The statutory framework approved by the UK Parliament on 3 December 2012 provides for the introduction of the Charitable Incorporated Organisation, a new form of limited liability structure created in response to requests from charities for a structure that provides them with some of the benefits of being a company whilst allowing them to sidestep some of the more onerous requirements that a company status imposes.


On 3 December 2012, the UK Parliament approved a statutory framework that provides for the introduction of a new form of limited liability structure designed specifically for charities with income greater than £5,000—the Charitable Incorporated Organisation (CIO).  On 10 December 2012, the Charity Commission began to accept applications from new charities wishing to register as a CIO.

The CIO was created by the Charities Act 2006 in response to requests from charities for a structure which would provide them with some of the benefits of being a company whilst allowing them to sidestep some of the more onerous requirements that a company status imposes.  Even though historically charities have tended to structure themselves as a trust or a company limited by guarantee, these structures are often not the most appropriate for a charity and are becoming increasingly outdated.  Incorporating a charity as a company, for example, imposes heavy reporting requirements from both Companies House and the Charity Commission.  Likewise, using a trust structure for a charity is sometimes viewed as outdated and inappropriate, particularly if the activities of a charity are on a large scale or involve a large number of decision makers. 

The Benefits of Structuring a Charity as a CIO

The genesis of the CIO model is the company limited by guarantee. However the CIO has been developed to specifically meet the requirements of charities. A CIO will register with, and report to, the Charity Commission only, and it will not be subject to obligations under company law.  Registration is simple and does not involve a fee.  Model CIO constitutions are provided by the Charity Commission, and they are drafted in language that is accessible and practical for charities.  Actions, obligations and powers of the trustees, not directors, are the focal point of the model constitutions. 

The reporting and accounting obligations of a CIO also are less onerous than those of a company registered as a charity.  A CIO will only file one set of annual accounts and an annual report, and, at present, the Charity Commission does not charge any filing fees.  The volume of information which a CIO must supply to the Charity Commission is also less than that which is required by Companies House. 

Like a company, a CIO has separate legal personality.  Contracts can be freely entered into, and property can be held by a CIO.  The members, of which there must be one or more, have limited liability, and on the winding-up of the CIO, the members’ liability will be limited by the constitution of the CIO.  The Charity Commission guidance states that the CIO constitution must stipulate that the members either have no liability to contribute to the assets of the CIO if it is wound up, or they will be liable to contribute to a maximum amount each if the CIO cannot meet its financial obligations when it is wound up.  Accordingly, liability can be fixed at a nominal level.

Charities Best Suited to Register as a CIO

The CIO structure is particularly useful for small to medium-sized charities that enter into contracts, own property or have employees.  Other charitable companies may also find the structure attractive as a way of reducing reporting and administration obligations, and it will be possible for existing charities which are established as trusts or companies to convert to a CIO during 2013 and 2014.

However, larger charities and charities that use their property as security for borrowing may find the CIO structure less attractive because of the Charity Commission’s lack of a publicly searchable register of charges.

How to Structure a Charity as a CIO

Generally, the process to register a CIO is similar to that for the registration of a charity formed as a company or a trust.  A detailed online application must be completed through the Charity Commission website.  The Charity will undergo the usual Charity Commission scrutiny as to public benefit and charitable status, and it will be required to meet the £5,000 annual income threshold in the same way that all entities must in order to be registered with the Charity Commission.  

A CIO must also have a governing document.  This document must be in a form specified by the Charity Commission or as near to that form as the circumstances permit.  The Charity Commission provided two model constitutions: the “foundation model,” which should be used where the only voting members of the CIO will be the charity trust, and the “association model” for charities that have a wider membership. 

Kathryn Ilczyszyn, a trainee solicitor at the London office, contributed to this article.