The legal structure you choose for your charity affects far more than the paperwork. It shapes how your board handles money, who owns the building, whether you can borrow, and what happens if things go wrong. Many trustees inherit a structure without fully understanding what it means for them personally, or they are weighing up a change without seeing the full picture.

A Charitable Incorporated Organisation, (CIO) has become a popular choice. It offers real protection for trustees while keeping things simpler than some alternatives. But it also has limitations that are worth knowing about upfront.

Here are the questions we’re answering today: Are you personally at risk? What reports do you have to file? Can you get a loan if you need one? Let’s start.

What Is a Charitable Incorporated Organisation?

A CIO is a legal structure created specifically for charities. The key difference from older structures like unincorporated associations is that a CIO exists as its own legal entity, separate from the people who run it. That means the charity itself can own property, sign contracts and take legal action. The trustees are not personally on the hook in the same way.

One of the biggest selling points is simpler regulation. A CIO only answers to the Charity Commission – there is no Companies House involvement, no second set of accounts, no duplicate filings. If you have ever dealt with a charitable company and its twin reporting requirements, you will understand why this is important.

One thing that surprises some boards: every CIO must register with the Charity Commission from day one, regardless of size. There is no income threshold below which you can skip registration.

A brand new CIO with £500 in the bank has the same registration and reporting obligations as one with £5 million. This is different from unincorporated charities, where smaller organisations sometimes operate without formal registration.

Foundation vs Association: Which Model Fits?

When you set up a CIO, you choose between two models. This choice affects who gets to make decisions about money, property, and the charity’s future direction.

A foundation CIO keeps things tight. The only members are the trustees themselves, so the board makes all the decisions. Want to approve a big purchase, change your reserves policy, or amend the constitution? The trustees decide, without needing to call a members’ meeting or get approval from anyone else.

This suits charities that want streamlined decision-making, grant-making trusts, for example, or smaller organisations where a wider membership would just add complexity.

An association CIO brings in a wider membership beyond the board. Members get voting rights on constitutional changes and may have a say in trustee appointments.

Community organisations, membership charities, or groups with a strong tradition of democratic involvement often prefer this model. The Charity Commission’s model constitutions give you templates for both.

From a practical standpoint, think about who signs off on the big stuff. If you want to sell a property or take on a loan, does the board decide on its own or do you need to consult members first?

In a foundation model, the board acts. In an association model, some decisions may need a member’s vote, which takes longer and adds steps. Neither is wrong; it depends on how your charity works and what feels right for your community.

Just make sure you understand how your choice affects how your board is structured and how new trustees come on board.

What Protection Do You Actually Get?

This is the question most trustees want answered first: if something goes wrong financially, am I personally liable? With a CIO, the short answer is no, provided you have done your job properly.

If the charity runs up debts it cannot pay, creditors go after the CIO itself, not the trustees as individuals. Your house, your savings and your personal assets are protected.

But that protection is not absolute. It falls away if trustees breach their duties, for example, by acting outside the constitution, ignoring conflicts of interest, making reckless decisions, or letting the charity keep operating when it clearly cannot pay its bills.

The Charity Commission’s guidance on trustee duties spells this out clearly. Act honestly and carefully, and you keep your protection. Act recklessly or in bad faith and you lose it.

There is also a practical benefit around property. When a CIO owns a building, it sits in the charity’s name, not in the trustees’ names. So when trustees change, there is no need to update the Land Registry or pay a solicitor to transfer the title.

The property just stays where it is. Over years of board turnover, this saves real money and hassle.

The NCVO’s guidance on trustee responsibilities is helpful if you want to understand how property ownership fits into the broader trustee role.

Even with limited liability, trustee indemnity insurance is still worth having. If someone brings a claim against you, defending yourself costs money, even if you win. Insurance covers those costs and gives you peace of mind.

Charities with strong financial controls and clear accountability structures usually get better premiums, too.

What Reporting Do You Have to Do?

Every CIO files accounts and an annual return with the Charity Commission, no exceptions. It does not matter if your income is £1,000 or £1 million; the filing obligation is the same. This catches some boards off guard, especially those used to smaller charities that fly under the radar without formal registration.

Charity Accounts

How you prepare those accounts depends on your income. If your charity brings in less than £250,000 a year, you can use receipts and payments accounting, basically a record of money in and money out.

Cross that threshold, and you move to accruals accounting under the Charities SORP. This means preparing a Statement of Financial Activities (SoFA), a balance sheet, and detailed notes. It is more complex and most charities bring in professional help when they make that transition.

Deadlines

Your accounts and annual return must reach the Commission within ten months of your financial year-end. Miss that deadline and your charity shows as overdue on the public register, something funders and donors can see when they check up on you.

Our guide to charity accounts covers these requirements in more depth.

Audit vs. Independent Examination

You may also need someone independent to check your accounts. If your income is above £25,000, you need an independent examination. Above £1 million, (or £250,000 income with assets over £3.26 million) you need a full audit.

There is a real difference in cost and complexity between the two, so it helps to understand what each involves before your charity grows into a new bracket.

One more thing: serious incidents must be reported to the Commission. Fraud, data breaches, safeguarding issues, and big financial losses, these cannot be handled as internal matters. Having solid bookkeeping helps you spot problems early and gives you the records you need if something does go wrong.

Can a CIO Borrow Money?

Yes, but with some limitations worth knowing about. The main one is technical but has real consequences: CIOs cannot grant what is called a ‘floating charge’ over their assets. In plain terms, a floating charge lets a lender take security over a changing pool of assets, (stock, equipment, money owed to you) rather than a specific item. Many business overdrafts and credit facilities rely on this mechanism and CIOs simply cannot offer it.

What CIOs can do is grant fixed charges, mortgages on property, for example, or security over specific equipment. So if you want to borrow against your building, that is fine.

But some types of borrowing, like invoice financing or flexible credit lines secured against general assets, may not be available to you. If you are planning a major project that needs external funding, raise this early with potential lenders so there are no surprises down the line.

Another quirk: there is no public register of CIO charges. Unlike companies, where anyone can search Companies House to see what security has been granted, CIO security arrangements stay private. Some lenders are not used to this and may need reassurance. Working with banks that have experience lending to charities makes these conversations easier.

On the plus side, owning property through a CIO is much simpler than through an unincorporated charity. The building belongs to the charity itself, not to individual trustees.

When board members leave, and new ones join, nothing needs to change at the Land Registry. Over time, this saves legal fees and administration. For boards thinking about long-term financial resilience, this kind of structural simplicity adds up.

What Are the Downsides?

CIO status works well for many charities, but it is not perfect for everyone.

The borrowing restrictions we just covered are the biggest practical limitation. If your charity expects to use complex financing, (invoice discounting, stock-secured lending, revolving credit) a charitable company might give you more flexibility, even though it means dealing with two regulators.

Recognition can be patchy. Major funders and high street banks understand CIOs, but some commercial partners and overseas organisations are less familiar with the structure. Opening a business bank account sometimes takes extra explanation. If you work internationally, be aware that CIO status does not automatically translate abroad the way company registration might.

Converting from an existing structure takes time and money. There is no simple switch. You register a new CIO, formally transfer all the assets across, and close down the old charity. Legal and accounting fees add up and the process demands trustee time. Once you have made the change, going back would mean doing the whole thing again in reverse.

Getting Your CIO’s Finances Right

The right structure makes your life easier. For many charities, a CIO offers the best balance: personal protection for trustees, simpler property ownership and one regulator to deal with. But it is worth understanding the trade-offs, especially if you expect to borrow or work with partners unfamiliar with the charity sector.

At Charity Accounting Partners, we help trustees get their financial foundations right, whatever structure they are working with. Whether you are thinking about becoming a CIO, already running one or just want to make sure your reporting and controls are where they should be, we are here to help. Book a discovery call and let’s talk through what you need.

FAQs

How long does it take to register a CIO?

Usually five to eight weeks, though it can take longer if the Commission needs more information or your application is complex. They review your constitution, check your charitable purposes and look at who your trustees are, before approving registration.

Can we convert our existing charity to a CIO?

Yes, though there is no direct conversion. You set up a new CIO, transfer assets across using a vesting declaration or formal agreement, then wind up the old charity. It involves legal and accounting costs, so most boards get professional advice to manage the process.