2.6.3 Converting a registered charity into a charitable community benefit society

Charitable incorporated organisations (CIOs) and Scottish charitable incorporated organisations (SCIOs) cannot be converted into any other corporate form, although there is provision for CIOs and SCIOs to amalgamate with other CIOs and SCIOs, and for CIOs and SCIOs to be dissolved and their residual assets passed to another registered charity. In England and Wales, a CIO could seek the approval of the Charity Commission to transfer its assets to a charitable community benefit society.  Also, a CIO or SCIO can be a wholly controlled subsidiary of a corporate entity, including any type of society.

In England and Wales, a registered charity that is also a company limited by guarantee can be converted into a charitable community benefit society, but only with the consent of the Charity Commission. Any other sort of registered charity would need to follow the dissolution procedures in its governing document. This might involve getting consent from the Charity Commission, but not necessarily. If the governing document contains no powers of dissolution, or the charity’s property include a permanent endowment then the charity may need the consent of the Charity Commission (see www.gov.uk/guidance/how-to-close-a-charity).

In Scotland for all cases the charity must apply to the Scottish Charity Regulator to change its legal form.  (See www.oscr.org.uk/charities/managing-your-charity/making-changes-to-your-charity). The same is true in Northern Ireland, where an application to change legal form must be made to the Charity Commission for Northern Ireland.

Under the Charities Act 2011, all charitable community benefit societies in England and Wales are exempt charities. This Act provides for the reform of exempt charity regulation, including the appointment of principal regulators or the removal of exempt charity status. The Charity Commission for England and Wales says that:

“No firm decision has been made on the future regulation of community benefit societies [and friendly societies] as charities. One possibility is that those which are registered social housing providers may remain exempt whilst others may lose their exemption if no suitable principal regulator can be found.” (Charity Commission CC23 Exempt Charities, September 2013)

Currently, therefore, in England and Wales a registered charitable company converting to a charitable community benefit society with the consent of the Charity Commission to the changes of its articles would automatically become an exempt charity, and would be removed from the Charity Commission’s register. The Charity Commission does not offer any guidance on this matter but will consider applications on a case by case basis. The Charity Commission will not consent if, in its opinion, the conversion would result in a community benefit society that was not charitable. Therefore, by agreeing to the conversion, the Charity Commission is giving its implicit approval to the charitable nature of the new form. It is up to HMRC to decide whether a charitable community benefit society is an exempt charity, but it will generally defer to the Charity Commission in determining whether a legal entity is charitable.