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
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:
PDF, 185KB, 2 pages
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
Once your new CIO is registered, transfer your original charity’s assets to it, ideally making sure you 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 do this agreeing to give all the original charity’s assets to the new CIO 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’.
Convert a charitable company to a CIO
You’ll be able to convert a charitable company to a CIO directly once the Office for Civil Society makes these regulations.
Direct conversion means you’ll be able to keep your existing name, bank accounts and charity number. Your new CIO will also receive any legacies left to the original charitable company. Until then, you can only convert a charitable company to a CIO by registering a new CIO, transferring assets to it then either:
- closing the original charitable company, or
- keeping the original charitable company as a ‘shell’ (if you think it may continue to receive legacies)
It may not be in your charitable company’s best interests to convert to a CIO before direct conversion is available. For example, you’ll need to:
- change your charity number – you’ll be setting up a completely new charity
- change your charity name – you can’t register a new CIO with the same name as an existing charitable company
You’ll also need to transfer any assets, contracts (including employment), pensions or debts. This can be very complex - take appropriate professional advice if you’re considering this.
The main advantage of CIOs over charitable companies is that CIOs are only regulated by the commission and not also by Companies House. The administrative time-saving is likely to be far outweighed by the administrative time and cost of converting before the direct conversion route is available.
Convert an unincorporated charity to a charitable company
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
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.
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, 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
MS Word Document, 43.5KB
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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.
Published: 2 December 2014
From: The Charity Commission
Related guides: Permanent endowment: rules for charities Transfer charity land or property to the Official Custodian How to merge or link charities How to write your charity's governing document (CC22b) How to register a charity (CC21b)