An essential part of Registration Division’s assessment of any application is identifying an organisation’s legal structure and ensuring that the governing document is suitable for a charity. An application cannot proceed if these factors cannot be ascertained.

There are four main types of charity structure, each having a different type of governing document. These are:

• Charitable Incorporated Organisations, or CIOs (CIO Foundation or CIO Association constitutions);
• Charitable companies (articles of association);
• Unincorporated associations (constitutions); and
• Trusts (trust deeds).

Other governing documents exist (such as statutes or charters) but most charities fall within these categories.

A governing document provides the framework for the charity’s administration, working as a rulebook that sets out information including; the name, charitable purpose, what it can do to carry out its purpose, who runs it, who can be a member, how meetings are held, how trustees are appointed, rules about paying trustees, whether the trustees can change the governing document and how the charity may be closed.

Trustees are legally obliged to comply with their governing document, so it is crucial they are familiar with its contents and that it is fit-for-purpose.

The type of structure you choose affects how your charity will operate. It can also impact the requirements for registration. For example, unlike other structures, CIOs are not required to demonstrate the minimum annual income threshold of £5,000.

Further information on this can be found in our guidance documents CC22a and CC22b.

This section intends to establish some general principles to help ICAEW members decide which structure is right for their organisation or the organisation they are applying on behalf of.

Applicants should ask themselves:

• Do we want/need a corporate structure?
• Do we want/need a wider membership?

Corporate bodies (CIOs and charitable companies) have several potential advantages over unincorporated structures (associations and trusts). The law considers a corporate body to be a person and so corporate charities can do many things in their own name, including employ paid staff, deliver services under contract and own land or property outright. As a general rule, trustees aren’t personally liable for what a corporate charity does (provided that they act responsibly within their powers and duties). Companies and CIO Associations may have wider memberships.

However, charitable companies are not the same as commercial companies. They cannot distribute surpluses to members or shareholders (they are limited by guarantee) and can only apply their assets to carry out their charitable purposes. Moreover, you must incorporate your company with Companies House before applying for registration as a charity. Charitable companies are also subject to dual regulation – by the Charity Commission and Companies House – and therefore involve an increased level of reporting responsibilities.

Unincorporated charities cannot enter contracts in their own name and require two of the trustees, a corporate custodian trustee or the charities’ land holding service to ‘hold’ any land on the charity’s behalf. The trustees will be personally liable for what the charity does. However, because of their size or proposed operation, many charities (like grant makers) may not need a corporate structure. For example, it may be appropriate to establish a trust if your organisation:

• doesn’t need a wider membership and will be run by a small number of people;
• is unlikely to employ many staff or carry on any kind of business;
• any administration is going to be relatively simple; and/or
• will hold land and buildings on trust for permanent use for the charity’s purposes.

Or, if your organisation is likely to remain small in terms of assets and operation but you wish to have a wider membership, it may be appropriate to establish an unincorporated association.

Applicants will need to carefully consider these factors when choosing a structure. To assist in a successful registration outcome, we’ll now outline some top tips on governing documents and structures.

• A charity can only have one structure. For example, it cannot simultaneously be a company registered with Companies House and a CIO registered with the Commission. Any connected organisations must be declared as part of the application process.
• Our model governing documents have been designed to contain all of the clauses and powers needed for a charity’s successful administration. Adopting a model governing document can result in a quicker registration decision.
• A trust deed must specify a sum of money, land or some other asset that the charity will start with. Although the amount can be nominal, if the deed declares charitable trusts but does not refer to any actual assets which are held on those trusts at the time the deed is executed, then it is void.
• A deed must be executed (signed and dated by those who are setting up the trust), in the presence of a witness, who themselves sign and provide their address. The witness must be independent.
• For newly unincorporated organisations we need evidence that members have adopted the constitution (usually via a copy of the constitution signed by all the charity trustees and dated to the day of the members meeting at which it was adopted)
• Section 206(5) of the Charities Act states that a CIO’s constitution must be in the form specified in regulations made by the Commission, or as near to that form as the circumstances admit. If your CIO constitution differs from our model document or another approved version, then you will be required to explain the reasoning behind any changes.
• When registering as a charitable company, ensure that the articles of association submitted alongside the application are the same as those listed with Companies House. We are unable to proceed when the company’s governing document is not clear.

Next time, we’ll run through exactly what makes a charity, when you should and perhaps shouldn’t apply for registration and what alternatives to charity status are available.