The Section about converting a charitable company to a CIO has been updated – in line with legislative changes from January 2018.
When to change charity structure, Your charity’s legal structure sets out what type your charity is. There are four common types of charity structure:
- charitable incorporated organisation (CIO) – there are 2 structures; association CIO and foundation CIO
- charitable company (limited by guarantee)
- unincorporated association
Your charity’s legal structure determines:
- who will run it and whether it will have a wider membership
- whether it can enter into contracts or employ staff in its own name
- whether its trustees are personally liable for what it does
You might want to change your charity’s structure because your existing structure doesn’t allow you to do something. For example, trustees of a growing unincorporated charity may decide to change to a corporate charity structure because the charity needs to employ staff.
An unincorporated charity isn’t a legal body in its own right so it can’t enter into contracts in its own name. The trustees have to enter into contracts personally – they can be liable if something goes wrong and they’re at fault.
You might also decide to change to a corporate charity structure (‘incorporation’) because:
- you want to register the title to your charity’s land or property in its own name (rather than in a trustee’s name or in the Official Custodian for Charities)
- you are concerned about the level of financial risk your charity faces and want to give the trustees more protection (although the trustees must still act responsibly)
- your charity will deliver charitable services under contract (for example with a local authority)
Changing to a different charitable structure usually involves setting up a new charity, transferring your original charity’s assets and liabilities to it then closing your original charity.
This can be complex, particularly if your charity has assets which are permanent endowment. You and the other trustees must decide that it’s in your charity’s interests to change to a different type of charity.
Read Charity types: how to choose a structure (CC22a) for more information on the advantages and disadvantages of the different types of charity structure.
You can also contact our Sector Support North East Lincolnshire team on 01472 355793 for guidance, or Pippa Robson, Deputy Chief Officer on Pippa@nbforum.org.uk 01482 499032