Charitable incorporated organisation legal form to go live in the autumn, Lord Hodgson reveals

Secondary legislation for CIOs is about to go before parliament, peer says in his review of the Charities Act 2006

Houses of Parliament
Houses of Parliament

The charitable incorporated organisation, a new legal form that will spare charities having to register with both the Charity Commission and Companies House, should be available in England and Wales in the autumn.

Lord Hodgson’s review of the Charities Act 2006, which created the CIO, says there has been great disappointment and frustration at the failure so far to make it operational, although it has come into force in Scotland.

But the necessary secondary legislation will soon be laid before parliament and CIOs should be operational later this year, Hodgson says: "This is very welcome progress, if not before time." The workings of CIOs should be reviewed in three years, he adds.

Hodgson also recommends modifying the law to provide that, in the case of mergers, bequests should be treated as gifts to the newly merged or incorporated charity in cases where a will might otherwise cause a gift to fail if the original charity has ceased to exist.

This move is designed to remedy problems with the 2006 act, which have caused some merging charities to continue to keep a ‘shell’ charity under their original names in order to be sure not to miss out on legacies.

The review points out that the small number of industrial and provident societies that are also charities are in practice unregulated because they are exempt from Charity Commission regulation and the Financial Services Authority, which registers them, but does not regulate them.

The solution should be to require IPSs that want to remain as charities to register with the commission and be regulated by it, Hodgson says: "Issues like this have the potential to undermine trust and confidence in charities."

He also recommends that disposals of mortgages and other charges over charity land should be deregulated so that trustees act under their duty of care with reference to guidance from the Charity Commission.

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