Charities in England and Wales Given New Status

A Kent-based charity – appropriately named ‘Challenge to Change’ – has become the first registered charity in England and Wales to incorporate as a Charitable Incorporated Organisation (CIO). The new legal status for charities, offered by the Charity Commission, follows legislation laid down by the Minister for Civil Society, Nick Hurd, in October 2012. It allows charities to incorporate, thereby limiting their liabilities. Previously, charities which wished to limit their liabilities, required dual registration, both as a charity with the Charity Commission, and as a company limited by guarantee, with Companies House.

Challenge to Change has operated as a charitable trust for about four years, supporting poor communities in Vietnam to adapt to climate change. Graham Adutt, Director of Challenge to Change, explained why the organisation decided to incorporate:

“Our local staff in Vietnam are regularly out on motorcycles in rural and coastal areas, working with poor and vulnerable communities. Our staff are insured, but we could never be fully confident that an insurance company would pay up when they should. Other risks include management of donor funds. We have good financial management systems in place, but there is sometimes a risk that our donors could disagree on our expenditures, and might want funds returned. While we were a Charitable Trust, our Trustees have faced these significant personal financial risks. They are not millionaires, and we don’t think they should be required to take on such risk, as a result of volunteering to work as Charity Trustees.”

Adutt is surprised it has taken so long for charities to be able to incorporate easily, and is glad the framework is now available. The situation of Challenge to Change may be typical of modern medium-sized charities which seek to minimise their administrative overheads and increase their efficiency.

“We didn’t want to be accountable to two different institutions – the Charity Commission and Companies House”, says Adutt. “We try to spend as much of our time as possible on projects and programmes, not on administration.”

This is the second ‘window’ for charity registration as a CIO. The first window opened in January, and was available for brand new charities with annual income of over £5,000. This second window, from 1st March, is for existing charities with annual income of between £250,000 and £500,000, to transform into the new legal structure.