If you are planning to set up a new charity or social enterprise in 2011, there will soon be a new legal structure available — the Charitable Incorporated Organisation.

First mentioned in a White Paper in 2002, introduced in the Charities Act 2006, but then delayed for a few years, the Government appears to be giving the CIO a much-needed push to ensure it is available to charitable organisations from spring this year.

The CIO will allow organisations with charitable purposes to register with the Charity Commission as a separate corporate entity.

Currently, charities wishing to incorporate must set up a company limited by guarantee, then register it as a charity.

This means they are regulated both as a company and a charity — known as dual regulation. The fact that company law is commercially driven with the aim of benefiting company members, while charities exist to benefit the public, has always caused tensions and confusion for those charities adopting this form.

In contrast, the CIO will offer sole registration and regulation by the Charity Commission.

Key features/benefits of CIOs The final regulations about CIOs are still to be published but it is likely they will include the following: n There will be two types: the foundation model which has trustees and no separate membership and the association model which has both trustees and members.

n Model constitutions for both types of CIO are being drafted by the Charity Commission and should be available for the launch.

n There will be no minimum income threshold for registration (currently the threshold for registration as a charity is £5,000).

n All CIOs will have to submit annual returns regardless of their turnover.

n Members and trustees will benefit from limited liability (this could be set at zero or a nominal £1).

n There will be rules for appointing trustees and members and what happens when a CIO winds up.

n Trustees of CIOs will be subject to appropriate duties of care and rules about private benefits and remuneration.

n CIOs will have an asset lock and will not be able to distribute any profits or assets to their members. It is anticipated some existing charitable companies will be interested in converting to a CIO. The detail of how this will happen and the likely timescale have still to be announced with priority likely to be given to new charities which are setting up from scratch.

Should we set up as a CIO?

The CIO will not suit every voluntary or community organisation and consideration of all the available options — including the community interest company or community benefit society for social enterprises — is still essential.

It should also be remembered that the CIO is a brand new legal form and there are likely to be teething problems. This means some organisations may prefer to opt for well-known, tried and tested legal forms, rather than a totally new one.

Also, not all charities, for example those making grants and having no real liabilities, need to be incorporated — a charitable trust is generally more suitable here.

But with an increasing number of charities wishing to incorporate, mainly to provide the trustees with some level of limited liability, the CIO could provide a timely solution.

While the actual detail of the regulations and the date they come into force remain under wraps, the long wait is nearly over.

n Contact: Tessa Hennessy Solicitor, 01865 723727.

Web: www.tessahennessy.co.uk