Commercial Update 109 – CIO Checklist

This week’s article is around what to think about when forming a charitable incorporated organisation (or ‘CIO’, as they are known).

This is following our request from a client and we have set out below the steps to think about before forming a CIO.

  1. Check whether it is appropriate to set up a new charity or whether there is another way to fulfil your charitable aims.  This would include thinking about what you are trying to achieve and what the aims of the venture are and working out whether these would be charitable in law, whether there is an existing charity with the same purpose or an alternative approach using other types of non-profit organisations/social enterprises. 
  1. Think about the name.  There are certain restrictions under charity law on the choice of the official name that a CIO can adopt, including regulations about not using ‘sensitive’ words or expressions without permission.  In terms of this, the Charity Commission register needs to be checked as well as Companies House register before selecting a name, plus other reasonable searches to check whether any other registered charity has the same or similar name.
  1. Check the activity for the CIO and make sure there are no licences or regulations that need to be satisfied in order to operate it and that it can be formed for a lawful purpose.
  1. Think about the registered principal office and where the most appropriate place should be for notices and correspondence to be sent.  The CIO must have a service address as well as a principal office address, but they can both be the same place.
  1. Think about the first trustees, all of whom must be 16 or over and not disqualified from being charity trustees.  A usual board of trustees will be between 3-12.  Think about whether the proposed trustees are happy to consent to act and are aware of their legal duties under charity law, including submitting a trustee declaration of eligibility registration form to the Charity Commission, which needs to be done when the CIO is registered as a charity, plus getting them to complete a fit and proper persons (trustee) form.  Details for trustees need to include full name (and former names), service and residential address, date of birth, nationality, country of residence and occupation. 
  1. In terms of regulatory, make sure you set up a register of trustees as required by regulation.  This needs to contain the name, service address and dates when they became a trustee for each volunteer.  Noted that a trustee’s service address need not be their residential address and can be the address of the principal office of the CIO. 
  1. Think about whether you need a charity secretary.  Where there is no charity requirement or any requirement under a standard CIO constitution to have one, it can be useful to have a dedicated person to act as the charity’s administrator/secretary.  This can be, but does not need to be, one of the trustees. 
  1. Who will be the first members on formation of the CIO?  A CIO may only have one member or a greater number.  One or more or all trustees may be but need not be members.  If the only members are to be trustees, then the CIO will need to be set up for what is called a Foundation CIO.  If any members are not also to be trustees, the CIO will need to be set up as what is known as an Association CIO.  It may be helpful to set up an Association CIO in order to help or enable volunteers to support the CIO’s work apart from the trustees to become members so they can be more involved.
  1. Do not forget to set up a register of members, particularly where there are members other than in addition to the trustees, as mentioned above.  Members registers need to contain the name and service address of each member and the dates when they became and subsequently ceased to be members.  Bear in mind, as for trustees, that a member’s service address need not be their residential address, it can be the principal address of the CIO. 
  1. Think about the constitution.  As mentioned above, the CIO will need to decide whether it will be a Foundation CIO or an Association CIO. 
  1. Remember that all CIOs, irrespective of the amount of their gross annual income, assets or other factors, must register with the Charity Commission.  CIOs are set up by means of an application to the Charity Commission to be registered as a CIO which is done via online portal with no fee payable.  If a CIO is wishing to claim that tax on Gift Aid, it will also need to register with HMRC. 
  1. Remember the obligation to keep accounting records and prepare accounts and in addition to this prepare receipt and payments accounts as opposed to accrual accounts for a CIO, but only if in the year concerned it has a gross income of £20,000-£30,000 or less.  Any CIO may opt to prepare accrual accounts instead but, if it has gross income exceeding £250,000 in an accounting year, then it must prepare these accrual accounts instead of receipt and payment accounts.  Any accounts need to be filed online with the Charity Commission for a CIO, irrespective of the amount of their gross annual income. 
  1. Remember the obligation to file an annual trustees report online with the Charity Commission. 
  1. If the charity is going to be operating from premises, are these going to be the same premises as the CIO’s registered office and will a Lease or other document need to be signed to cover the occupation?
  1. Consider what other assets will be used by the charity which could of course include IP rights as well as any organisation staples, such as office equipment, furniture and computers. 
  1. Think about financing – how will the CIO be financed and will there be any debt that needs to be taken on?
  1. Finally, think about whether the CIO as a charity would or could be eligible for any grants from any other charity or any other public bodies and what sponsorship opportunities there may be. 

Hope the above is helpful.

Roger Margand