I. THE ORGANISATION
Ch.1: Setting up an organisation
Ch.2: Unincorporated organisations
Ch.4: Charitable status, charity law & regulation
Ch.5: The organisation's objects
Ch.6: The organisation's name
Ch.7: The governing document
Ch.8: Registering as a charity
Ch.9: Branches, subsidiaries & group structures
Ch.10: Changing legal form
Ch.11: Collaborative working, partnerships and mergers
Ch.12: Members of the organisation
Ch.13: Members of the governing body
Ch.14: Officers, committees & sub-committees
Ch.15: Duties & powers of the governing body
Ch.16: Restrictions on payments & benefits
Ch.17: The registered office & other premises
Ch.18: Communication & paperwork
Ch.19: Meetings, resolutions & decision making
Ch.20: Assets & agency
Ch.21: Contracts & contract law
Ch.22: Risk & liability
Ch.24: Financial difficulties & winding up
III. EMPLOYEES, WORKERS, VOLUNTEERS & OTHER STAFF
Ch.25: Employees & other workers
Ch.26: Rights, duties & the contract of employment
Ch.27: Model contract of employment
Ch.28: Equal opportunities in employment
Ch.29: Taking on new employees
Ch.30: Pay & pensions
Ch.31: Working time, time off & leave
Ch.32: Rights of parents & carers
Ch.33: Disciplinary matters, grievances & whistleblowing
Ch.34: Termination of employment
Ch.36: Employer-employee relations
Ch.37: Employment claims & settlement
Ch.38: Self employed & other contractors
IV. SERVICES & ACTIVITIES
Ch.40: Health & safety
Ch.41: Safeguarding children & vulnerable adults
Ch.42: Equal opportunities: goods, services & facilities
Ch.43: Data protection & use of information
Ch.44: Intellectual property
Ch.45: Publications, publicity & the internet
Ch.46: Campaigning & political activities
Ch.47: Public events, entertainment & licensing
V. FUNDING & FUNDRAISING
Ch.48: Funding & fundraising: General rules
Ch.49: Fundraising activities
Ch.50: Tax-effective giving
Ch.51: Trading & social enterprise
Ch.52: Contracts & service agreements
Ch.53: Financial procedures & security
Ch.54: Annual accounts, reports & returns
Ch.55: Auditors & independent examiners
Ch.56: Corporation tax, income tax & capital gains tax
Ch.57: Value added tax
Ch.58: Investment & reserves
Ch.60: Land ownership & tenure
Ch.61: Acquiring & disposing of property
Ch.62: Business leases
Ch.63: Property management & the environment
VIII. BACKGROUND TO THE LAW
Ch.64: How the law works
Ch.65: Dispute resolution & litigation
UPDATED INFORMATION FOR CHAPTER 3:
VOLUNTARY SECTOR LEGAL HANDBOOK
This page contains information that has appeared on Sandy Adirondack's legal update website for voluntary organisations at www.sandy-a.co.uk/legal.htm. For current updates, including potential changes that are in the pipeline, see the legal update website.
To avoid spamming, an email address is not given on screen. If you can't see the word 'here' or have trouble sending an email by clicking on it, the address is bookservice at sandy-a.co.uk, with the spaces and 'at' replaced by the @ symbol.
These websites for each chapter update
the 3rd edition of The Russell-Cooke Voluntary Sector Legal Handbook by James Sinclair Taylor and the Charity Team at Russell-Cooke Solicitors, edited by Sandy Adirondack (Directory of Social Change, 2009). The websites are not intended as a comprehensive update and should not be treated as such.
To order a copy of The Russell-Cooke Voluntary Sector Legal Handbook, print out the order form at www.sandy-a.co.uk/bookserv.htm or send an email order by clicking
. It costs £60 for voluntary organisations or £90 for others, plus 10% p&p.
The information here covers the law applicable to England and Wales. It may not apply in Northern Ireland and/or Scotland. These news items are not a full or definitive statement of the law and are not intended as a substitute for professional legal advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting can be taken by the author.
The items below formerly appeared on the legal update website for voluntary organisations and are archived here. The content may be out of date and links may not work. For current updates to the chapter, see the legal update website for voluntary organisations at www.sandy-a.co.uk/legalstatus.htm.
COMPANIES HOUSE LONDON CHANGE OF ADDRESS
From 21 May 2012 the Companies House information centre in London has moved to Companies House, 4 Abbey Orchard Street, London SW1P 2HT.
The telephone number for all Companies House centres (Belfast, Cardiff, Edinburgh, London) remains 0303 1234 500, and the email address remains email@example.com.
Go back to contents
Go to archived items about companies (VSLH3 chapter 3)
COMMUNITY INTEREST COMPANIES REGULATOR WEBSITE
Since June 2011, the website of the community interest company (CIC) regulator has ceased to be on the Companies House website, and is on the website of the Department for Business, Innovation and Skills at www.bis.gov.uk/cicregulator. The website contains information about CICs, guidance and forms for setting up a CIC, and case studies.
There is no longer a separate list of CICs, as was on the previous CIC regulator's website. Information about individual CICs remains available through the Companies House webcheck service at www.companieshouse.gov.uk.
The CIC regulator's annual report for 2010-11, published in November 2011, showed that during the year 1,824 CIC were added to the register, seven converted to charitable companies and 484 were dissolved. Over the six years from July 2005, when CICs became available, to 31 March 2011 5,899 CICs were registered, 977 were dissolved and 17 converted to charities, leaving 4,905 on the register on 31 March 2011.
The regulator's annual reports can be accessed via tinyurl.com/6rrrb84.
Go back to contents
Go to archived items about companies (VSLH3 chapter 3)
CHARITABLE INCORPORATED ORGANISATIONS
Updated 11/1/15. This information updates s.3.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
After years of delay, the long-awaited charitable incorporated organisation (CIO, Welsh SEC) structure, giving charities in England and Wales the advantages of incorporation without having to register with both Companies House and the Charity Commission, finally started being registered on 2 January 2013.
In the first year, to 31 December 2013, 1,121 CIOs were registered, making up 21% of the total 5,309 charity registrations in 2013. Six of these CIOs were subsequently dissolved.
The following year, from 1 January to 31 December 2014, 2,016 CIOs were registered, making up 41.5% of the total 4,872 charity registrations in 2014. None of these CIOs had been dissolved by the end of the year.
Over the full two-year period, there were 3,137 CIO registrations, making up 30.8% of the total 10,181 charity registrations.
Although the CIO structure was eagerly awaited, has been rapidly adopted and has many advantages over the charitable company structure, it is not necessarily the best option for every charity that wants the protection of incorporation. For issues to consider, see CIO: Yes or no?, below.
Legislation, guidance and information
The statutory framework for CIOs was in the Charities Act 2006 but has now been consolidated in part 11 (ss.204-250) of the Charities Act 2011, at www.legislation.gov.uk/ukpga/2011/25/part/11.
The detail is in the Charitable Incorporated Organisations (General) Regulations 2012, at www.legislation.gov.uk/uksi/2012/3012/contents/made;
the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012, at www.legislation.gov.uk/uksi/2012/3013/contents/made;
and the Charitable Incorporated Organisations (Consequential Amendments) Order, at www.legislation.gov.uk/uksi/2012/3014/contents/made.
For detailed information about CIOs, the most comprehensive source is Key guides: Charitable incorporated organisations by Gareth G Morgan (£19.95 plus p&p from www.sandy-a.co.uk/bookserv.htm, the Directory of Social Change, bookshops or online booksellers). This covers all aspects of CIOs and Scottish CIOs.
Setting up a CIO: New charities and existing unincorporated charities
At present, the Charity Commission is registering only brand new charities as CIOs, or currently unincorporated charities wishing to become CIOs. An existing unincorporated charity sets up a CIO by registering it with the Commission, then the process is similar to changing from an unincorporated trust or association to a charitable company: because the CIO or company is a complete new organisation, all of the assets, rights and liabilities of the unincorporated charity must be transferred to the new one.
In most cases the unincorporated charity is then dissolved in accordance with the provisions in its governing document (constitution, trust deed etc), and the trustees of the unincorporated charity apply to the Commission to have the unincorporated charity removed from the register of charities and added to the register of mergers. There are, however, situations where it may be necessary or advisable to retain the unincorporated charity alongside the CIO, and advice should be taken about this.
Converting from charitable company or other incorporated structure to CIO
CIO regulations will contain procedures for charitable companies limited by guarantee, community interest companies with charitable objects and charitable community benefit societies (industrial and provident societies) to convert to CIOs. The process will be fairly straightforward, as it involves converting from one incorporated structure to another so will not involve a transfer of assets.
It was expected that the necessary regulations would be before Parliament by the end of 2013 setting out the conversion procedures for charitable companies, and conversion would become available sometime during 2014. This has been continuously delayed, and the regulations are now not expected until late 2015 at the earliest.
Procedures for conversion from community interest company (CIC) to CIO will follow. Charitable community benefit societies (CBS) are currently exempt charities and cannot register with the Charity Commission, so they will not be able to convert to CIO status until their exempt status is removed. There is no indication yet of when this might happen. Depending on when the conversion processes are going to become available, a CIC or CBS that wants to become a CIO sooner rather than later may want to consider converting first to a charitable company, then to a CIO when conversion from charitable company to CIO becomes available.
Until the statutory conversion process becomes available, an alternative for existing incorporated organisations which want to become CIOs is to set up a CIO, transfer the existing organisation's assets to it, and probably wind up the existing organisation. This process, involving the transfer of assets from one incorporated body to another, is more complicated than conversion under the CIO regulations will be, but can be done now. Advice should be taken before starting such a transfer.
Some commentators have said that regardless of whether the change is done by transfer or conversion, some lenders whose loans are secured on a company's or community benefit society's assets might not allow the organisation to become a CIO, because of the lack of a publicly available register of charges. For more about this see Borrowing, below.
The Charities Act 2011 requires all CIOs to have both members and trustees. But the foundation model constitution allows for a CIO in which the members and trustees are the same people, and the association model is for a CIO where there is, or is expected to be, a body of members wider than the trustees. The basic provisions are the same in both constitutions but there are significant differences, so it is essential to ensure a proper decision is made about whether the CIO will be an association CIO or foundation CIO, and to use the right constitution.
After the constitution is adopted and the CIO is registered it will be possible to amend a foundation model constitution to allow for a wider membership, if this becomes appropriate in future. It will also be possible to amend an association model constitution to cease having a membership wider than the trustees, but this would have to be approved by the members, who may not be willing to cease being members.
The Commission's association and foundation model constitutions are at tinyurl.com/o2qrhvy. The notes at the beginning of the draft constitutions explain with admirable clarity what a CIO is, how to use the model constitutions, and the process for becoming a CIO.
The Charities Act 2011 and CIO general regulations set out certain provisions that must be in all CIO constitutions, and other provisions that have to be included if they are to apply to that particular CIO. In addition to these, the Commission has included other provisions which reflect good practice or the law.
An organisation registering as a CIO without taking specialist advice should use one of the models. This will speed the registration process, and will ensure the constitution includes all legally required information.
However, every clause in the model should be checked to be sure it is appropriate for your organisation. In addition, if you are setting up a CIO to replace an existing charity, the model clauses should be checked against the provisions in the existing governing document. Where there are substantive differences these should be considered, and decisions should be made about whether the current provisions should be carried over into the CIO, and if so, how to do it in a way that does not lead to endless correspondence with the Charity Commission during the registration process. This is why it is sensible to take advice from a council for voluntary service, other infrastructure support organisation, solicitor or specialist advisor who specialises in setting up charities, rather than trying to set up a CIO on a do it yourself basis.
Some umbrella bodies for specific types of organisation have agreed approved CIO constitutions with the Charity Commission. These have been adapted to be appropriate for that type of organisation. A list of national organisations which can provide approved government documents is on the Commission's website at tinyurl.com/ofjy9p3, but the website does not indicate whether the the organisation has an approved model for CIOs. If a relevant umbrella organisation is listed, it will be worth contacting them to see if they have agreed, or are in process of discussing, an approved CIO constitution. [This also applies when setting up a charitable association, trust or company not just a CIO.]
The Charities Act 2011 s.206(5) requires a CIO's constitution to be in the form specified by the Charity Commission (i.e. one of the model constitutions or an approved constitution), or as near to that form as the circumstances admit. Some flexibility is built into the models, but trying to tailor the models to the specific needs or wishes of an individual organisation is likely to cause delays in the registration process. The Commission has said it will be flexible in interpreting "as near to that form as the circumstances admit", but it can never be anticipated what this may mean in practice. Again, taking advice while drawing up the draft constitution is likely to reduce time and hassle during the registration process.
Whether doing a DIY registration using a model constitution, using an approved constitution from an umbrella body, or taking specialist advice to create a bespoke adaptation of the Commission's model, all variations from the model or approved constitution should ideally be clearly indicated. This is because the Commission, as part of the registration process, has to ensure no changes have been made that would invalidate the constitution or make it unworkable. The more changes that are made especially if they are made without specialist advice the longer the registration is likely to take.
Unfortunately the CIO model constitutions, like the Commission's model governing documents for charitable associations, trusts and companies, are available only as PDFs that cannot be edited online, so they have to be printed out and adapted manually. For the CIO models it is now possible to fill in blanks online (name, objects etc) but other details cannot be added, amended or deleted online. The Commission has been saying for years that it is looking into formats that can be completed more easily than the current PDFs, and hopefully will come up with something better than just being able to fill in a few blanks.
Some provisions which apply automatically under company law (such as the right of members to remove company directors/trustees) apply to CIOs only if they are explicitly included in the CIO's constitution; others which cannot apply to companies (in companies formed since 2007, a chair cannot have a casting vote at company meetings) can apply to CIOs if included in their constitution. So when drawing up a CIO's constitution it is important to think carefully about each clause, and to consider the options set out in the side notes in the models. Some constitutional provisions which I think are of particular interest are included in CIO: Yes or no? below.
CIO: YES OR NO?
Updated 5/1/15. This information updates s.3.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
This article is intended to help you decide whether the charitable incorporated organisation (CIO) structure is right for your organisation. If you haven't already done so, read Charitable incorporated organisations, above. That background is necessary to understand some parts of this article.
This article covers:
Decisions when starting from scratch
Deciding whether to incorporate
Choosing between CIO and charitable company
The "Choosing" section includes an introduction and then:
Registration issues: registration body; familiarity; cost; transferring assets from an existing unincorporated charity; speed of incorporation; speed of charity registration; very small charities; changing from CIO to another structure.
Borrowing: A potential killer issue: using assets as security for borrowing; another borrowing concern.
Constitutional issues: constitutional flexibility; powers; amendments; effective date of amendments; entrenched provisions.
Membership issues: governance structure; members' guarantee; duty of members to act in the charity's interest; unincorporated organisations as members; register of members; non-voting members; disputes between members.
Members' meetings and decision making: AGM and other general meetings; requiring a general meeting to be called; right to appoint a proxy; postal/email voting; remote participation in meetings; right to require a poll; chair's casting vote; consensus decision making; decision making without a meeting (written resolutions).
Trustee issues: minimum age for trustees; suitability of trustees; information for new trustees; public information about trustees; statutory duties of trustees; maximum term of office; right to remove trustees; trustee meetings and decision making.
Administrative issues: annual accounts, report and returns; electronic communications; principal office; general admin; disclosure of name and status.
Merger and dissolution: merger; voluntary dissolution; options when insolvent; dissolution of inactive organisation; effect of dissolution; effect of removal from register of charities.
VERY IMPORTANT FOR EXISTING ORGANISATIONS. If the organisation is a member of a multi-employer pension scheme (such as Pensions Trust), changing legal structure may crystallise pension exit debt. Before even thinking about changing from unincorporated to incorporated or from one incorporated structure to another, advice from the pension provider and from an independent financial or legal advisor is essential.
Crystallisation may not be an issue or even it if is, there may be ways around it. But if the debt is going to crystallise if the organisation changes structure, this may be a major factor in your decision. For more about this, see Pension liability on incorporation, merger or winding up.
Decisions when starting from scratch
When setting up, all new organisations must decide:
whether to be charitable (and get the tax and other benefits of charitable status, but have to operate within the restrictions of charity law), or non-charitable (and miss out on the tax and other benefits, but have more flexibility);
whether to be unincorporated or incorporated;
if unincorporated, whether to be an unincorporated association (a membership body, generally with two tiers: the members of the organisation, and the members of the governing body), or a trust (with only the governing body, without a wider membership);
if incorporated, whether to be a charitable incorporated organisation (CIO), a charitable company limited by guarantee, or a community benefit society. The community benefit society structure (a form of industrial and provident society) is not widely used and is not considered here.
Deciding whether to incorporate
New organisations need to decide whether to be unincorporated or incorporated. Existing unincorporated organisations which are thinking of becoming CIOs need to decide whether to stay unincorporated or become incorporated.
Incorporation makes an organisation a "legal person". This enables the organisation to enter into contracts and other legal agreements as a body, rather than as individuals acting on behalf of an unincorporated organisation. Incorporation makes it easier to enter into contracts, leases etc and to own property, and greatly reduces the risk of members of the governing body being held personally liable if the organisation cannot meet its financial obligations.
Incorporation as either a charitable incorporated organisation (CIO) or a charitable company is therefore likely to be the sensible choice for any new charity or existing unincorporated charity which has or is likely to have employees, own property, borrow money, enter into significant contracts to purchase or provide goods or services, or have long-term financial commitments such as a lease without an easy get-out clause.
An unincorporated organisation cannot simply become incorporated. It must first set up the incorporated organisation (CIO or company), then transfer its assets to the new organisation. The original organisation is then generally dissolved and ceases to exist. The process for incorporation is basically the same regardless of whether the new organisation will be a CIO or charitable company, except that a CIO registers only with the Charity Commission, while a charitable company registers first with Companies House and then with the Commission.
There is more about the choice between unincorporated and incorporated charities in the Charity Commission's CC22 Charity types: How to choose a structure, at tinyurl.com/nfrvebd.
More detailed information about the choice between unincorporated and incorporated is in chapters 1-3 of The Russell-Cooke Voluntary Sector Legal Handbook.
Choosing between CIO and charitable company
New charities and existing unincorporated charities that have decided to incorporate basically have a choice between the traditional charitable company structure, or the new charitable incorporated organisation (CIO) structure. In addition, existing organisations that are already incorporated as a charitable company, community interest company or community benefit society (industrial and provident society) may want to consider whether, when it becomes possible to convert to a CIO, whether it is more advantageous to keep their current structure or convert.
When comparing CIOs with charitable companies, the immediate response is often that CIOs must be better, because there is only one registration (with the Charity Commission, rather than with both Companies House and the Commission), only one regulator, only one body of law, only one set of accounting regulations, only one annual return. But it may not be quite so simple, and some of the statutory or practical differences between charitable companies and CIOs may, for some charities, make charitable companies a better option.
Before CIOs became available, the Office for Civil Society said it expected the CIO structure to be used mostly by charities with annual income between £10,000 and £500,000. Those under £10,000 or larger but without paid staff, premises or long-term financial commitments and not undertaking risky activities are likely to be too small to need the protection (and extra paperwork and hassle) of incorporation. Unless they own property or a long lease, or have identified risks that would make incorporation sensible, it may be appropriate for them to remain unincorporated. Those over £500,000 or smaller if they are likely to need to borrow or if they have or might have a mortgage may find a charitable company more appropriate than a CIO [see borrowing, below].
In some cases it will be clear that a CIO is not necessary (at the lower income end) or advisable (at the upper end). But for many organisations it may not be clear cut, and the best decision may emerge only after weighing up a wide range of variables, many of which are set out below.
It is important not to get pushed into choosing or not choosing the CIO structure, unless it really does seem to be the best choice. At the moment a CIO, unlike other legal structures, cannot convert to any other structure. Lord Hodgson's review of charity law in 2012 recommended that CIOs should be able to convert to charitable companies, but this cannot be relied upon to happen.
The information below should help organisations choose wisely between CIO and charitable company, and to understand some of the issues when drawing up a draft governing document (CIO constitution or company articles) and going through the registration process. Where a particular issue may be critical to the decision, I have indicated this.
1. Registration and legal compliance
1.1 Registration body
Summary: Advantage to CIO. A CIO registers only with the Charity Commission, and must comply with general charity law as well as charity law requirements specific to CIOs. A charitable company registers with both Companies House and Charity Commission, and must comply with general charity law as well as company law requirements.
CIO. A CIO registers only with the Charity Commission, using a CIO constitution. It must comply with general charity law which applies to all charities, and the specific aspects of charity law relating to CIOs. Regardless of size, it must send its annual accounts and report and an annual return to the Commission.
All of the legal requirements relating to its legal structure and charitable status are in the Charities Acts and related regulations.
Charitable company. A charitable company first registers as a company limited by guarantee with Companies House, using a memorandum and articles of association, then registers the company with the Charity Commission. It must comply with company law (but not the many company law provisions which apply only to companies limited by shares rather than guarantee), and with charity law (but not the provisions which apply only to CIOs). Its annual accounts must comply with both company and charity law (which are similar, but there are significant differences). It must send its annual accounts and report to Companies House, and if its income is over £25,000 must send them to the Charity Commission as well. It must submit annual returns to both regulators.
The legal requirements relating to its legal structure and charitable status are in the Companies Acts, Charities Acts and related regulations. It is not always clear how the two sets of law mesh, and which takes priority when they relate to the same thing but in different ways (such as the statutory duties of company directors compared with the duties of charity trustees).
When it matters. It's certainly easier to have a single regulator and single body of law rather than two. But charitable companies have been around for a long time and the dual requirements are not all that confusing or difficult to administer. So dual registration and regulation in themselves should not be a major reason for choosing CIO over company. Many other factors may be more significant.
Summary: Advantage to company. Even though CIOs have been in existence since January 2013, the CIO structure is still relatively new, untested, and unfamiliar to funders, banks and others. This will change over time but in the meantime, charitable companies have been around for a long time and are well understood by funders etc.
CIO. The charitable incorporated organisation is a complete new structure. It may be unfamiliar to funders, donors, banks and others with whom the charity comes into contact. Banks and similar bodies that base their procedures on whether an organisation is unincorporated or incorporated may still not have forms that include CIO. Obviously this will ease with time, as the CIO becomes more established and better known.
Probably more significantly, the CIO is untested. There are many points where it is still unclear how a certain regulation or constitutional provision might be applied in practice, and how issues that have already arisen, such as borrowing, will be resolved.
Charitable company. As indicated above, charitable companies have been around for a long time. There is a huge body of knowledge about how charitable companies operate. There are legal precedents in company law for clarifying and resolving disputes between company members, between company members and the company, or between the company and third parties. None of this exists for CIOs.
When it matters. CIOs or potential CIOs may get tired of explaining to banks, insurers, funders and others, "It's like a charitable company but it's not a company and doesn't have to register with both Companies House and the Charity Commission. It only registers with the Commission." But presumably this will be only a relatively short term issue.
Summary: Advantage to CIO, but probably only in relation to the cost of preparing annual accounts, plus a small advantage in relation to statutory filing costs.
CIO. The Cabinet Office's explanatory memorandum to the Charitable Incorporated Organisations (General) Regulations 2012 stated that the cost of a new or existing unincorporated charity setting up a CIO is likely to be broadly equivalent to setting up a charitable company .
The Charity Commission does not (at present) make any charge for registering a charity, registering a change of charity name, submitting an annual return, or any other administrative procedure. However, it requires all charity registrations (not just CIOs), submissions of annual returns and accounts, and some other procedures to be done online.
Because a CIO will be able to prepare its annual accounts and reports under charity law rather than company law, the Cabinet Office estimated that the average cost of doing this would be £421 about one-third of the average cost for a charitable company. This is likely to be where the greatest cost differential between CIOs and charitable companies is.
Charitable company. Companies House charges for registering a company (£13 or £15 if done electronically, £40 on paper); registering a company change of name (£8 electronic, £10 paper); submitting an annual return (£13 electronic, £40 paper); and some less common administrative procedures. Companies House charges more for paper submissions than electronic, but unlike the Charity Commission at least it still allows them.
The Cabinet Office's estimate of the cost of preparing annual accounts and reports for a charitable company was £1,307 three times the average cost for a CIO.
1.4 Transferring assets from an existing unincorporated charity
Summary: Advantage to CIO. The process of transferring assets from an unincorporated charity to a CIO is more comprehensive than for transferring to a charitable company.
CIO. The Charities Act 2011 s.268 allows an unincorporated charity with annual income in its last financial year not over £10,000 to transfer all of its property to another charity, unless it holds designated land (land where there is a constitutional condition that it can be used only for one or more purposes of the charity). If the transfer is to a CIO or CIOs, the income restriction does not apply.
A pre-merger vesting declaration provides a different procedure for transferring assets. This is in s.310 of the Charities Act and treats the transfer as if the unincorporated charity is merging into the new organisation. If this merger is with a CIO all property, including restricted property and permanent endowment, can be transferred.
For more about the transfer of assets, see the Charity Commission's How to transfer charity assets at tinyurl.com/pfbrtde. Any organisation which has permanent endowment (property held on condition that it not be sold, or if it is sold the proceeds cannot be spent as income) must take advice to ensure this is transferred properly.
Charitable company. An unincorporated association or trust transferring to a charitable company can use the s.268 transfer process only if its annual income is £10,000 or less.
The s.310 pre-merger vesting declaration process, if used for a transfer to a charitable company, will not include restricted assets (any land or other assets that can be used only for a specified purpose) or permanent endowment.
When it matters. Regardless of whether it is most appropriate for an unincorporated organisation to use the s.268 transfer process or a s.310 pre-merger vesting declaration, the transfer of its property will be more straightforward if it is to a CIO rather than to a charitable company.
1.5 Speed of incorporation (may be a critical issue)
Summary: Advantage to company. A company can be registered at Companies House within a week or even on the same day, and comes into existence as soon as it is registered. A CIO does not come into existence until it is registered with the Charity Commission, which could take several weeks.
CIO. A CIO does not come into existence until it is registered with the Commission. Although some CIO registrations go through quite quickly, the Commission expects that a registration decision will normally be made within 40 working days even if the organisation uses one of the Commission's model constitutions, uses the Commission's model wording for its objects, shows that its activities are or will be consistent with the objects, and shows that any private benefit is only incidental and is properly managed. Other applications will take longer.
So there could be a period of two months or more while the people involved in setting up the organisation have agreed their CIO constitution, but are in limbo and cannot yet operate.
The Commission has said that when there is a specific reason to set up a CIO in a hurry, such as a disaster appeal, it can fast-track the application. It is probably unlikely to consider fast-tracking simply because the people involved have left it until the last minute and want incorporation NOW! to enter into a contract
Charitable company. It takes a week or less to get a company registered at Companies House, and for an additional fee it can be done as a same-day registration. Once it is registered the company can immediately start operating enter into contracts or leases, receive grants, hire staff, open a bank account and then start the process of registering with the Charity Commission. Delays with charity registration do not affect the existence of the company.
Provided the company's objects are exclusively charitable, the company will be entitled to tax exemptions and reliefs as soon as it is incorporated, even if it is not yet registered with the Commission. This is important where land, whether freehold or leasehold, is being acquired.
When it matters. For an organisation that needs to incorporate in a hurry, for example to enter a major contract or lease, speed of incorporation may be a crucial factor.
1.6 Speed of charity registration
Summary: Advantage to CIO. Once a CIO is registered with the Commission, it has both its incorporated status and its charity registration. A company, after registering with Companies House, then has to register separately with the Commission.
CIO. As indicated above, it may take two months or more to get a CIO registered. But any issues about its objects, activities or public benefit will have been sorted out as part of the Charity Commission registration process so once a CIO is registered, it is both incorporated and registered as a charity.
Charitable company. A company can be registered very quickly with Companies House but if it has charitable objects and its anticipated annual income is over £5,000, it still has to go through the charity registration process. There is always the possibility that as part of this process, the Charity Commission will require changes to the objects or other clauses in the articles of association that are fundamental to charitable status. Any such changes will involve calling a general meeting of the company's members to amend the articles, or a period of a month or more to do the amendments through a written resolution.
When it matters. If getting registered with the Commission and getting a charity registration number as quickly as possible is important, and there is no particular pressure to get incorporated in a hurry, CIO may be the better option. Or if you choose to become a charitable company, use the Commission's model memorandum and articles of association and model objects with minimal changes, or get advice from someone experienced in setting up charitable companies who can help you avoid anything that would cause delays in the charity registration process.
1.7 Very small charities
Summary: Advantage to CIO.
CIO. Very small charities, with actual (or anticipated, for new charities) annual income under £5,000, are unlikely to need the protection of incorporation, unless they own freehold land or a long lease. But if they do want the protection of incorporation, the CIO structure is easier and has less paperwork than becoming a company limited by guarantee.
Another advantage to CIO is that all CIOs, regardless of income, must be registered with the Commission, and therefore have a charity registration number.
Charitable company. A charitable company cannot register with the Commission unless its income is over £5,000. It will still be a charity and can get recognition of its charitable status from HM Revenue & Customs, but it won't have a Charity Commission registration number. This may be an issue with some funders who will only support charities registered with the Commission.
1.8 Changing to another structure
Summary: Advantage to charitable company. At present a CIO cannot convert to charitable company, community interest company or community benefit society. The law may be changed to allow conversion to one of these incorporated structures, but there is no certainty about whether or when this will happen.
CIO. There is no provision in the Charities Act 2011 or CIO regulations for CIOs to convert to another incorporated structure. Everyone agrees that this should be allowed, but any such provision would require a change in primary legislation.
Charitable company. Community benefit society law provides a straightforward procedure for a CBS to become a company. A community interest company with charitable objects can become a charitable company limited by guarantee. A charitable company can, if there is a good reason and with Charity Commission consent, become a community interest company with charitable objects. Charitable companies, community interest companies with charitable objects and charitable community benefit societies will all be able to become CIOs when the registration timetable allows. So a company or CBS can change to another more appropriate structure if they wish.
When it matters. The fact that a CIO can't convert to another legal structure probably won't ever really matter. But if it does, it is likely to be because the CIO needs an overdraft or other borrowing, and discovers its potential lender won't lend to CIOs because of the lack of a public register of charges [see next paragraph].
2. Borrowing: A potential killer issue
2.1 Using assets as security for borrowing (may be a critical issue)
Summary: Advantage to company. The lack of a public register of charges may make it difficult for a CIO to borrow although it is still too soon to know how much of an issue this will be in practice.
A legal charge is a form of security on an organisation's assets that a lender or funder requires to secure repayment when the organisation is in breach of the terms of the loan or grant. Legal charges include a mortgage which is secured on land or a building or on equipment or some other asset (a fixed charge), or a charge on an overdraft or other loan secured on all of the organisation's unrestricted non-fixed assets, such as equipment and stock (a floating charge). Some organisations issue a form of loan note known as debentures which may be secured by a legal charge on its assets. These would all be included in a register of charges.
Charitable company. Companies have a statutory duty to maintain, if applicable, a register of charges on their assets and keep it up to date, register such charges with Companies House, and inform Companies House within 21 days of any change. The register of charges is open to inspection by the public at the company's registered office or other inspection location and also at Companies House, and a copy can be purchased via the Companies House website for £1. This means that information about debts secured on the organisation's assets is easily and inexpensively available to potential lenders and anyone else.
CIO. Clause 4(1) in both the foundation and association model constitutions states that a CIO has power to borrow money and to charge all or any part of its property as security for repayment of the money borrowed, so there is no issue about a CIO being able grant mortgages or debentures. But there will be no register of a CIO's charges. Without this there is no easy way for potential lenders to find out which of the CIO's assets already have charges on them, nor will the lender have except for charges on land or buildings which are registered at the Land Registry a way of publicly registering its charge.
The draft CIO regulations in 2008 envisaged that CIOs would, like companies, keep a register of charges that would be open to the public. They would also have to register all charges at the Charity Commission, where they would be available to the public. Despite overwhelming support for a register of charges during the consultation on the regulations (81% of respondents supported it, and 17% gave qualified support), the Charity Commission announced in March 2011 that in order to simplify the CIO structure, there would be no provision for CIOs or the Charity Commission to keep a register of charges. But the main reason was not simplification; it was that the Charity Commission was (and remains) concerned about the resources they would need to hold registers of charges and make them available to the public. At the time of the announcement, the Commission acknowledged that the lack of a register of charges "may impact on the usefulness of the CIO structure for larger charities with significant assets". But it could also affect smaller charities that need to borrow.
Charges on land and buildings must be registered at the Land Registry so information will be available there, but it can be difficult to find information on the Land Registry website, especially for older properties or where an address has changed. And a separate document has to be obtained for every property, which costs more than simply getting a single register of all charges from Companies House.
Some commentators say that the lack of a register of charges is not likely to be significant for CIOs because anyone who makes a loan secured on property will ensure it is registered at the Land Registry, and because a CIO's annual accounts will include information about the CIO's liabilities, including charges on its assets. For CIOs which prepare accounts on an accruals basis, these debts will be included in the balance sheet. For CIOs which prepare accounts on a receipts and payments basis, reg.62 in the CIO general regulations explicitly requires a statement of assets and liabilities which includes details of any debt owed by the CIO which is secured by a charge on any of its assets.
However, the balance sheet or statement of assets and liabilities only shows the situation on the last day of the financial year, and there may have been significant changes since then so few lenders would use it to assess an organisation's situation at the time it is actually seeking a loan. Lenders who are accustomed to being able to obtain a comprehensive, up to date, instantly available list of charges via Companies House may be unwilling to lend in situations where such information is not easily available, or their procedures may not allow them to.
Lord Hodgson's recommendation that CIO law be changed to allow CIOs to convert to charitable companies will, if implemented, go some way towards alleviating concerns about this issue, because a CIO for which it becomes a problem will be able to convert to a company and its charges will have to be registered at Companies House. But there is no way of knowing whether this will happen, and even if it does it could be several years away.
Another option might be a statutory requirement under the CIO general regulations for CIOs to maintain a register of charges and make it available to any member of the public (in the same way as the CIO must maintain a register of trustees and make it available to the public). This would not be as good as a register available through the Charity Commission, and come CIOs might not keep a register even when they should, but it might go some way towards reassuring lenders. It could also be a requirement for auditors or independent examiners to draw it to the attention of a CIO if it should have a register and doesn't.
When it matters. The lack of a register of charges is seen by many charity law specialists as the most significant factor against CIOs. Many believe the lack of a register held by the Charity Commission could make it more difficult for a CIO to borrow using the charity's assets as security even making it difficult or impossible to take out an overdraft, if the bank requires it to be secured as a floating charge.
Without a public register which lenders can check, they may be reluctant to lend without other security, such as guarantees from a funder, a parent organisation or individuals. Those guarantors then become liable if the CIO cannot meet its obligations. (Even with a public register, a lender might still ask for guarantors. But this will be more likely to happen if there is no register.)
At least for the time being, any organisation which might, now or in future, need a mortgage or any other loan secured on assets, or which has such loans already, should take specialist legal advice before choosing to become a CIO rather than becoming (or remaining) a charitable company.
2.2 Another borrowing concern
There is also concern among lenders about the statutory requirement for the Charity Commission to dissolve a CIO that appears to be inactive. See Dissolution of inactive organisation, below.
3. Constitutional issues
For more about CIO constitutions, the difference between the foundation and association models and some issues to be aware of, see CIO constitutions above.
3.1 Constitutional flexibility
Summary: Probable advantage to company, because it is still not clear how much flexibility the Charity Commission will allow for CIO constitutions.
CIO. The Charities Act 2011 s.206(5) requires a CIO's constitution to follow a Charity Commission model constitution "or as near to that form as the circumstances admit". Flexibility is built into many provisions in the model constitutions, but it is unclear how flexible the Commission is being in allowing other variations, and how much this delays the registration process. At the very least the Commission will have to check that nothing has been deleted that needs to be in, and nothing has been added or changed that is not allowed to be in a CIO constitution.
Prior to 2006, company articles of association were required to be in accordance with Companies Act regulations "or as near to that form as circumstances admit". The Charity Commission has indicated that it will base its approach on the 1971 chancery court decision in Galman v National Association for Mental Health, which said the Companies Act requirement was concerned with the form of the articles (i.e. the general format and structure), rather than the detailed content. If the Commission does use this approach, quite a lot of variation may be possible.
Whatever approach the Commission takes, variations from a model or approved constitution should be clearly indicated when submitting a draft constitution, so the Commission can see what has been changed. Failure to do this will almost certainly significantly delay the registration process.
Charitable company. Companies have pretty much infinite flexibility in how the articles of association are worded and what is included, provided they include everything that legally needs to be included, and do not include anything that contravenes company law (and, for charitable companies, charity law). There is no obligation to stick as close as possible to the the Charity Commission's model articles of association or even to use them, although registration will generally be quicker if the model articles, or other articles approved by the Commission, are used.
Summary: Advantage to CIO. A CIO has a general statutory power so its constitution does not need to include a lot of specific powers, the way a company's articles of association usually do.
CIO. Under the Charities Act 2011 s.216, a CIO only has to include one power: "to do anything which is calculated to further its purpose or is conducive or incidental to doing so". Other powers may be included, but do not have to be because they will be taken as implied within the general power.
Both the association and foundation model constitutions include, in clause 4, this general power, along with specific powers to borrow, acquire property, dispose of property, employ staff, and deposit or invest funds. There is no reason other powers, such as those included in the Commission's model articles of association for a charitable company, could not be added if there is a particular reason the CIO wants to do so.
Charitable company. It is generally considered advisable for a company's articles of association (or memorandum, for companies formed before 1 October 2009), to include a detailed and relatively long list of powers, to avoid any doubt about what the company is allowed to do.
When it matters. Even when they are in relatively plain English, the long list of powers in a company's memorandum or articles can be offputting. The CIO's general power, or general power with a few specific powers, avoids this. On the other hand, a company's powers are arguably clearer because they are spelled out.
3.3 Constitutional amendments
Summary: Advantage to company, if written resolutions are ever going to be used to amend the governing document. A CIO needs consent of 100% of the members to amend the constitution by written resolution; a company needs only 75% of the members to amend its articles.
CIO. Under s.224 of the Charities Act 2011, amendments to a CIO's constitution require 75% of the votes cast at a general meeting (including votes cast by proxy, post or email, if voting that way is permitted), or a written resolution approved by 100% of the total membership of the CIO. In his review of charity law in 2012, Lord Hodgson recommended that the 100% requirement be reduced to 75%.
Charitable company. Under ss.21 and 283 of the Companies Act 2006, amendments to a company's articles require a special resolution, which requires 75% of the votes cast at a general meeting, or a written resolution approved by 75% of the total membership of the company.
When it matters. If using a written resolution to amend the constitution, it is likely to be a lot easier to get 75% of the members required in a company to reply and agree to it, rather than 100% of the members as required in a CIO unless the CIO has only a very small membership.
3.4 Effective date of amendments (may be a critical issue)
Summary: Advantage to company. Amendments to a CIO's constitution do not come into effect until registered with the Charity Commission. Company amendments come into effect immediately, apart from an amendment to the objects.
CIO. Under s.227 of the Charities Act 2011, amendments to a CIO's constitution do not take effect until they are registered with the Charity Commission. Both charitable companies and CIOs need prior written consent for some amendments, but even where consent has been obtained, a CIO's amendments will not take effect until they are registered. There is no way of knowing how long this may take and the Commission can in some circumstances refuse to register an amendment to a CIO constitution, even if it would not have required their prior consent.
Charitable company. In a charitable company, amendments to the articles take effect from the end of the general meeting at which they are passed (unless the resolution specifies a later date), or as soon as they are passed by written resolution. The only exception is an amendment to the objects, which under s.31 of the Companies Act 2006 does not take effect until it is registered at Companies House but this takes only a few days.
When it matters. Not knowing when or even if a CIO's constitutional amendment will take effect could be significant if, for example, amendments have been made to facilitate a merger, but there is no way of knowing how long it might take for the Commission to register the changes.
In his review of charity law in 2012, Lord Hodgson recommended that amendments to a CIO's constitution should take effect as soon as they are passed (or on a later date specified in the resolution), provided any necessary Commission consent has been obtained beforehand.
3.5 Entrenched provisions
Summary: As far as I am aware, no significant difference between CIO and company.
An entrenchment provision in a governing document allows for some types of amendment to be made only if specified conditions or procedures are more restrictive than they would otherwise be. For example, a CIO or company vote to amend the governing document generally requires 75% of the votes cast, but a provision could be entrenched requiring 90% of the votes.
CIO. Under reg.15 in the CIO general regulations, entrenched provisions can only be included in a CIO constitution if they are included in the original constitution at the time of registration as a CIO, or if an amendment to include them is agreed by 100% of the CIO members (not just 100% of those who vote). Entrenched provisions already in the constitution can only be amended by 100% of the CIO's members or by a Charity Commission or court order.
If the original constitution includes entrenched provisions, this must be stated in the application for registration.
Charitable company. Ss.22-24 of the Companies Act 2006 contain similar provisions for all companies.
When it matters. Take advice before including entrenched provisions. When registering a CIO don't tick the box saying it includes entrenched provisions if it doesn't and don't tick that it doesn't have entrenched provisions if it does. If in doubt, seek advice.
4. Membership issues
4.1 Governance structure
Summary: Slight advantage to CIOs. Both CIOs and charitable companies must have a two-tier governance structure, with members of the organisation and members of the governing body. Both can have constitutional provision for the members always to be the same people as the trustees (a narrow membership), or for a membership body wider than the trustees. CIOs' slight advantage is because there is a specific model constitution for this arrangement, without having to adapt company articles of association.
Both a CIO's constitution and a company's articles of association can be amended from narrow to wide membership or vice versa.
4.2 Members' guarantee
CIO. For CIOs there is a specific constitution, the foundation model, where the members and trustees are always the same people. The foundation model constitution does not include requirements that are unnecessary where the members are the same as the trustees. There is no requirement, for example, to have general meetings (meetings of the CIO members) except where this is required under the Charities Act or the constitution for specific types of decisions, such as amending the constitution or winding up.
CIOs which will have a membership wider than the trustees use an association model constitution.
A foundation CIO can have just one register, a register of trustees, rather than also needing a register of members as an association CIO must do.
Charitable company. A charitable company's articles of association can specify that the members and trustees (company directors) will always be the same people, but the articles will need to be specifically adapted as appropriate (for example, to say that a person becomes a member of the company on election or appointment as a director, and ceases to be a member when they cease to be a director).
A company must always have both a register of members and register of directors, even if they are the same people.
When it matters. If the members will be the same as the trustees, it may be easier to use a foundation model CIO constitution which is specifically designed for this situation, rather than trying to adapt company articles of association. But this is not in itself adequate reason for choosing CIO over company.
Summary: Advantage to CIO. A guarantee requires the members of an organisation to contribute a specified amount to the organisation's debts if it is wound up insolvent. In most CIOs, the members will not have any liability. In a company limited by guarantee there is always this liability, although it is usually only £1 or £10.
CIO. Under s.206(1) of the Charities Act 2011, a CIO that is not a conversion from a company can choose whether to have a members' guarantee (though I can't think of any reason why it would choose to have one if it doesn't have to).
If a company limited by guarantee converts to a CIO, under s.228(6)-(8) the guarantee is extinguished (ceases to exist) if it is £10 or less. If the guarantee is more than £10, the CIO's constitution must include a guarantee of not less than it was in the company.
Clause 8 in both the association and foundation model constitutions includes the wording for a guarantee or lack of one.
Charitable company. A company limited by guarantee must always have a members' guarantee, usually £1 or £10, that the member agrees to pay towards the company's debts if it is wound up insolvent. That's why it's called a company limited by guarantee: each member's liability to the company is limited to the amount of the guarantee.
When it matters. As the guarantee is usually so small in charitable companies, this is unlikely to be an issue in deciding between CIO and charitable company. But it may make life a bit easier not to have a guarantee that has to be explained to members. On the other hand, having a guarantee even a small one may make members take membership a bit more seriously.
4.3 Duty of members to act in the charity's interest
Summary: Advantage depends on your point of view. CIO members have a statutory duty to act to further the CIO's purposes. Company members do not have such a duty to the company.
CIO. S.220 of the Charities Act 2011 requires each member of a CIO to exercise their powers as members "in a way that the member decides, in good faith, would be most likely to further the purposes of the CIO". This duty is repeated in clause 9(3) in the association model constitution. It is not included in the foundation model constitution where the members have the same duty (and more) as trustees [see Trustee issues, below].
Charitable company. In a charitable company (or a charitable unincorporated association), the members are not legally obliged to act in the interests of the charity. The Charity Commission's view is that they should act in a way that furthers the charity's purposes rather than their own interest or the interest of anyone else, but there is nothing in law to say this is the case or to oblige them to do it.
When it matters. In all charities the trustees must, of course, always act to further the purposes of the charity. The CIO requirement for members also to act in this way may be helpful if warring membership factions ever need reminding that their duty is to the CIO's purposes as a whole, not to any narrower interest. But it is unclear whether or how this duty could be enforced in practice.
4.4 Unincorporated organisations as members
Summary: For organisations which are going to have other organisations as members, possible advantage to CIO. The CIO model constitution allows unincorporated organisations to be members of a CIO. Similar provision could be included in a company's articles of association, but it's not clear whether it would be legally valid.
Because unincorporated organisations (associations and trusts) are not "legal persons", technically they cannot be members of an organisation, and must appoint an individual or incorporated body to become a member on their behalf. This is an issue for umbrella organisations, federations and any other organisations whose members are themselves organisations which might be unincorporated.
CIO. Clause 9(1)(a) in the CIO association model constitution includes an optional provision for unincorporated organisations to be members, either through appointing an individual or corporate body to become a member as representative of the unincorporated organisation (the legally correct way of doing it), or directly. Having an unincorporated organisation directly become a member in its own right is possibly not legally valid, but if you do it this way and it ever becomes an issue for your organisation, it will be an interesting test case (so interesting that every aspect of the legal arguments will definitely make it onto this website).
Uncertainty can be avoided by including constitutional provision for all member organisations, whether unincorporated or incorporated, to authorise a person to act as its representative at general meetings of the CIO and in approving written resolutions of the CIO (if the CIO constitution allows members' written resolutions).
Charitable company. Although there may be no proper legal basis for it, many charitable companies do have explicit provision in their articles of association allowing unincorporated organisations to directly become members, or have provision allowing "organisations" unspecified whether incorporated or unincorporated to become members.
When it matters. With the association model CIO constitution, it's clear that unincorporated organisations can directly be members, which will be helpful for any organisation which has organisations as its members. With a company's articles of association it may be less clear but as far as I am aware, this has never been an issue.
4.5 Register of members (may be a critical issue)
Summary: Advantage to CIO. A CIO's register of members is not open to the public. A company's register of members must be.
CIO. Under reg.26(1) and schedule 1 of the CIO general regulations, an association CIO must have a register of members. This must contain the member's name, a service address (an address where documents can be physically delivered and a record of the delivery can be obtained), class of membership if there is more than one type of membership, and dates of becoming and ceasing to be a member. The service address does not need to be the member's residential address; it could be a work address, the CIO's principal office, or any other physical address (i.e. not a post office box or similar).
The register of members does not have to be open to inspection by the public, but it does have to be available on request to the Charity Commission and to trustees or members of the CIO who need to see it in order to carry out their duties for the CIO, or who want a copy of their own entry in the register.
A foundation CIO does not have to have a register of members, because the members are the same as the trustees and will be listed in the register of trustees [see Trustee issues, below].
Charitable company. All companies must have a register of members. For a company limited by guarantee, the register has to include the same information as a CIO's register. However, a company's register must, under company law, be open to the public at the company's registered office or an alternative inspection location, and any member of the public can request a copy of all or part of the register. There are provisions to prevent inspection or copies where the company believes the information will be misused, but this involves getting an injunction.
When it matters. The names of an organisation's members might be sensitive information for example where the organisation is involved in issues such as domestic violence or where all members have to have a specified condition such as being HIV+. In the past, such organisations often remained unincorporated, rather than becoming companies and having to make the members' names and an address (even if not their residential address) available on request to any member of the public. The CIO framework now allows such organisations to incorporate without having to make the register of members available to any member of the public.
4.6 Non-voting members
Summary: No significant difference between CIO and charitable company. The CIO model constitutions include provision for non-voting members. Company model articles of association don't, but it can be included.
When it matters. In many organisations, whether unincorporated or incorporated, there is great confusion between members of the organisation, and others who might be called "members" but have no formal governance role.
4.7 Disputes between members
Members of the organisation are individuals or in some cases organisations who are defined as members in the governing document, are admitted to membership under the provisions in the governing document and have rights and responsibilities defined in the governing document and if applicable in company or CIO law.
Others who might be called members but who have no constitutional role could include, for example, "members" of the organisation's youth club or lunch club, or "members" of a supporters' group, or anyone else called a member. If people who are not constitutional members take part in decisions which must constitutionally or under statute be made by members, the decision could in some situations be invalid.
CIO. Both the association and foundation model constitutions helpfully include an optional clause differentiating the constitutional members of the CIO from others who might colloquially be called members but do not have voting rights. This is clause 9(6) in the association model and clause 17 in the foundation model. The constitutions refer to these "members" as informal or associate members and make clear that they cannot take part in formal decisions. This can help clarify their role and differentiate them from constitutional members.
Charitable company. Model articles of association do not generally include anything about non-voting members, but it can be added. And even if it is not included, any organisation can have non-voting "members" provided it has proper procedures to make sure they do not vote or do anything else that can be done only by constitutional members.
Summary: No significant difference between CIO and charitable company. The CIO model constitutions (like the Charity Commission's model articles of association for a charitable company, and model constitution for a charitable association) require mediation for disputes between members before they resort to litigation.
CIO. Clause 27 in both the association and foundation model constitutions says that if a dispute arises between members of the CIO about the validity or propriety of anything done by the members under the constitution, and the dispute cannot be resolved by agreement, the parties to the dispute must first try in good faith to settle the dispute by mediation before resorting to litigation.
I have no idea why the association model requirement does not also apply to disputes between trustees, or between members and trustees, and would like to see it extended to include these. (This is not necessary for the foundation model, where the members are the trustees.)
Charitable company. Articles other than the Charity Commission's model may not include a comparable provision, but there is nothing to stop a company from including it in its articles, or from using mediation or any other form of alternative dispute resolution even if it is not included.
5. Members' meetings and decision making
5.1 AGM and other general meetings
Summary: No significant difference between CIO and charitable company. Neither has to have an AGM unless the governing document requires it. The Charity Commission's model constitution for an association CIO and model articles for a charitable company both require it, but it does not have to be included.
In any organisation which has a membership which is wider than the governing body (trustees/directors), the AGM and other general meetings provide an explicit framework for the governing body to report to the members, and for the members to make decisions which must be made by them rather than by the governing body.
CIO. There is no statutory obligation as such for CIOs to hold an AGM. However, clause 11(1) of the Charity Commission's association model constitution includes this requirement.
The clause can be adapted to remove the requirement for an AGM and simply to allow general meetings to be called when needed, but this constitutional change should be made only if there is good reason. Examples might be if the membership is always likely to be relatively small and could make its decisions through written resolutions rather than meetings, or if the members of the organisation are widely spread geographically and/or likely to find it impossible or very difficult to attend meetings.
Clause 19 in the foundation model constitution does not require general meetings, but allows any meeting of the trustees to be designated as a general meeting for decisions that must be made by the CIO's members rather than its trustees (amending the constitution, amalgamating or merging with another CIO, or winding up). Yes, it's daft that the Charities Act says all CIOs have to have both members and trustees, even foundation CIOs where they are always the same people. But it does.
As with any organisation which has members and a separate governing body (unincorporated association, company, CIO, community benefit society) it is essential that agenda, minutes, background papers etc for members' meetings are kept completely separate from documents for trustee meetings.
Charitable company. Prior to the Companies Act 2006, all companies had to have an AGM. Now private companies (which all charitable companies are) are no longer required to hold an AGM or any other general meeting, unless this is required under the articles of association (and even if it is, the articles can be amended to remove the requirement), or if a resolution is being put to remove a director or auditor before the end of their term (which must always be done at a general meeting rather than by written resolution).
When it matters. Both an association model CIO and a charitable company can have a governing document that either does or does not require an AGM. In either case, it must include provision for an AGM or other general meeting to be called. The issue is irrelevant for foundation model CIOs, which do not have members separate from the trustees. The foundation model constitution does, however, include rules for general meetings in clauses 18 and 19, for decisions such as amendment and winding up that legally must be made by the CIO's members rather than the trustees.
5.2 Requiring a general meeting to be called
Summary: Advantage depends on your point of view. CIO members have the right to require a general meeting to be called only if the constitution says they do. Company members always have this right.
CIO. CIO members do not have a statutory right to require (requisition) a general meeting (a meeting of the members) to be called, but clause 11(2) in the Charity Commission's association model constitution includes a right for 10% of the members, or in some cases 5%, to require this. This provision does not have to be included, but it is recommended that it is.
Charitable company. Under the Companies Act 2006 s.303, members of any company holding at least 5% of the voting rights always have a statutory right to require a general meeting.
When it matters. If members' right to call a general meeting is included in the constitution of an association CIO with a large membership, it may be appropriate to reduce the required percentage of members from 10% to 5% so it is in line with company law and is easier for the members to require a general meeting to be called. On the other hand, the people setting up the CIO may not want to make it easier...
5.3 Right to appoint a proxy
Summary: Advantage depends on your point of view. CIO members have the right to appoint a proxy only if the constitution says they do. Company members always have this right.
CIO. Members of an association CIO do not have a statutory right to appoint a proxy to attend, speak and vote on their behalf at general meetings, but reg.13(5) in the CIO general regulations allow a CIO to include this right in the constitution. The notes to clause 11(6) of the association model constitution and clause 19 of the foundation model explain this, and an optional clause is included in the appendix of each model.
The fact that it could be included in a foundation CIO's constitution creates an interesting situation. In their capacity as a charity trustee, a foundation CIO trustee cannot appoint a proxy to attend, speak and vote in their place at a trustee meeting. But in their capacity as a CIO member, they can appoint a proxy for general meetings even though in a foundation CIO a general meeting would be used only for the most major decisions of amending the constitution, amalagamating or merging with another CIO, or winding up.
Charitable company. Under the Companies Act 2006 s.324, all company members always have a statutory right to appoint a proxy, even if the articles of association expressly forbid it. This right cannot be removed or limited.
When it matters. The are advantages and disadvantages to having proxies. If it is and always will be important for members to be able to appoint a proxy, this right will always (unless company law is changed, which is unlikely) exist in a company and cannot be removed. In a CIO there is flexibility to include this provision or not when the CIO is set up, and to amend the constitution to remove or add it later.
5.4 Postal/email voting
Summary: No significant difference. Neither CIO nor company members have the right to vote by post/email unless it is included in the governing document.
Postal voting (sometimes called distance, remote or advance voting) should not be confused with a written resolution. Postal voting, if it is allowed by the governing document, applies to decisions that will be made at a general meeting but where members who cannot attend can vote before the meeting takes place. Written resolutions, in contrast, are used for decisions that will be made without a meeting.
If postal voting is allowed, it may include provision not only for post but also for voting by fax or email. The governing document will say that if a member who has cast a valid postal or email vote subsequently attends the meeting or appoints a proxy to attend, they will not be able to vote at the meeting.
Postal/email voting may be particularly appropriate for large organisations, or organisations whose members would find it difficult to attend meetings.
CIO. Reg.13(6) in the CIO general regulations allows for provision to be included in a CIO constitution allowing members to vote by post. If such provision is not included, postal voting is not allowed.
Neither reg.13(6) nor the notes to clause 11(6) of the association model constitution and clause 19 of the foundation model say that post in this context includes email. But the Charity Commission has confirmed that it does, and the optional clause in the appendix to each model constitution allows for voting by post or email. As the model clause includes email I can't think of any reason why voting by fax could not be included as well, if the organisation still uses fax.
A CIO's constitution may include provision for either proxy or remote voting, or both, or neither.
Charitable company. Company members can vote electronically (fax/email) if postal voting is allowed under the articles and the vote is authenticated as set out in the Companies Act 2006 s.1146. This requires a paper vote to be signed by the member, or an email/fax vote to be authenticated as required by the company. If the company does not specify, the electronic document must contain or be accompanied by a statement of the sender's identity, and the company must have no reason to doubt the truth of the statement.
5.5 Remote participation in meetings
Summary: CIO members have the right to participate in telephone, video, internet etc meetings if the constitution allows. Company members can participate remotely in meetings provided all the members can see and hear each other, and if the articles allow can participate in meetings (such as conference calls) where they can each communicate with all the other participants, even if they cannot see and/or hear each other.
Each participant attending remotely counts towards the quorum. The rules on notice for meetings, chairing and minutes are the same as for a meeting in which there is no remote participation.
CIO. Clause 19(4) in the foundation model constitution allows members of a foundation CIO to participate remotely in general meetings. There is no corresponding provision in the association model constitution, but there is no reason it could not be included, provided the CIO would be able to arrange a meeting where each member, whether physically present or participating remotely, could communicate with all the others.
Charitable company. Provided each participant can see and hear all the other participants, a charitable company can allow members to participate remotely in general meetings. If the articles allow, remote participation is valid if they can each communicate with all the other participants even if they can't see and/or hear each other.
When it matters. In either a CIO or a charitable company, it can be useful to have a range of options: to make decisions at a general meeting as usual, and/or with postal or email voting beforehand with those votes being included but the members not being included in the quorum, and/or with some members participating by telephone, internet or video and counting towards the quorum. And, if workable, to have the option of making decisions by written resolution, without having a meeting at all.
5.6 Right to require a poll
Summary: Slight advantage to company. A poll is a counted vote, sometimes done by a simple head count, but usually by each person's vote being recorded on a voting slip or by signing a voting list. CIO members have this right only if it is included in the constitution. Company members always have the right.
CIO. Under reg.13(3)(c)(v) in the CIO general regulations, members of a CIO have the right to demand a poll at a general meeting only if it is included in the constitution. The Charity Commission's association model constitution includes an optional clause 11(6)(b)-(d). There is no corresponding provision in the foundation model constitution but it could be included.
Charitable company. Company members always have a statutory right under the Companies Act 2006 s.321 to require a poll to be taken at a general meeting, on any matter other than the election of the person to chair the meeting, or adjournment of the meeting. They can also have the right to demand a poll on those issues, if the articles allow.
When it matters. Company members will always have the right to demand a poll. For an association CIO, it is good practice to include it.
5.7 Chair's casting vote
Summary: Depends on your point of view. In a CIO the chair can have a second or casting vote at a general meeting if it is included in the constitution. In a company formed since October 2007 the chair can never have this right.
CIO. In a CIO, the person chairing a general meeting can have a second or casting vote in case of an equality of votes, if the constitution allows this. (A second vote is where the chair has already voted during the initial vote; a casting vote is where the chair did not vote in the initial vote.) The Charity Commission's association model constitution includes optional clause 11(6)(e) and the foundation model includes clause 19(3) allowing the chair to have a second or casting vote at a general meeting.
Charitable company. The Companies Act 2006 ss.282 and 283 have the effect of preventing a company formed after 1 October 2007 from including in its articles a provision allowing the person chairing a general meeting to have a second or casting vote in case of an equality of votes. If the articles of a company formed before October 2007 includes provision for a second or casting vote it remains valid, but if the articles do not include this provision they cannot be amended to include it. A chair who does not have a second or casting vote can, if they are a member of the company, vote in their own right as a company member in the same way as other members.
When it matters. There are advantages and disadvantages to a chair being able to break a tie by exercising a second or casting vote. If it is and always will be important for the chair not to be able to do this, choose charitable company. In a CIO there is flexibility to include this provision or not when the CIO is set up, and to amend the constitution to remove or add it later.
5.8 Consensus decision making (may be a critical issue)
Summary: Advantage to CIO. A CIO's constitution can allow for members to make decisions without voting. Members' decisions in a company must always be made by a vote.
CIO. A real legal first for CIOs is that reg.13(7) in the CIO general regulations allows for members to make decisions at a general meeting without voting, if the constitution allows for an alternative decision making process. Provision for such consensus decision making, with the decision having to be made without dissent, is included in clause 29(1)(a)(ii) in both the association and foundation model constitutions, in relation to winding up the CIO.
In my view, it is unfortunate that the Charity Commission does not include this possibility for other decisions under clause 29, and does not refer to it for decision making on other issues in the notes to clause 11(6) in the association model constitution or clause 15 in the foundation model. But the wording of the winding up clause could be included as an option within association clause 11(6) or foundation clause 15, or other parts of clause 29 in either model.
My view is that if consensus decision making is included in the constitution, the option of voting should always be included as an alternative to consensus, unless there is a principled objection to voting. Otherwise, a single dissenting member could make the consensus approach unworkable.
Charitable company. All provisions for decisions by company members require a vote to be taken, either at a general meeting or through a written resolution.
When it matters. The CIO option for consensus decision making is particularly appropriate for organisations such as the Religious Society of Friends (Quakers) who as a matter of principle do not make decisions by voting. Organisations which just "don't like the idea of voting" should be aware that CIO law requires any decision without voting to be agreed without any dissent.
5.9 Decision making without a meeting (written resolutions)
Summary: Slight advantage to company, if you might ever want to use written resolutions to make decisions without a general meeting. Company members always have the right to make decisions by written resolution, apart from a couple of exceptions. CIO members can do this only if the constitution allows.
CIO. Regs 13(8) and 35 of the CIO general regulations allow for decisions of CIO members to be made without a general meeting, i.e. by written resolution, if the constitution allows for this. Provision for written resolutions is included in the Charity Commission's association model constitution clause 10(1) and 10(3) and foundation model clause 18, but it does not have to be included. If written resolutions are used, the constitutional procedure must be strictly followed.
Even if the constitution gives CIO members the right to remove a trustee, this cannot be done by written resolution. It must always be done at a general meeting.
Charitable company. The Companies Act 2006 ss.288 and 300 allow members of all private companies (which all charitable companies are) to pass nearly all resolutions in writing, even if the articles of association explicitly prohibit this. The only resolutions which cannot be passed by a written resolution are to remove a director or auditor before the end of their term of office. These must always be dealt with at a general meeting.
When it matters. In a company, the members will always have a right to make decisions by written resolution (except to remove a director or auditor). A CIO can choose whether to include provision for written resolutions when the CIO is set up, and can later add or remove the provision by amending the constitution. If it is not in a CIO's constitution, written resolutions cannot be used.
In both a CIO and a company, the majority or percentage of votes specified in statute or the governing document to pass a written resolution is always that percentage of all the members eligible to vote on the resolution. This is different from voting at a general meeting, where the specified percentage is based on the percentage of votes cast at the meeting by the members present in person (and also cast, if allowed, by members present by proxy or participating electronically, or who voted by post or electronically before the meeting).
6. Trustee issues
6.1 Minimum age for trustees
Summary: No difference between CIO and charitable company.
CIO. The CIO consultation responses in 2008 were evenly divided between those who wanted the minimum age for trustees to be 16 (as in charitable companies) and those who wanted 18 (as in charitable associations and trusts) or higher. Under reg.31 in the CIO general regulations the minimum age is 16, but it can be set at a higher age either by the people setting up the CIO or later by amending the constitution. If it were to be set higher than 18 advice would need to be taken about whether this contravenes age discrimination legislation.
6.2 Suitability of trustees
Summary: Hmmmm.... interesting.
CIO. Clause 10 in the foundation model constitution says that when selecting individuals for appointment as trustees, the existing trustees "must have regard to the skills, knowledge and experience needed for the effective administration of the CIO". I find it interesting that this is being made a constitutional requirement.
There is no comparable requirement in the association model constitution. In an association CIO, all or most of the trustees would probably be appointed or elected by the CIO members rather than the trustees, so it would presumably be difficult to interfere with members' choice by imposing a constitutional requirement for competence.
Charitable company. No comparable requirement.
6.3 Information for new trustees
Summary: Advantage to CIO, but can be included in company articles of association.
CIO. Clause 14 in the CIO association model constitution and clause 11 in the foundation model require the trustees to make available to each new trustee, on or before their first appointment, a copy of the CIO's constitution and the most recent trustees' annual report and accounts. This is not a statutory requirement but is such good practice, and is so frequently not done, that you have to wonder why it hasn't always been included in model governing documents.
I suggest adding, between the two existing requirements, "any rules or bye-laws made under clause 26 of this constitution". The need to provide them to trustees could also be added to clause 26.
Charitable company. No comparable provision, but I recommend that it be included in articles of association.
6.4 Public information about trustees (may be a critical issue)
Summary: Advantage to CIO. CIO's have to make some information about their trustees available to the public, but (a) less information is included; (b) it's not instantly available the way company directors' information is on the Companies House website; and (c) where the charity's work is sensitive, the Charity Commission can give dispensation from having to make even the trustees' names public.
CIO. Under reg.26 and schedule 1 in the CIO general regulations every CIO must have a register of trustees, containing trustees' full name, former names, a service address, and date of becoming and ceasing to be a trustee.
A service address is one where documents can be physically delivered and a record of the delivery can be obtained. For both companies and CIOs it can be any physical address, including the director's/trustee's residential address, a workplace or the company's registered address or CIO's principal address. If the service address is not the residential address, the Charity Commission and (for companies) Companies House must be given the residential address, but this is not made public.
Trustees' names (but no other details) are listed on the charity's entry on the register of charities on the Commission's website. In addition, any member of the public has the right to inspect the register of trustees at the charity's principal office or wherever the register is kept, and to request a copy of all or part of the register (for which a charge can be made). This means they would be able to see trustees' former names and their service address.
The Charity Commission has power to give any charity dispensation from having to publish trustees' names in its annual report, and details of trustees covered by the dispensation do not have to be made available to the public and are not listed on the charity's entry on the Commission's website. An example would be a women's refuge, where the trustees could be at risk. With a dispensation, members of the public do not have access to information about trustees, not even their names.
Charitable company. All companies must have a register of directors (who in a charitable company will be the same as the trustees). The register must include full name, former names, a service address, and date of becoming and ceasing to be a director. Unlike the CIO register, it must also include date of birth, occupation and nationality.
As in a CIO, any member of the public has the right to inspect the register of directors at the company's registered office or other place where it is kept, and to request a copy of all or part of the register (for which a charge can be made). Directors' names are not included on the Companies House website, but their full details, including service address, date of birth, nationality and date of becoming a director, can be easily ordered free of charge via the website.
Unlike with a CIO, there is no provision for Companies House to withhold, or allow a company to withhold, directors' names. So even if the Charity Commission has given a dispensation to an organisation, if it is a charitable company the dispensation will not apply to its Companies Act requirements.
When it matters. CIO is the best option if:
the trustees believe that having their names made public could put them at risk, and the organisation wants to be able to get Charity Commission dispensation from having to make any information at all, even trustees' names, available to the public via their register of trustees, annual report or the Commission's website; or
the trustees don't mind their names being listed in their annual report and on the Commission's website, and don't mind members of the public being able to inspect the register of trustees at their principal office and see trustees' service addresses but do not want members of the public to be able to find out their date of birth or nationality (as they would be able to via the Companies House website, if the organisation were to become a charitable company instead of a CIO).
6.5 Statutory duties of trustees
Summary: Advantage to CIO. The CIO conflict of interest duties may be stricter than for companies, but at least with a CIO, trustees only have to comply with one set of duties. Trustees/directors of charitable companies have to comply with both charity law and company law duties, and these are sometimes overlap confusingly.
CIO. Under the Charities Act 2011 s.221, every trustee of a CIO has two statutory duties. The first is to exercise their powers and perform their functions as a trustee in the way that he or she decides, in good faith, would be most likely to further the purposes of the CIO.
The second is that they must, in the performance of their functions as a trustee, exercise such care and skill as is reasonable in the circumstances, having regard in particular to any special knowledge or experience they have or purport to have. If they are acting as a trustee in the course of a business or profession, they must also have regard to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession.
As well as these duties, under the Charities Act s.222 a CIO trustee may not benefit personally from an arrangement or transaction entered into by the CIO, if before the arrangement or transaction was entered into, the trustee did not disclose their interest to all of the other trustees. (Note that this does not authorise a trustee to benefit just because they have disclosed their interest.)
Under reg.36 of the CIO general regulations, a CIO trustee who would benefit personally, whether directly or indirectly, from a transaction or arrangement the CIO proposes to enter into must not take part on any decision either by the CIO's members or its trustees about whether or not to enter into that transaction or arrangement, and must not be counted in the quorum for that part of the business. This duty does not apply where the transaction or arrangement cannot reasonably be regarded as likely to give rise to a conflict of interest.
Under reg.34, a CIO trustee has a statutory duty to not accept a benefit from a third party that is given to them because of their position as a trustee or because of them doing, or not doing, something as a trustee. There are exceptions, including where the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest.
Charitable company. Under ss.170-185 of the Companies Act 2006 company directors have a number of statutory duties. These are:
When it matters. The main issue for CIOs is with reg.36, which imposes a clear prohibition on a trustee taking part in nearly all decisions about whether the CIO should enter into a transaction or arrangement which could lead to direct or indirect personal benefit for the trustee. This applies not only to decisions by the trustees, but also by members. A CIO will need to ensure it has procedures in place to monitor this, and to minute that the trustee declared a conflict of interest and did not take part in the decision.
s.171: duty to act within their powers (which all charity trustees have to do anyway);
s.172: duty to act in good faith in a way most likely to promote the success of the company, or in a charitable company to promote the achievement of the charitable purposes (basically the same as the charity law duty of all charity trustees and the specific statutory duty of CIO trustees, but the Companies Act includes a detailed list of factors the directors are required take into account);
s.173: duty to exercise independent judgment (which all charity trustees must do anyway);
s.174: duty to exercise reasonable care, skill and diligence (which all charity trustees must do anyway, and similar to the statutory duty of CIO trustees);
ss.175-177: duty to avoid conflicts of interest, duty not to accept benefits from third parties, and duty to declare interest in a proposed transaction or arrangement. These and subsequent sections set out the steps directors must take in a range of situations where they or a person connected with them has, or could have, a conflict of interest. These are in general less strict than the conflict of interest duties that all charity trustees have, but can be more procedurally complicated. Although charity and company duties may appears similar there are significant differences, and it can sometimes be unclear whether charity law or company law requirements take precedence for trustees of charitable companies.
As well as these specific statutory duties for CIO trustees and charitable company directors/trustees, there are many other statutory duties under the Charities Acts and Companies Acts, as well as common law requirements. In a CIO, trustees are only dealing with charity law, rather than with both company and charity law as they would be in a charitable company.
6.6 Maximum term of office
Summary: In both a CIO and charitable company the maximum term, if any, depends on what is in the governing document. So think it through carefully when drawing up the CIO constitution or company articles.
In his review of charity law, Lord Hodgson recommended that a charity’s governing document should normally limit trusteeship to three terms of no more than three years each. He recommended that the Charity Commission and umbrella bodies should amend their model governing documents to reflect this, and that any charity which does not include this in its constitution should be required to explain the reasons for this in its annual report.
In my view there can be advantages in a constitutional maximum number of years or terms, as it can reduce the risk of the governing body becoming stagnant, and can make it easier for trustees to leave without feeling they are letting the side down. But a maximum is certainly not appropriate for all charities.
CIO. There is nothing in the CIO regulations about a maximum number of terms, but optional provisions for this are included in clause 16 in the association model constitution and clause 12(3) in the foundation model.
Both constitutions assume that rotation of trustees will be on the basis of one third or the number nearest one third retiring each year, and being eligible for re-election or reappointment. This generally leads to a term lasting three years, but depending on the actual number of trustees at the time of the election, a term could be more or less than this.
The suggested clause setting a maximum number of terms says that a trustee who has served for three consecutive terms may not be reappointed (this includes being re-elected) for a fourth consecutive term, but may be reappointed after an interval. Interestingly, and for no obvious reason that I can think of, the suggested gap in the association model constitution is three years, but in the foundation model is one year.
Charitable company. There is nothing in company law about a maximum length of time a person can serve as a director, but a maximum could be written into the articles of association.
6.7 Right to remove trustees
Summary: Advantage definitely depends on your point of view. CIO members have a right to remove trustees only if it is in the constitution. Company members always have a right to remove directors.
CIO. Under reg.13(3)(b) of the CIO general regulations, CIO members have the right to remove trustees only if it is included in the constitution. This right is included as an option in clause 15 in the Charity Commission's association model constitution. This gives members the right to remove a trustee for any reason, provided they specify the reason and comply with the constitutional procedures. This right should be exercised only in the interests of the charity, and with a fair and transparent procedure.
In a foundation CIO, where the only members are the trustees, there is no corresponding right in the model constitution. This means that in a foundation CIO a trustee can be removed only for reasons specified in clause 12 (absence from meetings, mental incapacity, disqualification under the Charities Act 2011 from serving as a trustee) and not for any other reason. Foundation CIOs may want to consider including a provision, similar to the one in the association model constitution, allowing removal by the trustees in other circumstances. Such a provision could be used if, for example, a trustee brings the CIO into disrepute.
Charitable company. Members of all companies, including charitable companies, always have a statutory right under the Companies Act 2006 s.168 to remove company directors. This right cannot be removed.
When it matters. A right to remove governing body members before the end of their term of office can be abused. On the other hand, lack of such provision can mean it is impossible to remove someone who is clearly considered unsuitable, but who is not removable on the basis of non-attendance, mental incapacity, disqualification or other provisions in the governing document.
6.8 Trustee meetings and decision making
Summary: No significant difference between CIO and charitable company, except perhaps that CIOs can include provision for consensus decision making.
CIO. Regs.13(3)(c), 13(13) and 13(14) in the CIO general regulations say that if trustees are to have the right to demand a poll, be able to make decisions without a vote (consensus decision making) and/or make decisions without a meeting (written resolutions), this must be included in the CIO's constitution.
Optional provision for written resolutions by trustees is in clause 17 in the association model constitution and clause 13 in the foundation model. Written resolutions require approval by 100% of the trustees; this cannot be amended.
Provision for consensus decision making by trustees is not included in either the association or foundation model constitutions, but could be included, with a clause based on the one for general meetings (see consensus decision making under Membership issues, above).
Similarly for trustees having the right to demand a poll, there is nothing in the model constitutions but a clause could be included based on the one for general meetings (see right to demand a poll under Membership issues, above).
Neither the CIO regulations or the model constitutions say anything about postal or email voting by trustees, but I am not aware of any reason why provisions based on those for general meetings could not be included.
The regulations do not say anything about the person chairing trustee meetings having a second or casting vote, but optional clauses 19(3)(c) in the association model constitution and 14(3)(c) in the foundation model allow it.
Optional clauses 19(4) in the association model constitution and 15(4) in the foundation model allow electronic participation in trustee meetings, for example with telephone or video conferencing or Skype, provided each participant can communicate with all other participants.
Charitable company. Any of the above methods, apart from consensus decision making, can be used for meetings of company directors, if provision is explicitly included in the articles of association. Consensus decision making (decisions at a meeting without a vote) cannot be used because company law requires all decisions to be by vote.
Where there is no provision in the articles for company directors to make decisions without a meeting (for example by email), case law allows a decision without a meeting provided it is agreed by every director. This case law provision cannot be used for CIOs, because CIO legislation is very specific that any decision making by trustees outside meetings must be included in the constitution.
When it matters. It is particularly important for trustees to discuss issues in appropriate detail and for all trustees to be able to have their say, and this is often best done face to face. But especially where it is difficult for trustees to attend meetings, a provision for electronic participation can be helpful. Similarly, where trustees are making straightforward decisions that do not need much discussion, provision for postal or email voting before a meeting or for decisions to be made by written resolution without a meeting may be useful.
7. Administrative issues
7.1 Annual accounts, reports and returns (may be a critical issue)
Summary: Advantage to CIO. All companies, regardless of size, must prepare accruals accounts; CIOs with annual income not more than £250,000 can prepare simpler receipts and payments accounts. Even for larger CIOs there is an advantage in being able to prepare accounts only under charity law, rather than under both company and charity law.
CIO. In preparing their accounts and having them independently examined and audited, CIOs only have to comply with charity law requirements. This means that under s.133 of the Charities Act 2011, a CIO whose gross annual income is not more than £250,000 can choose to prepare a receipts and payments account and a statement of assets and liabilities, rather than accruals accounts. A receipts and payments account simply shows income and expenditure received during the financial year, even if it relates to an earlier or later year.
Larger non-company charities, including CIOs, have to prepare accruals accounts in accordance with charity law and the statement of recommended practice for charity accounts and reports (charities SORP). Accruals accounts are adjusted so they include only income or expenditure relating to that financial year, regardless of which year it was actually received or spent in. Because of the necessary adjustments, it is more expensive to prepare accruals accounts than receipts and payments accounts.
Even where charity law allows a receipts and payments account to be prepared, funders may require accruals accounts.
All CIOs, regardless of size, must submit their annual accounts, trustees' annual report and an annual return to the Charity Commission. The annual accounts and report are accessible free of charge on the Charity Commission website.
Charitable company. All charitable companies, regardless of size, have to prepare accruals accounts in accordance with both company law and the charities SORP.
All charitable companies must send their annual accounts and reports to Companies House, where they are available to the public for £1 via the Companies House website. Charitable companies with annual income under £25,000 do not send their accounts and report to the Charity Commission unless asked to do so. For charitable companies which have to submit their annual accounts, these are accessible to the public free of charge on the Commission website.
Charitable companies must submit annual returns to both the Charity Commission and Companies House.
When it matters. Prior to the introduction of CIOs, the Cabinet Office said that the main cost advantage for CIOs over charitable companies would be in preparing annual accounts and reports, and that the cost for a CIO could be, on average, one third of the cost for a comparable charitable company. When it becomes possible, in 2015 or later, for charitable companies, community interest companies and community benefit societies to convert to CIO, they may want to discuss with their accountant and independent examiner/auditor what the cost differential is likely to be. Especially if their annual income is under £250,000 and they would prepare receipts and payments accounts, the savings might be enough to justify the cost and hassle of conversion.
7.2 Electronic communications
Summary: I haven't really got my head around this but I'm told that the CIO provisions are better than those for companies.
CIO. Unlike companies, there is no statutory right for a CIO to use electronic communications (email, website, disk or whatever becomes available in future) to send official communications such as notice of meetings to its members. If it wants to do so now or in future without having to get consent from each member, provision for electronic communication must be included in the constitution. Provision for electronic communication is in clause 22 in both the association and foundation model constitutions, with the detailed provisions in a clause in each appendix.
As well as the constitutional provisions there are detailed provisions on communications to or by a CIO in reg.4 and schedules 2 and 3 of the CIO general regulations. The constitutional and statutory rules must be strictly followed; failure to do so could invalidate a meeting or decision.
The clause in the appendix of the model constitutions contains what seems to me a potentially problematic provision. This says that "any member or trustee of the CIO, by providing the CIO with his or her email address or similar, is taken to have agreed to receive communications from the CIO in electronic form at that address, unless the member has indicated to the CIO his or her unwillingness to receive such communications in that form".
My understanding of this is that unless the member or trustee has said they do not want to receive communications by email (or whatever other electronic method), the CIO can use any email address provided by the member/trustee. This is convenient for the CIO, and avoids having to ask each member/trustee for an email address to which communications can be sent.
But I am concerned that someone like me, who has for example a hotmail address that I use when travelling or for certain other purposes but often don't look at from one month to the next, could communicate with a CIO with that address and end up with them sending notice of meetings and other important communications to my hotmail address, or any one of the several other addresses I use from time to time rather than communicating, as I would wish, only with my sandy-a.co.uk address.
I would probably recommend that the first part of the model clause is changed to say "any member or trustee of the CIO, by providing the CIO with his or her email address or similar and confirming that it can be used to receive communications from the CIO ...". This may mean more work for the CIO, but avoids the risk that essential communications end up going to a little-used address.
Charitable company. I think that company provisions for electronic communications are more detailed and complicated than for CIOs, but am not sure. As this is unlikely to be a factor in deciding whether to choose CIO or charitable company, I am not going to summarise them. If you want a summary, it's in s.18.3 in The Russell-Cooke Legal Handbook.
7.3 Principal office
Summary: No difference between CIO and charitable company.
CIO. S.205(2) of the Charities Act 2011 requires every CIO to have a principal office, which must be in England or Wales. The principal address is included in the register of charities, but does not need to be the charity's office or place of work; it can be any address.
One commentator initially said that because nothing in either the Charities Act or the CIO general regulations says the principal office must be a physical location, a post office box could be used. The Charity Commission has since said that this is not the case.
Charitable company. S.86 of the Companies Act 2006 requires every company to have at all times a registered office. This must be a physical address. Companies which for whatever reason do not want to use their actual office or other place of business as their registered address often use another address, such as their solicitor or accountant.
7.4 General admin
Summary: Advantage to CIO. A CIO's administrative laziness, incompetence or just forgetting is not generally penalised with fines, as it is with company lapses.
CIO. During consultations on the CIO, there was a strong feeling that the CIO should be administratively easier than a charitable company, and not just in relation to accounts. The CIO general regulations include detailed requirements for registers of members and trustees, members' and trustees' meetings and procedures, service of documents, communications and other administrative requirements. Without going through them and the comparable company requirements point by point, I can't compare the detail (and even if I could, I don't want to). The CIO is certainly less administratively cumbersome, but I'm not sure the difference is significant.
As many of the comparisons above show, even where a CIO and a charitable company have different requirements, it's often (but not always) six of one, half dozen of another, or pretty close to it.
When it matters. What is significant is that failure to comply with many company law administrative requirements, such as getting the annual accounts in on time or failing to allow a member of the public to see the register of members or any other statutory register, is an offence for which the company will or can be fined, and persistent failure can lead to the directors being fined and getting a criminal record.
Failure to comply with charity law administrative requirements does not, in most cases, lead to fines or a criminal record. (It does, however, lead to the Commission indicating in bright red on the charity's register entry that the accounts and/or return are late, and the Commission will not allow the charity to exercise certain Charities Act rights, such as the having land vested in the official custodian for charities, until the non-compliance is rectified.) The only administrative breach of CIO or charity law that I am aware of that could lead to fines is failure to include the CIO's name and status on specified locations, documents, communications and conveyances [see below].
Although it's not an administrative matter, it is also an offence for a person to give the impression that any body is a CIO when it is not, unless the person can prove that they believed on reasonable grounds that it was a CIO.
Even where a breach of CIO or other charity law is not in itself an offence, the Commission or court can require the charity to comply with the law, and continued failure to do so would be in contempt of court.
7.5 Disclosure of name and status
Summary: No difference between CIO and company. The requirements and penalties are the same.
CIO. The Charities Act 2011 s.211 requires a CIO to include its name on specified locations, documents, communications and conveyances, and s.212 requires the fact that it is a CIO to be included if its name does not include the words "charitable incorporated organisation", CIO (with or without full stops) or the Welsh equivalents.
The list of locations, documents etc where a CIO's name and, if applicable, status must be shown is the same as for companies. This is set out in the Companies (Trading Disclosures) Regulations 2008 at www.legislation.gov.uk/uksi/2008/495/contents/made and the Companies (Trading Disclosures)(Amendment) Regulations 2009 at www.legislation.gov.uk/uksi/2009/218/contents/made.
The requirements are in more accessible form in Companies House booklet GP1 at tinyurl.com/d2ncsct.
CIOs must also comply with the much more limited, but different, status disclosure requirements for all registered charities with annual income over £10,000, as set out in the Charities Act 2011 s.39.
Charitable company. Exactly the same.
When it matters. Any organisation registered as a CIO or company) must ensure name and status are included on locations, documents, electronic and other communications, websites and conveyances as required. Failure to make the required disclosures can lead to fines for all trustees/directors, and for any other person who signs or authorises the signing of a non-compliant document, communication or conveyance. Failure to include the required information (for example, not including the CIO's or company's full registered name) can also invalidate a contract or conveyance (Charities Act 2011 ss.213-214).
8 Merger and dissolution
Summary: Advantage to CIO if merging with another CIO. Otherwise no significant difference between CIO and charitable company.
CIO. The Charities Act 2011 includes provision to make mergers between CIOs easier than mergers between other types of organisation.
A merger may be an amalgamation, where two or more organisations create a new organisation and both (or all) merge into it. Or it may be what the Charities Act calls a transfer of undertaking, where one organisation merges into another.
Both types of merger involve transferring all of the assets, staff, contracts, rights and liabilities of the organisation that is being merged, into another organisation. This can involve deeds of transfer, vesting declarations, novation of contracts, warranties, indemnities, and other procedures that are unfamiliar and may be time-consuming and/or require expensive advice.
But under the Charities Act ss.235-239, two or more CIOs ("the old CIOs") can apply to the Charity Commission to be amalgamated into a new CIO. The old CIOs must both (or all) pass resolutions approving the amalgamation and adopting the constitution of the new CIO, and must publicise the proposed amalgamation and invite representations to be sent to the Charity Commission.
If the Commission approves the amalgamation the new CIO is registered; all the property, rights and liabilities of the old CIOs are automatically transferred to the new CIO; and the old CIOs are dissolved.
Regs.10-11 in the CIO general regulations set out the requirements for transferring accounting records to the new CIO and retaining the records after amalgamation.
In a transfer of undertaking under the Charities Act 2011 ss.240-244, the property, rights and liabilities of one CIO (the transferor) are automatically transferred to another CIO (the transferee), and the transferor is dissolved so only the transferee remains. The process for this is relatively straightforward but could take a long time. The Charity Commission has to approve the transfer and has six months to make its decision and at any time during that period can give notice of an extension of up to another six months. Being uncertain for this amount of time about whether the transfer will take place could make it impossible for either organisation to plan anything.
The provisions for automatic transfer of property, rights and liabilities are a very positive feature of the CIO legislation, but apply only to amalgamations and mergers between CIOs.
In an amalgamation or transfer of undertaking between a CIO and a non-CIO, the "old" organisation(s) or the transferor(s) have to go through what may be a complex procedure of transferring all of their assets and everything else to the new organisation or transferee, and then winding up using the dissolution procedure in their governing document (unless there is a specific reason why the old organisation or transferor is going to be kept).
The process of transferring everything to another organisation is not impossible; it happens every time an unincorporated organisation "becomes" incorporated by setting up a charitable company or CIO, transferring its assets and liabilities to the new body, and then winding up.
There is no doubt that the transfer of assets, rights and liabilities is a whole lot simpler when both or all parties to an amalgamation or merger are CIOs. On the other hand, if the merger (in the sense of transfer of undertaking) is between a CIO and non-CIO, there will not generally be any need for Charity Commission consent as there is when one CIO transfers its undertaking to the other. This means there will be no need for a wait of perhaps six months or even a year until the Commission gives, or does not give, consent for the merger.
Charitable company. A charitable company does not have any restrictions on amalgamating or merging with a charity with a different legal structure. But neither does it have the straightforward procedures in the Charities Act for amalgamation and the transfer of assets, liabilities and rights that are available when both or all parties are CIOs. So the transfer process will be more complex and probably more expensive, and could potentially take just as long as waiting for the CIO-to-CIO transfer.
When it matters. A charitable company merging with another organisation cannot take advantage of a simplified process to transfer assets etc. A CIO can take advantage of those procedures if it is merging with another CIO, but not if it is merging with a non-CIO.
8.2 Voluntary dissolution
Summary: No significant difference between voluntary dissolution of a CIO by the Charity Commission and voluntary striking off of a company by the registrar of companies.
CIO. Under part 3 of the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012 (regs.4-15), a CIO's trustees can apply to the Charity Commission for voluntary dissolution. The CIO's members must first pass a resolution to dissolve the CIO. As part of the application for voluntary dissolution the trustees must confirm that all of the CIO's debts have been settled or provided for in full, and confirm how the charity's property has been applied or will be applied after dissolution.
The regulations include strict procedures for all of this and for what happens after the application for dissolution. These require that as soon as it has applied for dissolution, the CIO must cease its operations (apart from those necessary to proceed with the dissolution or to comply with a statutory requirement) and not incur any debts. The requirements in the regulations must be strictly followed; failure to do so is an offence.
Charitable company. The voluntary dissolution process for CIOs replicates the voluntary striking off procedure for solvent companies in the Companies Act 2006 ss.1003-1034 so much so that failure to comply with the notice and other requirements in the CIO regulations is an offence not under the Charities Act, but under the Companies Act.
8.3 Options when insolvent
Summary: No difference between CIO and company.
CIO. The Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012 amend the Insolvency Act 1986 and related regulations so that they apply to CIOs in exactly the same way as to companies. This means that a CIO can be subject to a voluntary arrangement, be placed in administration or receivership, be wound up by a members' or creditors' voluntary winding up, or be wound up by the court.
The Charitable Incorporated Organisations (Consequential Amendments) Order 2012 amends the Company Directors Disqualification Act 1986 so that it applies to CIO trustees in the same way as to company directors.
Charitable company. Exactly the same rules and procedures as for CIOs.
8.4 Dissolution of inactive organisation
Summary: Similar procedures for CIOs and charitable companies, but there are particular concerns about CIOs [see para.8.5 below].
CIO. Under s.34 of the Charities Act 2011 the Commission is required to remove a CIO from the register of charities if it reasonably believes the CIO is not in operation. Regs.16-17 in the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012 set out a tight timetable for dealing with CIOs that appear not to be operating. The Commission sends an initial letter asking for clarification of the situation. If there is no reply within one month, the Commission must, not later than two months after the date of the first letter, send a second letter saying that unless it receives a reply within one month, it will publish notice of its intention to dissolve the CIO.
If there is no reply to this second letter, or the CIO confirms that it is no longer operating, the Commission publishes a notice saying it intends to dissolve the CIO within three months unless it is shown that the CIO is in operation or will be within a reasonable period of time. A copy of this notice is sent to the CIO.
If by the end of the three-month notice period there is no evidence that the CIO is or soon will be operating, the Commission dissolves the CIO and removes it from the register. But unlike an unincorporated association or company, which continues to exist even after it is removed from the register of charities, a CIO exists only by virtue of its inclusion on the register. So as soon as it is removed, it ceases to exist and any assets are vested in the official custodian for charities. The assets may then be transferred to another charity or charities, to be used for charitable purposes specified by the Commission.
If an appeal is lodged against the the decision to dissolve a CIO, the Commission would presumably not make an order for disposal of the CIO's property until after the appeal had been heard. Were there to be a successful appeal to the charity tribunal, the CIO would be restored to the register.
Charitable company. A similar provision in s.1000 of the Companies Act 2006 allows, but does not require, the registrar of companies to strike off (remove from the register of companies) a company that it reasonably believes not to be in business or operating.
When it matters. Although the procedures are similar to CIOs and charitable companies, there are differences that could in practice be significant.
The Commission must send the first letter if it believes a CIO is not operating; the registrar of companies may send it.
Assets of a CIO dissolved by the Commission are vested in the official custodian for charities and may, by order of the Commission, be vested in another charity or charities. Assets of a company struck off by the registrar of companies are bona vacantia (belong to the Crown). This could, in effect, mean that charitable assets would cease to be charitable. But the bona vacantia assets of a dissolved charitable company are, by custom, meant to be applied cy près (as close as possible to the original intention), so they may be vested in another charity or charities in the same way as a CIO's assets.
8.5 Effect of dissolution
Summary: Advantage currently to charitable company, until more is known about the implications for CIOs.
CIO. Under reg.33 in the CIO insolvency regulations, a CIO that has been dissolved by the Commission under the procedure for inactive CIOs can be restored to the register of charities within six years from the date of dissolution. The Commission may itself decide to restore the CIO, or an application may be made by any person who was a trustee immediately before the dissolution. Where the Commission has already vested all of the CIO's property in another charity or charities, the CIO will be restored to the register only in very limited circumstances.
Under reg.34, an application to the court for restoration to the register of a CIO that has been dissolved under the Insolvency Act or has been in administration and is treated as having been dissolved may be made by the Commission, a person who was a trustee immediately before dissolution, or any person with a financial or contractual interest in or potential legal claim against the CIO.
An application under reg.33 must be made within six years of the date of dissolution. Under reg.34 it is six years except where the application is being made in relation to a claim for personal injury, when there is no time limit.
On the date of restoration, any property still vested in the official custodian vests in the restored CIO.
There does not seem to be provision for restoration of a CIO which has undergone voluntary dissolution.
Charitable company. If a charitable company is removed from the register of charities but not from the register of companies, it continues in existence [see s.8.5 below].
It does cease to exist if it is removed from the register of companies, But ss.1029-1034 of the Companies Act 2006 allow an application for restoration to the register of companies to be made by the secretary of state [which in effect means the registrar of companies], any former director of the company, or any person with a financial or contractual interest in or potential legal claim against the company. The application may be made regardless of whether the company was removed after being struck off by the registrar because it was not operating, or after a voluntary striking off, or after being dissolved under the Insolvency Act or having been in administration and being treated as dissolved.
As with CIOs the application must generally be made within six years from the date of dissolution. On the date of restoration, any property still held bona vacantia is restored to the company. If any property has been disposed of, the restored company is paid the amount received or the value of the property at the time of disposition.
When it matters. Some banks which lend to charities have expressed concern about the CIO procedures, in particular in relation to dissolution by the Charity Commission (either voluntary dissolution, or the procedure for dissolution of an inactive CIO). As with borrowing secured on assets, an organisation which might need to borrow from a bank or similar lender, even if the loan would be unsecured, should not register as a CIO until more is known about this issue and the banks' response to it, or should take proper advice before registering as a CIO.
Here are what seem to me to be the issues. But I am not an expert in this area of law, so specialist advice is necessary if it could be relevant to your organisation.
You can see why lenders might be concerned.
A lender to whom money is owed at the time of dissolution, or anyone else with a claim, can apply for restoration of a company regardless of how the company was dissolved, or for restoration of a CIO that has been dissolved under Insolvency Act provisions or after administration. Once the company or CIO is restored, the lender or other person can bring a claim against it.
But only the Commission itself or a trustee at the time of dissolution can apply for restoration a CIO dissolved by the Commission because it was inactive. A lender or other person with a claim against the CIO has no right to apply. And no one, it appears, can apply for restoration of a CIO that was dissolved by voluntary dissolution. This leaves lenders and others with no way to take action against the CIO after it has been dissolved by the Commission or through voluntary dissolution.
When a company is restored, property still held bona vacantia (by the Crown) is returned to the company. If the property has been disposed of, the company receives its value at the time of disposition.
When a CIO is restored, any property still held by the official custodian for charities will be returned to the CIO. But where the property has been transferred to another charity, there appears to be no provision for the CIO to receive the value of that property.
The Charity Commission must take steps to remove a CIO that appears not to be operating; the registrar of companies may do so for a company. This may make it more likely that a CIO will be dissolved by the Commission than a company will be struck off by the registrar.
For both dissolution of an inactive CIO by the Commission and striking off by the registrar of companies, the timetable is very tight (the one for companies is actually a fortnight tighter than for CIOs). A CIO or company could be operating but could be administratively so incompetent that it does not send in its annual accounts or reply to letters. Or it could have moved address and not notified the Commission or Companies House. In as little as five months from the date of the first letter, the CIO could be dissolved or the company struck off. After that time, a lender or other person with a claim could take steps to have the company restored but would not be able to do so for a CIO.
8.6 Effect of removal from register of charities
Summary: Advantage to charitable companies. A company continues to exist, as a company, if it is removed from the register of charities. A CIO ceases to exist when it is removed.
CIO. A CIO that is removed from the register of charities because it appears to be inactive [see s.8.3 above] or no longer meets the requirements for being a charity ceases to exist, and its property is vested in the official custodian for charities. The only way it can come back into existence is through the process for restoration to the register in the CIO insolvency regulations,
Charitable company. A charitable company that is removed from the register of charities because it appears to be inactive or is no longer a charity continues to exist as a company. A company ceases to exist only when it is struck off the register either voluntarily or by the registrar, or when it is wound up after insolvency or being in administration.
When it matters. Even if a company ceases to be registered with the Charity Commission, there will be implications for funding agreements and other arrangements that are dependent on charitable status. But most relationships will continue unchanged with the company. The company can continue to hire staff, occupy premises, own property, owe money and pretty much operate as it always has.
The advantages for lenders, and for anyone involved in any way with the company, are obvious.
HODGSON RECOMMENDATIONS ON CHARITABLE INCORPORATED ORGANISATIONS
Updated 25/5/13. This information updates s.3.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
In his review of the Charities Acts presented to Parliament on 16 July 2012, Lord Hodgson made the recommendations below in relation to charitable incorporated organisations.
My comments are in italic.
Sandy's comment: The CIO structure may not be appropriate for charities that will need to borrow [see CIO: yes or no?]. This recommendation would allow a CIO that has outgrown the structure to convert to a charitable company.
The impact of CIOs should be assessed three years after implementation [Chapter 10 organisational forms recommendation 3].
The regulations which will allow charitable companies, community benefit societies (industrial and provident societies) and community interest companies to convert to CIOs should be expanded to include enabling CIOs to convert into charitable companies [Chapter 10 organisational forms recommendation 4].
The rules governing CIOs should be changed to reflect updates to company law, to the effect that a 75% majority is required to make constitutional changes or a resolution to transfer assets outside the context of a meeting (i.e. by written resolution) [Appendix A recommendation 31].
Sandy's comment: This and the recommendation below on constitutional changes would remove two of the disadvantages of CIOs as compared to companies [see CIO: yes or no?].
Legislation should be amended so that constitutional changes to CIOs take effect immediately, provided any necessary Charity Commission prior approval has been obtained. There should be a requirement
for subsequent notification of any changes to the Charity Commission [Appendix A recommendation 32].
There was disappointment that Lord Hodgson did not include a suggestion put forward during the consultation, for a simple conversion process for unincorporated charities wishing to become CIOs.
Lord Hodgson's report and recommendations can be accessed on the Cabinet Office website via tinyurl.com/c2azftb.
Go to list of all of Lord Hodgson's recommendations
COMPANIES ACT 2006
Updated 13/1/11. This information supplements s.3.3 and updates various sections in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
The Companies Act 2006 was implemented in seven tranches from January 2007 to October 2009. Information about the changes and lists of all the new Companies Act forms, are at www.companieshouse.gov.uk.
Provisions which have come into effect since mid-2009 are listed below. Unless indicated otherwise, the changes apply in the same way to charitable companies and community interest companies as to ordinary companies limited by guarantee.
Memorandum and articles
Company name and status
Company and business names
Company directors and secretary
Conflict of interest duties of directors
Resolutions and company meetings
Members' right to require a general meeting
Accounts: in effect for financial years starting on or after 1 April 2008
Audit or independent examination of charitable companies
Accounts: in effect for financial years starting on or after 6 April 2008
Directors' duties when signing accounts
New rules on circulating accounts to company members
Filing period for accounts changed from 10 months to 9 months
Accounts: in effect for financial years ending on or after 1 April 2009
New threshold for charitable companies submitting accounts and reports to Charity Commission (Charities Act)
New thresholds for independent examination or audit of charitable companies (Charities Act)
CHANGES TO COMPANIES HOUSE FEES AND FILING
Added 26/3/11. This information supplements s.3.3 and updates various sections in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
Companies House fees are changed from 6 April 2011.
The fee for registering a company using software went down from £15 to £14, but registering on paper went up from £20 to £40. A new web registration service, not previously available, is £18. The increased fee for paper registration does not apply to community interest companies (CICs), companies delivering documentation in Welsh, or certain other registrations for which Companies House receives relatively few applications and for which there is currently no electronic service.
Same day company registration, which can only be done on paper, went up from £50 to £100.
The fee for electronic filing of an annual return went down from £15 to £14, but for paper filing went up from £30 to £40.
An application to make a director's residential address unavailable for public inspection (forms SR01-SR03) went up from £15 to £55.
The fee for monitoring a company was removed.
A full list of fees can be accessed via www.companieshouse.gov.uk.
Companies House expects all incorporations and filings of annual returns, accounts and the main companies changes for the main company types to be done electronically by March 2013.