1. An introduction to CIOs for Students’ Unions
Thea Longley and Leona Roche
June 2013

2. Overview
What is the CIO?
Comparison with CLG
Becoming a CIO

3. Charitable Incorporated Organisation
What is the CIO?
Charitable Incorporated Organisation
A new incorporated legal form designed especially for charities

4. Why was it needed?
Legal forms for charities:
Unincorporated
Trust
Unincorporated association
Incorporated
Charitable company limited by guarantee (CLG)
Industrial and Provident Society

5. Why an incorporated legal form?
Legal identity
Limited liability for trustees
BUT
More administration (and regulation)

6. Problems with the charitable company limited by guarantee
Dual regulation
Companies House
Charity Commission
Company law
Unsuitable for charities?
Assumes that members have a financial interest

7. Basic structure of a CIO (1)
Two-tier structure:
Trustees
Members
Foundation or Association Model
Governed by Constitution

8. Basic structure of a CIO (2)
Name doesn’t need to include CIO
Usual rules of charity law apply:
Public benefit
Restrictions on non-primary purpose trading
Restrictions on campaigning
Restrictions on trustee benefit

9. How does the CIO compare with a charitable CLG?
Pros
Cons
Differences
Similarities

10. Pros
Single Regulator
No company law
No reporting to Companies House (annual and event driven)
Less risk of fines and offences
Tailored especially for charities
Receipts and payments accounts for smaller charities (with a statement about outstanding guarantees and charged debts)
Lower costs
Currently no registration or filing fees
No income threshold for registration
From January 2014 CIOs may register even if their annual income is below £5,000

11. No Register of Charges – may deter lenders
Cons
New and untested
Gaps in the law
No Register of Charges – may deter lenders
Not formed until registration
Changes to constitution not made until registered with Commission
Dissolved if ceases to be a charity - within three months
Not available for exempt charities

12. Differences (1) Becoming a Member CLG: need Member to agree
CIO: no need for actual agreement, but Members should still be informed in usual way and notified of opt out

13. Differences(2)
Members have fewer rights
Rights to amend Constitution, approve transfer/amalgamation with another CIO, dissolve/wind up
No automatic rights to: accounts; call meetings; circulate resolutions; appoint proxies; remove the board
Need to build these rights into constitution if want members to have them

14. Differences (3) Electronic communications
CLG: Members must give individual consent to receiving electronic communications
CIO: Constitution can provide that Members consent by virtue of becoming a Member

15. Differences (4) Members’ duty
Members of a CIO have an express duty to exercise their powers in a way which they believe in good faith would be most likely to further the purposes of the CIO
Privacy
Broadly speaking, only the members and trustees may inspect the register of members of a CIO

16. Differences (5) Conflicts of interest CIO regime is more restrictive
Charity trustees may not benefit personally unless made prior disclosure to all trustees
Charity trustees may not take part in a trustees’ or members’ decision if they would benefit (what if they would all benefit e.g. trustee indemnity insurance?)

17. Minor differences (1) Majorities for written resolutions
CIO rules require unanimity
Company law requires a similar level of majority to a resolution passed at a meeting (e.g. over 50% or 75%)
Flexibility to change legal form in future
No framework for CIO to convert to a company
Companies will be able to convert to CIO (when relevant legislation comes into force)

18. CIOs can include casting vote
Minor differences (2)
Chair’s casting vote
CIOs can include casting vote
No casting vote at members’ meetings for post October 2007 companies
Statutory duty of care for trustees of CIO

19. Still a two tier structure
Similarities (1)
Still a two tier structure
Similar restriction of limited liability for trustees on insolvency
Fraudulent trading
Wrongful trading

20. Amending constitution approval of university/college
Similarities (2)
Amending constitution
approval of university/college
approval of members
CLG: 75% special resolution
CIO: 75% (or 100%)

21. Student enrolment form
Similarities (3)
Register of Members
Student enrolment form
Membership of union/opt out
Electronic communications
Data sharing

22. Documents you will need
Setting up a CIO
Documents you will need
Charity Commission application form
Declaration for trustees
Constitution
Procedure
File application with Charity Commission
Wait!

23. Setting up a CIO - Timetable
When will the Charity Commission accept applications?
Currently - new charities with income over £5,000 and existing unincorporated charities with income over £100,000
From 1 July – existing unincorporated charities with income over £25,000
From 1 October – existing unincorporated charities with income over £5,000
From 1 January 2014 – new charities and existing unincorporated charities regardless of income level

24. Converting from an existing unincorporated form (1)
Reminder of the reasons for incorporation
Pros
Limited liability
Note the limited scope of trustee indemnity insurance (see “Duties of Charity Trustees” available at trustees)
Legal identity
Succession planning
Cons
Upheaval
Greater administrative burden
Privacy

25. Converting from an existing unincorporated form (2)
Process
Create a new CIO with the Charity Commission
Transfer of assets and liabilities etc
List assets, liabilities, registrations, contracts (e.g. staff, bank accounts)
Decide on mechanism for transfer
Obtain third party agreement where required (e.g. funding contracts, grants)
Change registrations (e.g. Ofsted, Information Commissioner)
Pensions
Permanent endowment

26. Converting from an existing unincorporated form (3)
Wind up existing charity
Register of mergers?

27. Conversion of CLG to a CIO
Why would you?
Not yet available – 2014
No change of legal identity

28. Thea Longley: t. longley@bwbllp. com Leona Roche: l. roche@bwbllp
Thea Longley: Leona Roche: Bates Wells & Braithwaite London LLP 2-6 Cannon Street London EC2V 6YH Tel: