CIC Association

Serving Community Enterprise

I got chatting with a project officer recently who shared that they were being a CIC, but that the agency who were drafting their articles for them had used wholly charitable objects as they (the agency) felt that the group 'might want to convert to a charity in the future';

 

checking up on the CIC Regulators' FAQ, it appears that a CIC can indeed change its status to a charity, but I wonder if (1) anyone's ever done it, (2) why they did it, and (3) what the process might be given that presumably you'd have to 'un-CIC' yourself before seeking charitable status (which wouldn't necessary be successful)

 

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Hi Adrian

I know there are examples but dont have names, give me a little time and I'll try and get some examples. Ive spoken to the Regulator previously about this and in a general sense its relatively' easy if your a CLG

Surely it would be easier to start a new CLG, get it Charitable status and then transfer all your assets to the new asset-locked body?

Hi Adrian

 As the Office Manager for CICs I have reviewed over 5,000 applications for CIC status and the vast majority operate with social rather than charitable aims.  We have no objections to CICs having charitable objects as long as the articles make clear that they are a CIC not a charity  and the community interest statement meets our test.  There is however no need to fireproof in this way and for most CICs,  charitable objects would not be appropriate.  I would hope that the agency looks at each application on a case by case basis and does not have this approach for each CIC it processes.  With over 4,700 CICs on the public register and 189 registered last month alone, we have had just 17 CICs convert to a charity (3 in 2007/08, 2 in 2008/09, 5 in 2009/10 and 7 so far this year).  The principal reasons are , (i) that they believe that a charity would be best suited to their activities, (ii) that they are attracted to the benefits that being a charity brings, (iii) that they believe being a charity will give them better access to funding. The process for conversion is reasonably straightfoward and is certainly easier than converting from a charity to a CIC,  of which we have had just 3 to date.  CICs that wish to convert to a charity need to pass a special resolution, amend their articles and provide a statement from the Charity Commission that they agree to the conversion - see attached:

http://www.cicregulator.gov.uk/CICforms/cictocharity.shtml

Alastair's suggestion, whilst workable, would involve the CIC winding-up, transferring its assets on dissolution and resolving the issue over names (if the new charity wanted the same name as the CIC), this is not a route I would recommend.   One final point, John is right that it is relatively easy to convert to a charity if you are a CLG, we are currently exploring the Commission's policy regarding CICs wishing to convert to charities that are CLS.  Watch this space!

Just read all this which is very interesting.  Does anyone have any info on this:  We have been CIC for 2 years with 3 elements to our business.  We want to change one of these to charity.  How can we do this?  also there is an existing charity who we actually have had contact with, with a similar name.  We are Square Peg Foundation CIC and they are Square Peg.  We have had this name for 2 years so wouldn't want to change it.  Sorry to mix this up with 2 issues.

Hi Sharon - if you scroll down a little further in this discussion thread you'll see a post from the CIC regulator which should hopefully help answer your questions here

Hi Adrian, Thanks for the information you've provided on the conversion of a CIC to a charity. I wonder if your statement about the process being relatively straightforward applies to both CIC's limited by guarantee and those limited by shares?  Thanks, K. 

charity law isn't able to be able to recognise/accept any incorporated body that has share capital Kellieanne, so you'd have to follow Alastair's suggest route above - the only except to this that I know of is Hastings Pier who are a community benefit society and their share capital was used to crowdfund as part of their wider fundraising campaigns (although it wasn't a straightforward application, requiring the agreement of at least 3 regulatory bodies and 2 national sector bodies...) 

Hi Adrian.  As the Policy Manager for the CIC Office, I can confirm that 61 CICs have chosen to convert to a charity since we opened in 2005.  Reasons vary but most felt that they should have been a charity at the outset and had been wrongly advised, not by our office I hasten to add.  Others were belatedly attracted to the tax benefit and rates relief that they could enjoy as a charity but not as a CIC and some sought funding from charitable trusts and were told that they would only help charities. The process is relatively straightforward and needs engagement with the Charity Commission   https://www.gov.uk/government/publications/community-interest-compa...  61 is a very small number over the years and it is a lot less than the number of charities that have converted to a CIC. As you will appreciate most CICs do not go down the conversion route because they want to operate as a business and make corporate decisions without ceding authority to trustees.  An attractive option is for the CIC to operate as a subsidiary company of a charity, chapter 2.5 refers:   https://www.gov.uk/government/uploads/system/uploads/attachment_dat...

thanks for adding all this detail and clarification Philip - great to get such depth of detail and insight from 'the horses' mouth' (rather than other routes of speculation and whispers ;-)

Thanks - this is really helpful...K

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