Latest insights from our experts
Will CIOs Dominate the Charity Sector?
Last week, a draft order was laid before Parliament that proposes a ‘quick conversion’ process for charitable companies and Community Interest Companies (CICs) to become Charitable Incorporated Organisations (CIOs). If approved as expected, we could see such conversions as early as January 2018.
The CIO structure has been very successful, with over 12,500 new CIOs registered with the Charity Commission since January 2013. This success is largely attributed to new and unincorporated charities wishing to reap the benefits of incorporation without regulation by Companies House. We have updated our guidance with this latest news, along with some helpful pros and cons for charitable companies and CICs looking to convert.
CIOs are simpler and cheaper to operate than companies – but we question their suitability in some circumstances and also the likely uptake. Although 95% of consultation respondents said that there would be demand for a simple conversion process, the cost, time and effort might outweigh the gain for some – especially well run charitable companies, which already have what they need and may perceive some disadvantage in conversion despite the reduced regulation it offers.
But there may be a number of CICs that could have had charitable status due to the nature of their activities, but instead opted for the CIC model of social enterprise at inception, perhaps because they were looking for shareholder investment or were concerned that charity regulation would offer them less flexibility, who might now wish to switch to CIO status.
Judging by the provisional timetable we have seen, the implementation is likely to be phased, with charitable companies being first from January 2018 (starting with the smallest ones, through to the largest in August), and then finally CICs from 1 September 2018. Once fully implemented there will be no income threshold, meaning that any charitable company or CIC of any size could convert, as can any unincorporated charity.
Once the official timeframe is published, we will update you further. In the meantime, weigh up the pros and cons of conversion and get in touch if you feel that a change is needed.