The Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012 (SI 2012/3013); Charitable Incorporated Organisations (Consequential Amendments) Order 2012 (SI 2012/3014) and Charitable Incorporated Organisations (General) Regulations 2012 (SI 2012/3012) came into force on 2 January 2013.

The Charitable Incorporated Organisation (CIO) is a new incorporated legal structure with separate legal personality and limited liability intended specifically and exclusively for use by charities. CIOs will be registered with, and regulated by, the Charity Commission. The law applicable to CIOs is contained in sections 204 to 250 of the Charities Act 2011 (ChA 2011), but these provisions will not come into force until a commencement order is made. ChA 2011 also gives the Minister for Civil Society power to make regulations with more detailed provisions about the formation, operation and dissolution of CIOs.

The Charity Commission has been accepting applications to register new CIOs in the register of charities since 3 January this year. However, it is likely that there will be delay until later this year or 2014 before the coming into force of provisions which will enable existing charitable CLGs, community interest companies and charitable industrial and provident societies to convert into CIOs.

The Government has assumed that the target market for CIOs is charities with annual incomes of between £10,000 and £500,000. There are believed to be around 70,000 registered charities within this income bracket in the UK. It also assumed (based on experience of take-up of the Scottish CIO) that 20% of existing charities will adopt the CIO structure. Government estimates suggest that the average cost of incorporating a CIO will be broadly equivalent to the cost of incorporating a CLG. However, one advantage of the CIO is that it is estimated that the average costs of the annual accounts and reports preparation for a CIO will be significantly lower than for CLGs.

For further information please contact Richard Baines, Partner, or Richard Monkcom, Partner, Druces LLP

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