Governance Guidance

Governance Guidance

Thinking of becoming a Charity or CIO?

If you’re considering becoming a charity or CIO, it can be difficult to know where to start and what factors to take into account. The information below is intended as a practical guide to help you to identify gaps, understand potential risks and dependencies, and decide whether further specialist advice may be needed.

Community Futures provides general guidance and signposting but does not provide legal, financial, or professional advice and does not manage applications or conversions.

• What makes a charity
• What is a CIO
• Foundation vs Association CIO
• Becoming a CIO

What makes a charity

Legal requirement: to be a charity in England and Wales, your organisation must satisfy the definition of a charity in the Charities Act

The Charities Act says that a ‘charity’ is an institution which

• is established for charitable purposes only
• is subject to the control of the High Court’s charity law jurisdiction

Charitable Purposes – Your organisation’s ‘purpose’ is what it is set up to achieve.

A charity’s purpose is usually set out in the ‘objects clause’ of it’s governing document (the legal document that creates a charity and says how it should be run).

Legal requirement: to be a charity your organisation must have charitable purposes only. It cannot have some purposes that are charitable and some that are not.

Legal requirement: to be a ‘charitable purpose’ (as defined in the Charities Act) it must:

• fall within the descriptions of purposes in the Charities Act
• be for the public benefit

Charities Act

What is a CIO

A Charitable Incorporated Organisation (CIO) is a legal structure created specifically for charities by the Charities Act 2011. It gives charities its own legal identity and protects trustees from personal liability – without the administrative burden of registering with both Companies House and the Charity Commission. CIOs come in two forms: foundation and association. Registration is with the Charity Commissiong alone.

A CIO has its own legal personality, meaning it can enter contracts, hold property, sue, and be sued in its own name rather than in the name of its trustees.

Foundation vs Association CIO

Foundation: Set up a foundation CIO if you want your charity to be a corporate body, the only members are the trustees and you don’t want a wider membership. You must:

• have a constitution as your governing document
• register your CIO with the commission for it to legally come into existence
• keep a register of its trustees (who are also the members)
• send its accounts and annual return to the commission each year, regardless of its income

Association: Set up an association CIO if you want your charity to be a corporate body and have a wider membership, including voting members other than the trustees. You must:

• have a constitution as your governing document
• register your CIO with the commission for it to legally come into existence
• keep a register of its members and trustees
• send its accounts and annual return to the commission each year, regardless of its income

If you are an existing charity wishing to convert to a CIO structure, choose the CIO model constitution which best matches your original charity.

Use the association model if your original unincorporated charity:

• has a constitution as its governing document
• has a wider membership which votes on important decision, such as electing trustees or committee members

Use the foundation model if your original charity:

• is governed by a trust deed, will, scheme or conveyance
• is run solely by its trustees
• doesn’t have a voting membership

Common reasons organisations consider becoming a CIO

Where CIO may not be necessary

Community Futures’ role and limiations

CIO Readiness Checklist

Useful resources

Charity Commission Guidance

What makes a charity

Set up a charity