News coming out of the Office of the Third Sector seems to suggest that there will be further delays in the rolling out of the Charitable Incorporated Organisation (“CIO”) – the new legal form for charities.
As mentioned in our previous e-bulletins, the CIO is a new corporate structure, registered and regulated by the Charity Commission, which specifically applies to charities. It is an alternative to incorporation under the Companies Acts and does not require regulation under both company law and charity law. The benefits of this include simplified reporting and filing requirements.
The CIO had initially been expected to be available from summer 2008. However, the consultation period took somewhat longer than had been expected and the roll out was initially delayed until late 2009 and then put back further to spring 2010. As this has arrived we have now heard that the hopes of seeing the new model in this parliamentary session have all but disappeared.
When can we expect to see the CIO?
The Office of the Third Sector is still to publish the updated draft regulations that will be used to implement the CIO. However, we understand that the Office of the Third Sector is hopeful that the legislation will be passed early in the new parliamentary session and that the CIO will become available in late 2010 or early 2011.
Whether this target is optimistic remains to be seen. The implementation of the CIO should not be a political issue but if a new government is elected in May it will have its own priorities in relation to legislation and this could have a further impact on the implementation date for CIOs. Hopefully the picture will become somewhat clearer after the results of the general election are known.
What options are available for charities waiting for the CIO?
Charities waiting for the CIO model will no doubt be disappointed to hear of the further delays. Unincorporated charities in particular may feel troubled by those delays where they had been hoping to utilise the CIO structure in order to benefit from the limited liability that the structure can afford. Incorporated charity clients can wait until the roll out and then convert from a company limited by guarantee to a CIO. Unincorporated charities, such as trusts and unincorporated associations, may wish to reconsider whether or not they are prepared to wait for a further 12 months (or possibly more) before they are able to utilise the new legal form. Where there are concerns, in particular in relation to limited liability, unincorporated charity clients may wish to consider incorporating as a company limited by guarantee and then converting to a CIO at a later date.
We will continue to keep a very close eye on developments and will be advising our charitable clients on the best way forward so that those wishing to convert can do so quickly and efficiently.
For a no obligation chat on how we can assist Charitable Incorporated Organisations, or on incorporating as a company limited by guarantee, please contact Mark Lewis.
