Whether you are establishing a new charity, converting to a charitable status, forming a Charitable Incorporated Organisation (CIO) or Community Interest Company (CIC), understanding the key elements and the importance of careful preparation cannot be overstated. In this article, Jo O’Donovan covers some pointers on how to ensure your application or conversion is as successful as possible.
Key Benefits
Each structure has its own particular benefits which suit an organisation best and it is important when considering a structure to consider which best suits the organisations needs.
Charities enjoy a high level of public trust, making it easier to attract donations and grants, and benefit from tax reliefs on income, profits, and certain purchases.
Charitable Incorporate Organisations (CIO’s) retain the benefits of a charity with the added advantage of limited liability, providing legal protection for trustees and members but with the distinct advantage that they do not need to register as a Company and comply with Companies House requirements. They therefore face fewer administrative burdens compared to charitable companies.
Community Incorporated Companies (CIC’s) are designed to serve the community, allowing greater flexibility in their operations while ensuring profits are reinvested to benefit the community. They can attract social investment and demonstrate a clear commitment to social goals, which can appeal to supporters.
Each structure provides a tailored framework that aligns with the organisations specific goals making their impact more effective.
Key Elements to consider when making any application
- It is fundamental to present clear objectives and activities
Charity: The organisation’s objectives must be exclusively charitable and provide public benefit. Clearly defined charitable purposes aligned with the Charities Act 2011 are essential.
CIO: Similar to traditional charities, CIOs must have clear charitable objectives and ensure they benefit the public.
CIC: Must demonstrate that activities benefit the community.
- Governing Documents must comply with the relevant legislative requirements:
Charity: Requires a constitution or trust deed outlining the charity’s purposes, how it will be run, and its dissolution procedures.
CIO: Needs a constitution detailing governance, member and trustee responsibilities, and operational procedures.
CIC: Must have Articles of Association specifying its community interest objectives and adherence to the CIC Regulator’s requirements.
- Trustees and Governance:
All structures need Trustees or Directors who understand their legal responsibilities.
- Financial Planning and Reporting:
Demonstrating financial planning and sustainability is important. This includes a clear budget, funding strategy, and transparent reporting mechanisms to maintain trust and accountability.
- Public Benefit and Community Impact:
Explaining how the organisation’s work benefits the public or community is fundamental for all three structures and the application or conversion will hinge on this point. This includes providing evidence and clear descriptions of intended outcomes and impact.
- Compliance and Regulatory Requirements:
Ensuring adherence to legal requirements, including registration with the Charity Commission for charities and CIOs, or the CIC Regulator for CICs. Compliance with data protection, safeguarding, and fundraising regulations is also essential.
Importance of Getting it Right
Properly setting up your charity, CIO, or CIC ensures legal and financial protections for the organisation and its trustees. It reduces the risk of legal disputes, financial mismanagement, and regulatory penalties.
A well-prepared application that meets all legal and regulatory requirements is more likely to lead to a successful application which in turn improves the organisation’s reputation and builds trust with donors, beneficiaries, and the public.
Conclusion
Embarking on the journey of becoming a charity, CIO, or CIC is a significant step towards making a meaningful impact. However, the complexity of the process demands careful preparation and understanding of key elements. By ensuring clear objectives, robust governance, financial planning, and compliance with legal requirements, organisations can set a strong foundation for success.
For expert guidance and support in navigating the application or conversion process, contact us today. Jo O’Donovan has experience of working with charities and incorporating charities, CIC’s, CIO’s and social enterprises.
