Should your hall become a Charitable Incorporated Organisation (CIO)?  

Lots of halls have been in contact with AirS recently, asking whether they should become CIOs, so we thought we’d do a spotlight on this topic this month.  

Most charitable community halls are unincorporated trusts. This means that the trustees as individuals carry personal liability for any costs arising in the unlikely event that anything goes wrong, for example if someone is injured at the hall which results in a personal injury claim.   

The good news is that risks are generally low for trustees of village halls and many of the potential risks trustees face are covered by the hall’s insurance. For example, public liability insurance covers the trustees against personal injury claims if the hall is found to be negligent. Good management practices, such as health and safety risk assessments, are also essential and your insurer will be keen to see these in place to reduce the risk of claims – and may even reduce your premium. Many trustees also take out trustee liability insurance which covers them if they inadvertently cause a loss to the charity, despite behaving reasonably and responsibly (this is called breach of trust).    

 However, there are situations in which trustees might want to consider incorporating so that the charity has its own legal identity and trustee liability is limited. If you are taking on large contracts (such as those involved in major building work), or employing a number of staff (with possible redundancy costs), or have a non-charitable trading arm, there is a good case for considering the change to CIO status. In some cases, a funder may also require it (or much prefer it) though this is not common.  

 Nowadays most charities in this situation opt to become a Charitable Incorporated Organisation (CIO) rather than a company limited by guarantee, which previously was the only option available to charities. The main reason for this is that it only means reporting to one regulator, the Charity Commission, rather than two – the Charity Commission and Companies House.  The reporting requirements for CIOs are similar to those of charitable trusts. 

 As well as limiting trustee liability, there are other advantages in becoming a CIO for a community building. For example land can be registered directly in the charity’s name, avoiding the need for holding trustees or a custodian trustee, and the ACRE CIO model constitution (available from AirS) is more modern and easier to understand, although trust deeds can also be updated to reflect current needs.  

 The main disadvantage of the change to the CIO trust for halls that are charitable trusts is that it is expensive and time-consuming, currently taking a year or more to complete the process. You can instruct a solicitor to do the whole process for you, but it’s important to instruct a firm with experience of community halls and both charity and land law – it is a niche area. It will also be costly. AirS offers a service to help halls preparing for the transfer, obtain necessary permissions from the Charity Commission, and register the CIO, but you would still need to instruct a solicitor to deal with the land side of things.  

 We are planning a session on becoming a CIO, specifically for charitable community halls, in November so look out for that.  

 In the meantime, subscribers to our service can read our topic note on CIOs and community buildings, available in our subscriber area.  

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