMT review of Industrial and Provident Society legislation


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Establishing a Charity - options for legal structures

  • Unincorporated

    • Charitable Trust – trust deed

    • Charitable Association – constitution or rules

  • Incorporated

    • Charitable Company – (memorandum and) articles of association

    • Industrial and Provident Society for the Benefit of the Community (Rules)

    • For the lucky few, Royal Charter or Statute

  • Choose carefully…………..


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Charities Act – The CIO

  • New legal form specifically for charities

  • Benefits of incorporation and limited liability for its trustees and members

  • Sole registration and regulation by the Charity Commission

  • Consultation during Autumn / winter 2008 –almost 100 responses received

  • CIO implementation to begin in early 2010


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CIO advantages

  • Single registration – with the Charity Commission

  • Less onerous accounts preparation requirements

  • Less onerous reporting requirements

  • Only one annual return

  • Single and cheaper filing

  • Simpler and flexible constitutional forms

  • More straightforward merger and reconstruction

  • A legal framework designed specifically with charities in mind


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CIO disadvantages

  • All CIOs must submit annual accounts and reports to the Charity Commission

  • More information will be publicly available about CIOs than unincorporated charities

  • Unincorporated Associations and Trusts are likely to be simpler to set up and operate

  • Awareness amongst funders / lenders etc.. of CIO compared with Company Limited by Guarantee which is well known


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CIO – striking a balance

  • The Charities Act 2006 provides the framework for the CIO.

  • Secondary legislation needed to complete the legal framework.

  • Need to strike a balance:

    • Make the CIO an attractive option for charities compared with other existing options

    • Recognise that the members and trustees of a CIO will have more protection from the CIO’s liabilities than is the case for unincorporated charities, and this needs to be reflected.

    • The CIO model needs to be attractive for funders, lenders, and others that will do business with CIOs.


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The CIO – some key issues

  • Application of the Duty of care

  • Minimum age of CIO trustees

  • Information obligations – e.g. register of members & trustees

  • Unincorporated membership of a CIO

  • Permanent endowment

  • Registration of charges

  • Accounting requirements for CIOs

  • Model constitutions

  • Conversions


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The CIO – Welsh CIOs

  • Where a CIO’s constitution is written in Welsh it may use the Welsh equivalent of CIO in its name: sefydliad elusennol corfforedig (SEC).

  • The name of the CIO must be included in various business documents. If CIO or SEC is not in the name of the CIO itself, then those various business documents must also state that the organisation is a CIO

    • If such documents are wholly in Welsh, then the Welsh equivalents may be used


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Some consultation feedback

  • Too much reliance on company law

  • Too many criminal offences (mirroring company law)

  • Permanent endowment

  • Unincorporated membership

  • Information obligations – trustees and members registers

  • Concerns about barriers for unincorporated charities setting up as CIOs

  • Accessibility of register of charges

  • Duty of care

  • Mixed views on e.g. trustee age limit, accounts, conversion


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CIO Governing Documents

  • Model constitutions from the Charity Commission

    • Foundation model - trust

    • Association model – membership organisation


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CIO Model Constitutions

  • The Models are intended to:

    • be consistent with other Commission models

    • be easy to understand, flexible and adaptable

    • clearly identify legal requirements

    • clearly identify, and promote, good practice

    • clearly identify what can, and cannot, be altered

  • Some good consultation feedback – models currently being revised in light of this


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Charities Act – CIO summary

  • New form only for charities – available in 2010

  • Is incorporation right for your charity?

  • The benefits of limited liability and incorporation need to be measured against additional requirements it brings

  • CIO offers several advantages over Company Limited by Guarantee form – but are these sufficient to warrant conversion?

  • CIO is a new form – it will take time for awareness to spread throughout those that do business with charities


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Next steps & further Information

  • Imminently – summary of responses and way forward

  • Update Regulations – and take through Parliament

  • Charity Commission develop systems, processes, guidance, etc…

  • Keep a lookout on the following websites:

    • www.cabinetoffice.gov.uk/thirdsector

    • www.charitycommission.gov.uk

  • To receive email updates of progress on Charities Act implementation you can sign-up on our website.


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