The long wait for CIO status

CIO legislation is set to go before parliament in autumn - but will it meet expectations?

Parliament: legislation would allow charities to have contracts as corporate entities
Parliament: legislation would allow charities to have contracts as corporate entities

It seems that the journey towards implementation of the Charitable Incorporated Organisation legal form may soon be over, six years after it was introduced in the Charities Act 2006.

In his review of the act last month, the Conservative peer Lord Hodgson said it was "welcome progress" that the secondary legislation required to make CIOs a reality was due to be laid before parliament in the autumn.

The new legal form, which will allow charities to enter into contracts as corporate entities with limited liability for trustees and members, has been long sought by many in the sector.

Charities taking up CIO status would not need to register with Companies House or be subject to company law, and would still be registered with and regulated by the Charity Commission.

The introduction of the CIO, initially envisaged to go live in early 2008, has become a strained and protracted affair. Many charities have continued to go down the traditional route of also becoming a limited company, while others patiently hold out for the promised land of the CIO.

Emma Moody, head of charities at Dickinson Dees solicitors, says she remains cautious because of the many false dawns in the story so far.

"My initial gut reaction to Hodgson's announcement was 'oh no, not again'," says Moody. "I am still slightly sceptical because it has been a long time coming, but once it is in force I am looking forward to exploring the opportunities with clients.

"I do want it to work and, provided that all the regulations are drawn up, there is no reason why it should not be a success."

Moody, who was part of the Charity Law Association working party that made submissions to the Hodgson review on issues including CIOs, says that she thinks the delays have been caused by wrangling over details and changing priorities brought about by the financial climate.

She also questions Hodgson's recommendation not to include a register of charges against property for charities that become CIOs, pointing out that this might deter larger charities from taking up the status.

She says the trustees of many small to medium-sized charities that want the benefits of incorporated status have chosen to wait for CIOs rather than take on the administrative burden of registering separately with Companies House.

She says: "There is a real case for small to medium-sized charities to incorporate to protect trustees, but because of the light at the end of the tunnel for CIOs, many people have been saying 'we'll wait, we'll wait'."

Stephanie Biden, senior associate at Bates Wells & Braithwaite, welcomes the prospect of the introduction of CIOs but says that more should be done to make it easier for unincorporated charities to adopt the new status.

She says: "In my view, the CIO will bring only limited benefits if existing charities have to go through the relatively complex and expensive process of setting up new CIOs and transferring assets and liabilities to them.

"If a simpler route could be found, it might dramatically increase the uptake of the CIO legal structure by small to medium-sized unincorporated charities, which would gain most from using it."

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