Conversion to CIO Consultation

The Current Position

Claverham Village Hall (CVH) was founded as an unincorporated charity in 1996.  Its goal at that time was to raise funds to build a Village Hall on the land provided by FH Limited (now Claverham Limited), this was completed in 1999.  At the time the best structure for the charity was to be unincorporated with a voting membership.  As an unincorporated charity, Claverham Village Hall does not have a legal presence in its own right, therefore all contracts are entered into and all assets are held by the Trustees personally on behalf of the charity. 

There are some problems with this structure:

  • It is rather complicated.  The lease from Claverham Limited is held by Yatton Parish Council and Claverham Village Enterprises Limited (CVE), which runs the bar, is held in trust by 3 individuals who are not members of the committee.
  • The Trustees of the charity, which in the case of Claverham Village Hall is the Executive Committee, have unlimited liability against any claims against the charity which in the worst case scenario could mean that they could lose their homes.  While we do have insurance to protect ourselves against this we all know that insurance companies will look for any reason to not pay out on a claim.  This not only applies to the current committee but could also apply to past committee members for a period of time.

As time goes on there are less and less people around who remember the ins and outs of how the charity was originally setup which could lead to further complications in the future.  Individuals may be put off from being Trustees due to the unlimited liability against them.  It is for these reasons that the Committee feel that it is time for a change.

The Proposed Structure

Since 2002 the government has been considering a new legal form for charities which is a bridge between unincorporated charities and charitable companies. The Charities Act 2006 set out the broad legal framework.  The new form is called a Charitable Incorporated Organisation (CIO) and has been available for new registrations since 3 January 2013, with conversion being phased in from 1 March 2013.  Due to the size of CVH we became eligible for conversion on 1 July 2013.

CIOs are a new corporate entity, having its own legal identity, and are specifically for the charity sector.  In the past a charity wishing to have its own legal identity would need to be a charitable company, having a duel registration with Companies House and the Charity Commission, adding further reporting requirements.  The new CIO format only requires registration with the Charity Commission.

We have approached Yatton Parish Council and Claverham Limited who have no objections to our proposals.

Advantages

  • CVH will be a legal entity and therefore able to enter into contracts (e.g. the lease) and hold assets (e.g. CVE) in its own name.
  • Trustees and members will have no liability, although Trustees can still be held liable if they are found to have acted improperly.
  • Cheaper and quicker to achieve limited liability compared to a charitable company.
  • Not required to have a duel registration.
  • The structure of CVH can be simplified for future generations.

Disadvantages

  • We have to have a new constitution which is based on standards issued by the Charity Commission.  While we have been able to replicate most of our existing constitution there are certain elements that will be slightly different.  You can read our constitution here.
  • Relatively new legal structure which banks and creditors maybe unsure of.  This should not affect CVH because we do not have any borrowings or large creditors.
  • There will be some legal fees incurred regarding the lease and the transfer of assets.  These legal fees should be outweighed by the simplification of CVH going forward.

What This Means

  • We will still be known as Claverham Village Hall, and we do not have to adopt any other wording in the name.
  • The lease for the land can be transferred to the new CIO removing the need to have Yatton Parish Council involved.
  • The shares in CVE will no longer need to be held by 3 individuals. They will be transferred into the CIO removing the requirement to find replacements when needed
  • We will continue to have a register of members (voting register) which will be open to the same group of people as the current constitution.
  • We will continue to have annual AGMs where the trustees will be elected.  Unlike the current constitution, trustees will be required to retire by rotation every 3 years but may stand for re-election immediately. This should give more continuity.
  • Trustees will have more protection if things go wrong, which should help with recruiting new trustees in the future.

The Process

We held a Special General Meeting on the 29th November 2013 in the conservatory where we outlined our proposal again and answered any questions that anyone had.  At this meeting we proposed a resolution to allow the committee to proceed with the process of converting CVH into a CIO which was passed by 19 votes for to 1 vote against.

Following the above meeting we submitted the application to the Chairty Commission and were accepted onto the register on 9th Januay 2014.

We have now called another Special General Meeting of CVH on 7th March 2014 where we will propose a resolution to dissolve the existing charity and transfer everything to the new CIO.  The intention is to complete the transfer on 31 March 2014.

Final accounts for the existing charity will then be prepared and a final AGM called.  At this AGM the final accounts will be approved and the old charity will be dissolved.  We will also incorporate the first AGM of the new CIO where all existing Trustees will resign and new trustees will be appointed (although all existing trustees will be eligible for reappointment).  Following this we will enter the normal annual cycle of AGMs.

Further Information

http://www.charitycommission.gov.uk/

http://www.charitycommission.gov.uk/frequently-asked-questions/faqs-about-charitable-incorporated-organisations-(cios)/

http://www.charitycommission.gov.uk/trustees-staff-and-volunteers/trustee-role/becoming-a-trustee/