Guidance

Change your charity structure

How to change an unincorporated association or trust to a charitable company or CIO, plus other types of conversion.

When to change charity structure

Your charity’s legal structure sets out what type your charity is. There are four common types of charity structure:

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

Your charity’s legal structure 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

You might want to change your charity’s structure because your existing structure doesn’t allow you to do something. For example, trustees of a growing unincorporated charity may decide to change to a corporate charity structure because the charity needs to employ staff.

An unincorporated charity isn’t a legal body in its own right so it can’t enter into contracts in its own name. The trustees have to enter into contracts personally - they can be liable if something goes wrong and they’re at fault.

You might also decide to change to a corporate charity structure (‘incorporation’) because:

  • you want to register the title to your charity’s land or property in its own name (rather than in a trustee’s name or in the Official Custodian for Charities)
  • you are concerned about the level of financial risk your charity faces and want to give the trustees more protection (although the trustees must still act responsibly)
  • your charity will deliver charitable services under contract (for example with a local authority)

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

This can be complex, particularly if your charity has assets which are permanent endowment. You and the other trustees must decide that it’s in your charity’s interests to change to a different type of charity.

Read Charity types: how to choose a structure (CC22a) for more information on the advantages and disadvantages of the different types of charity structure. Use the following checklist and video to help you plan a change to a different charity structure:

Changing your charity structure

Convert an unincorporated charity to a CIO

First, choose the CIO model constitution which best matches your original charity. Use the association model if your original unincorporated charity:

  • has a constitution as its governing document
  • has a wider membership which votes on important decisions, such as electing trustees or committee members

Use the foundation model if your original charity:

  • is governed by a trust deed, will, scheme or conveyance
  • is run solely by its trustees, and
  • doesn’t have a voting membership

Complete the appropriate CIO constitution template as your new CIO’s governing document. Once the trustees agree the constitution, register your new CIO with the Charity Commission.

Once your new CIO is registered, transfer your original charity’s assets to it, provided you can do so without one or both of the charities first getting prior authority from the Commission. Ideally you should settle any debts first. Take professional advice if you think you need it, for example if you’re transferring any contracts (including employment) or debts.

You may be able to transfer your charity’s assets by agreeing to give all the original charity’s assets to the new CIO as a way to meet the original charity’s purposes. The 2 charities’ purposes must be sufficiently similar and the original charity’s governing document must allow you to give away all its assets.

When deciding whether you need Commission approval before transferring the assets, a key issue to consider is whether any of the trustees of the original charity are the same as the trustees of the new CIO. If some or all of the trustees are the same, is it possible to manage the conflict of interest or loyalty that will arise in the decision to transfer? For example, are there enough un-conflicted trustees on both sides of the proposed transfer to allow each to make a quorate decision of un-conflicted trustees? Alternatively, is there a power in the governing document of the original charity that directly and explicitly allows a transfer even if some or all of the trustees may have a conflict of interest or loyalty?

If not, you may need the commission’s approval – read our guide How to transfer charity assets.

In many cases the trustees of the transferring charity will also seek an indemnity from the trustees of the CIO. This may also need the Commission’s approval – read our guide on How to transfer charity assets.

Once the asset transfer has been completed, close your original charity in line with any rules set out in its governing document and notify the Commission that it has closed.

Transfer of permanent endowment assets from unincorporated to CIO

Permanent endowment is money or property that was originally meant to be held by a charity forever. This is usually set out as a restriction in the charity’s governing document.

A CIO permanent endowment transfer is different from an unincorporated one,. This is because a CIO can hold restricted assets and permanent endowment as part of the CIO, without the need for a new restricted and linked fund.

If you have permanent endowment which you want to transfer, you need to:

  • register a new CIO, then
  • make a vesting declaration, which is a legal document that transfers all the property of the original charity to the new CIO

Again, you will need to consider if you need Commission approval before doing this (see above).

Model vesting declaration

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Once the asset transfer has been completed, close your original charity in line with any rules set out in its governing document and notify the Commission that it has closed.

Convert a charitable company to a CIO

From 1 January 2018 charitable companies with a yearly income of under £12,500 can use a simple process to change to a Charitable Incorporated Organisation (CIO). The process will become available to larger charities in stages according to the timetable in our CIO legislative changes guidance.

Using this process means that the charity continues to exist but in a different form. This means you’ll be able to keep the charity’s existing name and charity number.

You should also be able to keep the charity’s existing bank accounts and in most cases the new CIO should receive any legacies left to the original charitable company.

The main advantage of CIOs over charitable companies is that CIOs don’t have to register with and send accounts to Companies House as well as the Charity Commission.

To change a company into a CIO you need to apply to us.

Before you apply you will need to check all of the following:

what is your charity’s income and when can you make an application? if it’s less than £12,500 this will be 1 January
is your charitable company registered with the Commission? if it is exempt from registering it won’t be able to convert to a CIO
are you up to date with any Companies House or Charity Commission filing requirements? for example accounts and any changes in registered details
has your company issued any shares? this is quite rare for charitable companies, but if it has, these must be fully paid up
what is the liability of company members if it winds up? if it requires payment of more than £10, this will need to be the same, or greater, for the new CIO

Do you need to make any changes to:

the company’s objects or to its name? If you do, you’ll need to make these, with our consent where needed, and register them, either before or after becoming a CIO. Note that the process does enable you to replace “limited” with “CIO” or “Charitable Incorporated Organisation” or their Welsh equivalent
widen the provisions allowing benefits and payments to the charity trustees? You will need to do this if the provisions in your company’s articles of association are more restrictive than the provisions in the CIO constitution.) If you do, you’ll need to make these changes, with our consent where needed, and register them before becoming a CIO
the provisions about who receives any remaining funds if the charity is dissolved? If you are making amendments which change how the company’s property is to be used after the company is dissolved, you’ll need to make these changes, with our consent where needed, and register them before or after becoming a CIO

We will not accept any application for conversion where any of the above issues apply but haven’t been addressed.

You must apply for conversion using the online application form and need to include the following information with your application:

  1. For the company, a copy of its resolution confirming the decision to convert to a CIO. The resolution must be either a special resolution passed at a meeting or a unanimous written resolution signed by or on behalf of all the members of the company who would be entitled to vote on a special resolution. The resolution must contain the company number and the charity number or the conversion request will be rejected
  2. For the proposed CIO, a copy of the proposed constitution – use one of our model constitutions for CIOs to avoid delay and reduce the chance of your application being refused. There are two models, use the Association model if the CIO will have a membership other than the trustees or use the Foundation model if the trustees are to be the only members
  3. The resolution adopting the proposed constitution of the CIO. The resolution must contain the company number and the charity number or the conversion request will be rejected
  4. A declaration that the trustees of the CIO are eligible to serve as trustees
  5. If the proposed constitution has any “entrenchment” provisions (restrictions on amendments which go beyond what the law requires), a statement specifying this and identifying the relevant provisions

When your application has been submitted we will check:

  • the CIO will meet the legal requirements for charitable status and registration
  • the name of the CIO can’t be confused with that of another charity and is not misleading or offensive
  • your company and each of its trustees have filed all of the documents and information which they are required to file with Companies House and with the Commission
  • there aren’t any disqualified trustees
  • there aren’t any legal proceedings against the charitable company by Companies House
  • your company is not in the process of being dissolved or in liquidation or administrative receivership
  • having checked with Companies House, and in some cases with other individuals or organisations, there is no reason to think that registering the conversion would be inappropriate

If these checks are satisfactory we will ask Companies House to remove the company from the register of companies. We will complete the registration of the CIO when the company has been removed from the register of companies.

We will tell you when the conversion of your charity to a CIO is complete.

If in exceptional circumstances you need to withdraw your application you can do so up to the point that we ask Companies House to remove the company from the register of companies. Once we have notified Companies House they have a legal duty to remove the company from their register.

If our decision is to refuse your application we will explain the reasons why and the process for asking us to review our decision. You can also appeal to the First tier Tribunal.

Convert an unincorporated charity to a charitable company

First, set up and register a new company with Companies House. You then need to register your new company as a charity with the Commission.

If your proposed company name includes words like ‘charity’ or ‘charitable’, ask the Commission to confirm it doesn’t object to this before you apply to Companies House

Once your new company is registered, transfer your original charity’s assets to it, provided you can do so without one or both of the charities first getting prior authority from the Commission (see below). Ideally you should settle any debts first. You may be able to make a valid transfer decision by agreeing to give all the original charity’s assets to the new company as a way to meet the original charity’s purposes.

The 2 charities’ purposes must be sufficiently similar, and the original charity’s governing document must allow you to give away all its assets. Take professional advice if you think you need it, for example if you’re transferring any contracts (including employment) or debts.

When deciding whether you need Commission approval before transferring the assets, a key issue to consider is whether any of the new trustees of the original charity are the same as the trustees of the new company. If some or all of the trustees are the same, is it possible to manage the conflict of interest or loyalty that will arise in the decision to transfer? For example are there enough un-conflicted trustees on both sides of the proposed transfer to allow each to make a quorate decision of un-conflicted trustees? Alternatively is there a power in the governing document of the transferring charity that directly and explicitly permits a transfer even if some or all of the trustees may have a conflict of interest of loyalty?

If not, you may need the Commission’s approval – read our guide How to transfer charity assets.

If the transfer will include a substantial non cash asset, see question 3 note in flowchart below, and there is even a single trustee (director) of the company who was a trustee of the original charity, the company will need Commission’s authority – read our guide How to transfer charity assets

Change your charity structure

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If the original charity holds permanent endowment, it cannot transfer this to the corporate funds of the Company, but the Company may be able to be appointed as trustee of permanent endowment. You will need to contact the Commission.

In many cases the trustees of the transferring charity will also seek an indemnity from the trustees of the company. This may also need the Commission’s approval – read our guide How to transfer charity assets.

Registering a charity merger may ensure that your new charitable company continues to receive legacies left to the original unincorporated charity.

Otherwise transfer the original charity’s assets and liabilities (if any) to the new charitable company. You may be able to do this agreeing to give all the original charity’s assets to the new charitable company as a way to meet its purposes. The 2 charities’ purposes must be sufficiently similar and the original charity’s governing document must allow you to give away all its assets.

If not, you may need the commission’s approval – read ‘How to transfer charity assets’. Take professional or legal advice if you think you need it.

Once the asset transfer has completed, close your original charity in line with any rules set out in its governing document and notify the Commission that it has closed.

Other types of conversion

You can convert a charitable company or CIO to an unincorporated charity by reversing the process. But if the original incorporated charity owned land, this can’t be transferred straight across to the new, unincorporated charity because it won’t be able to hold land in its own name. Instead, vest the land with a holding trustee or the Official Custodian.

You can also convert a community interest company (CIC) into a charity by setting up a new charity, transferring the CIC’s remaining assets to it then closing the CIC. Read Community interest companies: benefits of a CIC for the differences between CICs and charities. This also covers the practical and legal issues involved in converting a charity to a CIC.

From 1 September 2018, a CIC can convert directly into a CIO

Published 2 December 2014
Last updated 5 November 2018 + show all updates
  1. Updated the section 'convert a charitable company to a CIO’. Resolutions must contain the company number and the charity number or the conversion request will be rejected.
  2. Added link to guidance on converting from a Community Interest Company to a charitable incorporated organisation.
  3. Section about converting a charitable company to a CIO has been updated - in line with legislative changes from January 2018.
  4. First published.