CIOs have been heard about - what are they and what benefits do they offer?
AnswerThe CIO is the Charitable Incorporated Organisation and is an entirely new legal format for charities which is being brought into existence by the Charities Act 2006 and has been under discussion since the early 1990s. The relevant provisions in the Act are likely to come into effect in the middle of 2008 but the timetable could slip. Due to the fact that this is a new concept, it is proving difficult for the government to make sure that all current laws which might have an impact on CIOs are taken into account in drawing up relevant regulations for their operation. Much of the rules concerning CIOs will be included in secondary legislation. The government and Charity Commission are working on a consultation paper which will include model forms of constitution for CIOs. The main benefits of a CIO are that it will have limited liability to third parties and it will not be subject to company law. At the moment, any charity wanting to have limited liability must establish itself as a company limited by guarantee which means the trustees must have regard to both charity law and company law. This can be burdensome. It seems likely that there will be two permitted formats for a CIO – one which involves both members and trustees and one with a board of trustees alone. Further details will become clear once the government/Charity Commission consultation is published. The Charities Act 2006 provides a mechanism for charitable companies to convert into CIOs. It seems likely that the CIO will not be suitable for all situations. For example, it may well not fit well into a legal structure where there is a main charity and a network of subsidiary branches.
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Charities Update Q&A 