Background
CICs are simpler to set up than charities, with less rigid rules on trading and distributing profits. For example, directors can be paid, and dividends can be distributed. Reporting and regulatory requirements are also less demanding for CICs than for charities. However, one of the main challenges CICs face is accessing funding. CICs are expected to generate most of their income through trading activities, and while some funders offer grants to help with start-up costs, securing ongoing funding is more difficult.
Charities, on the other hand, often have better access to grants, funding, and tax reliefs that CICs do not qualify for. Charities also tend to benefit from greater public trust, which can make it easier to recruit volunteers and involve the community in their work.
For some organisations, the CIC model is the perfect fit, but for others, converting to a CIO may open up new opportunities to support and grow their work.
Steps to Convert
If you decide to convert from a CIC to a CIO, the process involves several key steps:
- Prepare a Conversion Resolution: The directors of your CIC must pass a formal resolution agreeing to the conversion.
- Adopt a Charity Commission Constitution: This document sets out your organisation’s charitable purpose and how it will operate.
- Prepare a Resolution to Adopt the Constitution: This ensures your CIC agrees to follow the new governance structure.
- Apply for Charitable Status with the Charity Commission: Submit an application that demonstrates how your organisation meets the Charity Commission’s criteria.
It’s important to note that gaining charitable status is not automatic. The Charity Commission’s registration criteria differ from the CIC Regulator’s, and your organisation must have a recognised charitable purpose and exist for public benefit.
Additional Advice and Support
If you’d like more information or guidance on converting your CIC to a CIO, VODA can help. We offer advice, support, and training to voluntary, community, and social enterprise (VCSE) groups. Contact our Core Services Team on 0191 323 2040 or email development@voda.org.uk for further assistance.
