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How to Choose a Structure (CC22a)

The Charities Commission has issued new guidance on how to choose a structure for a charity and what is reuiqred for each structure type.  Full guidance on the following link: https://www.gov.uk/charity-types-how-to-choose-a-structure?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CharityCommissionUpdates+%28Charity+Commission+updates%29

The main four types of charity structure are:

  • Charitable Incorporated Organisation (CIO) – split into two types: Association CIO and Foundation CIO;
  • Charitable Company (limited by guarantee);
  • Unincorporated Association;
  • Trust

The main factors determining which structure best suits each charity are:

  • Who will run the charity and whether it will have a wider membership; and
  • Whether it will be a corporate body.

Wider membership means it can have voting members other than the charity trustees.  A charity with a wider membership may carry out its work wholly or partly through the volunteer and member contributions.  Charities with wider membership, cannot be only set up for the benefit of your members unless a sufficient section of the public can become members or the membership structure is a suitable way of carrying out your charity’s purposes for the public benefit.

Corporate bodies are considered by the law to be a person in the same way as an individual.  This will give the charity legal status to enter contracts as a person would. If a charity structure is a corporate body, then usually the trustees are not personally liable for the charity’s actions.

For corporate bodies with wider memberships, the ideal structure is an Associate Charitable Incorporated Organisation.  Corporate bodies without wider memberships should establish Foundation CIOs.

Corporate bodies can also be Charitable Companies with or without wider memberships. These are different to commercial companies in that the surpluses may not be distributed to members and are limited by guarantee not shares.

For charities which are not corporate bodies and have wider membership, an Unincorporated Association structure is recommended.  Mainly suitable for charities with relatively few assets.

Charities without wider memberships that are not corporate bodies should set up as a Trust. Suitable for charities with few members of staff and only makes grants.

Further advice on requirements of each structure type is given on the link above and advice can be found for changing charity structure.

 

 

Date: 10th November, 2014
Author: Wendy Bambrick

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