Briefing Note

Incorporating a Charity

Updated June 2018

Please note that this Briefing Note is not maintained, and reflects the law as at the date of publication or update


This Briefing Note provides an overview of the different legal structures available to charities and considers when and why a charity may want to incorporate.

This Briefing Note should not be relied upon as legal advice and you should contact us for advice on your specific circumstances.

You may also wish to refer to our separate Briefing Note that deals with Charitable Incorporated Organisations (CIOs) in more detail.

Main legal structures

There are four main legal structures available in England and Wales to individuals or organisations wishing to pursue charitable purposes. These are:

  • Trusts. A charitable trust will usually be governed by one or more deeds or declarations of trust and/or one or more Charity Commission Schemes. They can also be created by a bequest in a will or can arise by way of legal presumption (e.g. where there is evidence that property has been devoted to charitable purposes for a long time but the instrument creating the charity cannot be found). The trustees are charity trustees.
  • Unincorporated associations. These usually have a written constitution or rules that are a contract between its members, although it is possible for an unincorporated association to be created without any form of written governing document. The charity trustees are individuals appointed in accordance with the rules to carry out the day-to-day management of the association. They may be referred to as the committee, the board of management or similar.
  • Companies. Most charitable companies are set up as companies limited by guarantee. The constitution of a company limited by guarantee consists of its articles of association and any resolutions and agreement that affect its constitution. The directors of a charitable company are charity trustees. The company is governed by both charity law and company law and accordingly has to comply with the requirements of both the Charity Commission and Companies House.
  • Charitable Incorporated Organisations (CIOs). The CIO is a legal form of charity created in response to requests from charities for a new structure that provides some of the benefits of being a company, but without some of the burdens. CIOs are governed solely by the Charity Commission but have many of the features of a company, namely they have a separate legal personality and can enter into contracts in their own right.

Charities can also be:

  • Industrial and Provident Societies. These are community benefit societies (established and registered with the Financial Services Authority) and are corporate bodies with limited liability. Housing associations are often set up as Industrial and Provident Societies. However they are not common elsewhere in the charity sector.
  • Charitable corporations. These are created by either Royal Charter or Letters Patent granted by the sovereign on the advice of the Privy Council. Charities incorporated by Royal Charter are governed by the Royal Charter itself and bye-laws.
  • Acts of Parliament. The relevant statute or statutes, which may be altered by a Charity Commission or Parliamentary Scheme, governs the charity.
  1. Differences between unincorporated and incorporated status

The key differences between unincorporated and incorporated status relate to liability of the trustees and legal personality.

Neither unincorporated associations nor trusts provide the limited liability or separate legal personality enjoyed by corporate structures, such as companies and CIOs. Accordingly, the charity trustees will be personally liable for the repayment of any debts they have incurred on behalf of the charity that cannot be met from the charity’s funds. Additionally, unincorporated structures are unable to hold property in their own name. Unincorporated structures are therefore generally unsuitable where the charity undertakes large-scale activities or where there are significant contractual activities.

Conversely, an incorporated charity has a legal personality distinct from its members and trustees and has the legal capacity to do many things that a person can do. The liability of individual members, as well as the trustees (provided they have not acted negligently or improperly), is usually limited.

When to incorporate?

An unincorporated charity may wish to incorporate (as a company or a CIO) where:

  • The charity has or will have employees.
  • The charity does or will deliver charitable services under contractual agreements.
  • The charity does or will regularly enter into commercial contracts.
  • The charity is or will be the owner of freehold or leasehold land or other property.

The financial risk in being a charity trustee of an unincorporated body increases as the scale and complexity of that charity’s activities increase.

The incorporation process

An existing unincorporated charity cannot simply be converted into a company or CIO. Instead, a new company or CIO must be formed and registered. The new corporate body will be a new entity separate from the previous unincorporated charity and will have a new charity registration number. The assets and undertaking of the unincorporated charity must then be transferred to the new incorporated charity. The method of transfer depends on the unincorporated charity’s constitution.

Following the transfer, the unincorporated charity may be dissolved and removed from the Charity Commission register. In some cases, the Charity Commission will agree to retain the old unincorporated charity as a ‘linked charity’ on their register. Alternatively, where the unincorporated charity is likely to be the subject of any outstanding legacies, the incorporation can be registered as a merger so that any future legacies in the name of the old unincorporated charity will usually take effect as a gift to the successor charity.

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