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What are the benefits of being a CIO?

The CIO structure has several benefits over unincorporated charities and charities that are limited companies:

  • The members and trustees are usually personally protected from the financial and contractual liabilities incurred by the charity – this is not the case for an unincorporated charity.
  • The charity has a legal personality of its own, enabling it to conduct business in its own name, instead of the name of the trustees as per an unincorporated charity.
  • There is only one registry to deal with – The Charity Commission, whereas a limited company charity also has to file accounts with Companies House.

Are there any drawbacks?

Every charity has different circumstances and the items below may not necessarily be judged by you to be a drawback but nonetheless when deciding whether not to register a CIO you should be aware of them.

  • There is no provision for the maintenance of a register of charges by either a CIO or the Charity Commission, which is likely to make it difficult for CIOs to issue floating charges or issue debentures. This will make the CIO less attractive to larger charities that are involved in raising finance for projects.
  • CIOs must hold an annual general meeting of its members (companies limited by guarantee do not have to have an AGM unless their Articles stipulate).
  • CIOs cannot be exempt charities as CIOs must be registered with the Charity Commission.
  • CIOs are new, untried and untested and it is unclear how certain aspects will work in practice. In addition, as they are not known or understood by financial institutions and organisations abroad, it may take time before they are recognised and accepted.
  • Until the CIO is registered as a charity it does not exist, unlike companies, trusts and unincorporated associations.
  • Once set up, CIOs must notify the Charity Commissions of changes within 28 days – other charities do not have these time limits.
  • The Charity Commission has the power to dissolve a CIO if it considers the CIO is no longer a charity and the CIO only has 3 months to prove to the Charity Commission that it is a charity. If dissolved, the CIO’s property will vest in the Official Custodian. As the dissolution means that the CIO ceases to exist, there is uncertainty as to what will happen to any contracts held by the CIO and the position of its employees. Therefore, if an organisation is concerned about how the law of public benefit is evolving and its application by the Charity Commission, a CIO may not be suitable at present.
  • Written resolutions of the Trustees can only be passed unanimously, unlike a company limited by guarantee which is more flexible.
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