It was first referred to in the Charities Act 2006 (which was subsequently replaced by the Charities Act 2011) but the phased implementation for charitable companies to be able to convert to a charitable incorporated organisation (“CIO”) is now complete. Guidance has been published on the Government website about how to achieve this conversion.
A CIO is incorporated but is not a company. It therefore provides some of the benefits of a company without some of the burdens.
The ability for Community Interest Companies (CIOs) completes this sequence of reforms. The time table is set out below.
Charitable companies – annual income of less than £12,500 – 1 January 2018
Charitable companies – annual income between £12,500 and £25,000 – 1 March 2018
Charitable companies – annual income between £25,000 and £100,000 – 1 May 2018
Charitable companies – annual income between £100,000 and £250,000 – 1 June 2018
Charitable companies – annual income between £250,000 and £500,000 – 1 July 2018
Charitable companies – annual income over £500,000 - 1 August 2018
Community interest companies – 1 September 2018
As a CIC is not a charity, the Charities Commission will need to satisfy itself that the proposed CIO will be exclusively charitable. The Charitable Incorporated Organisations (Conversion) Regulations 2017 confirms a similar process to charitable companies for CICs converting to CIOs. However, it is important to note:
- CICs with a share capital cannot convert if they have any shares not fully paid up. It also means that any shares are cancelled on conversion;
- CICs cannot convert to a CIO if they would be exempt from charity registration; and
- a CIC limited by guarantee must provide in the CIO Constitution that members of the CIO contribute to its assets if the CIO is wound up unless the amount each member of the CIC was liable to contribute is £10 or less.