Government reconsiders rules for charitable incorporated organisations

Draft regulations were 'too close to company law'

The Government is to amend its plans for the rules on charitable incorporated organisations in time to introduce the new legal form in April next year.

The planned changes come after a consultation with the sector on the draft regulations for CIOs, created by the Charities Act 2006 as a simpler route to incorporation.

Among respondents to the consultation was the Charity Law Association, which said the draft regulations relied too heavily on company law and would be too complicated for small charities (13 January, page 5).

In response, the Government was planning to make the regulations less reliant on company law and cut the administrative burden, Ben Harrison, policy manager at the Office of the Third Sector, told a seminar held at law firm Withers last week.

Criminal penalties for CIO trustees who fail to meet their legal duties and the plan to give the public access to the register of CIO directors and members were among the sections being reworked, he said.

"There was a feeling we'd leaned too heavily on company law in setting out the detailed legal framework for CIOs," said Harrison.

"We've imported bits of company law that we thought would work well, but there was a concern that we'd relied too heavily on it, so that's something we're looking at."

He said the criminal penalties could be replaced by civil sanctions or the Charity Commission's existing enforcement powers. The OTS and the commission were also looking into cutting the administrative burden of the members' register. Plans to let CIOs place a less stringent duty of care on trustees might also be reversed.

Harrison said the OTS would publish a summary of the consultation and a timetable for the introduction of CIOs next month.

He said April 2010 was a realistic start date, but it had not yet been decided if there would be a phased introduction of the new legal form.

At present, charities that are companies have to report to the Charity Commission and Companies House. CIOs will have the benefits of incorporation and report only to the commission.

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