Meet our Expert

Reema MathurReema Mathur – Associate, Charity & Social Enterprise Team Stone King LLP

Reema is an associate in the Charity and Education team, acting for a wide variety of charity and not-for-profit clients. In her spare time, Reema is trustee of a charity that supports women and their children experiencing domestic violence. She is also a member of the Charity Law Association.

 

“Our charity (currently registered with the Charity Commission and also a UK company) would like to convert our status to become a new Charitable Incorporated Organisation (CIO). How should we go about doing this and what are the key things to consider?”

 

The answer

Unfortunately, an existing charitable company cannot yet convert to become a Charitable Incorporated Organisation (CIO). Although the Charities Act 2011 contains provisions which enable this change in legal structure, the necessary regulations have not yet been issued. Of course, this contrasts with the position for existing unincorporated charities, which (depending on the amount of their annual income) have been able to convert to CIO status since December 2012.

That said, it is expected that the necessary regulations will be in place during the course of 2014 and the Charity Commission has said that it expects the conversion process to be relatively straightforward.

Conversion from charitable company to CIO status will certainly be beneficial from an administrative perspective, since CIOs are regulated by the Charity Commission only, and do not have to making filings with Companies House. There are, however, a few key things to consider when considering change in status. The first point to check is whether there are any restrictions in the Articles of Association of the existing charity which may prevent conversion to a CIO. This is unlikely, but should nonetheless be covered off.

You will need to set up and register a CIO as a new charity, using the Charity Commission’s model form of CIO constitution. There are two forms: the association model and the foundation model, and which one you use will depend on the structure of your existing charitable company. The former will be appropriate if your current charity has a wide membership and a smaller board of trustees; the foundation model will be appropriate if the trustees and the members of your charity are the same group of people.

Another point to consider is that conversion means that the assets of the existing charity will need to be transferred to the new CIO. This includes your charity’s staff (if any), its use of premises and your contracts with third parties. The trustees of the existing charity will need to ensure that they comply with TUPE, if relevant, and alert the charity’s landlord, bank, suppliers and funders to the conversion, and obtain their consent if necessary.

It may be useful to familiarise yourself with the Charity Commission’s advice and regulations on running a CIO, since the requirements are likely to be different (and in some cases more straightforward) to those which currently apply to your charity. It would also be useful to keep up to date with the Charity Commission’s website, which will provide information regarding when it becomes possible to convert from a charitable company to a CIO, as well as detailed steps on the conversion process:

http://www.charitycommission.gov.uk/start-up-a-charity/as-your-charity-grows/becoming-a-charitable-company-or-cio/