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Changing the structure of a charity

Guidance produced by the Charity Commission says making sure your charity has the right legal structure for its needs is very important as it determines:

  • who will run it and whether it will have a wider membership
  • whether it can enter into contracts or employ staff in its own name
  • whether its trustees are personally liable for what it does

There are four common types of legal structure that are available to charities:

  • charitable incorporated organisation (CIO) - there are 2 structures; association CIO and foundation CIO
  • charitable company (limited by guarantee)
  • unincorporated association
  • trust

CIOs were created specifically for charities, allowing them to register just once with the Charity Commission as an incorporated form of charity - as a result reducing the administrative burden of having to register and report to Companies House. The Charity Commission says the CIO structure is most beneficial for small to medium-sized charities which often employ staff and enter into contracts.

Changing to a different charitable structure usually involves setting up a new charity, transferring the original charity’s assets and liabilities to the new charitable company and then closing the original charity.

Before making any change to the structure, it is important to make sure the charity’s most recent annual return and accounts have been submitted to the Charity Commission.

Careful planning is required as the new charity will probably require new bank accounts, a new PAYE reference, a new or transfer of a VAT registration, and changes to any pension schemes. Timing is critical in making sure that there is a smooth handover.

Please use the following link to read the charity Commission’s guidance on changing the structure of your charity in full:

If you would like to find out more about how to change your charity’s structure, the Charity Commission has produced a useful checklist here.

It is important for charities to regularly review whether their existing structure continues to be the most suitable.

If you have any questions about the changing the structure of your charity, please contact our Charities team.

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Charity Newsletter

Summer 2018

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