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Change in the Law for Charitable Companies
A new law has been introduced to make it easier for a charity to change its structure to better suit the way it plans to operate.
Anyone setting up a charity must first decide what sort of organisational structure it will have. The options are:
- a charitable incorporated organisation (CIO)
- charitable company (limited by guarantee)
- unincorporated association
For many years, a charity which wanted to operate with the same protections of limited liability as trading companies, set up as a charitable company (limited by guarantee) but had to accept the inconveniences of being governed by charity law and company law.
In recognition of this, five years ago the Government introduced a new type of structure – a charitable incorporated organisation (CIO). Many new charities have taken advantage of this structure and a good many existing charitable trusts have converted to CIOs.
However, up to now charitable companies have not been able to convert to CIOs without following a long-winded procedure of setting up a new charity and transferring all their undertaking across.
On 1st January 2018 a new law was introduced allowing charitable companies with an annual income of less than £12,500 to apply to convert to a CIO without having to go through the process of setting up a new charity.
After 1st March 2018 the same will apply to charities with an annual income of £12,500 to £25,000. Larger charitable companies will have to wait until later in the year, when there will be phased stages from May to August.
However, charities can get started at any time so that they have all their ducks in a row ready to make the application at the relevant time.
To discuss the pros and cons of converting to a CIO call Catriona Wheeler at Andrew & Co Solicitors on 01522 781472.