CIO Disadvantages for Charitable Trusts: What You Need to Know

So you’re thinking about running your charitable trust as a Charitable Incorporated Organisation—better known as a CIO. It sounds modern and less stuffy than traditional structures, right? But slow down a minute. The truth is, CIOs come with their own set of headaches, especially for anyone hoping for smooth sailing.

You might hear that a CIO keeps things simpler and gives you ‘limited liability’, which sounds great on paper. But there’s a flip side. You only report to the Charity Commission, but don’t crack open that celebratory chocolate just yet. There’s a snag: that same independence sometimes means you’re stuck in a holding pattern if the Commission’s wheels turn slowly (and trust me, they do—there are cases where it’s taken over a year for even basic changes to get approved).

Plus, if you handle property or larger sums of money, CIOs can raise a few eyebrows at the bank and with funders who prefer older, more ‘reliable’ formats like charitable companies or trusts. If you’re looking for flexibility, or you have big plans for merging, expanding, or fundraising, there might be a few roadblocks ahead with the CIO setup.

• CIOs: What’s the Big Idea?
• Hidden Red Tape of CIOs
• Fundraising and Asset Hurdles
• Governance and Control Issues
• Reporting and Compliance Demands
• Is a CIO Right For Your Trust?

CIOs: What’s the Big Idea?

If you’re picking a legal structure for your charity, there’s been a lot of buzz around something called the CIO or Charitable Incorporated Organisation. So what’s actually different about this, and does it really make life easier?

The CIO format was rolled out in England and Wales back in 2013, aiming to give charities a more user-friendly option. They’re designed to combine the best of a company and a trust—with the big pull being limited liability for charity trustees and members. That basically means, if things go sideways, like your trust faces a lawsuit or sudden debts, your personal assets (your house, your car, your rainy-day savings) usually aren’t on the line. That’s a big deal for peace of mind.

Another supposed win: the paperwork. CIOs are registered only with the Charity Commission—not Companies House. At first glance, this cuts out some double-reporting. But keep in mind, some say it’s just a different hoop to jump through. You’ll still have annual accounts, reports, and a constitution to update whenever anything changes.

• You get legal status—yep, the CIO itself can enter contracts, own property, or employ staff.
• Members and trustees aren’t liable for debts (if they act properly, of course).
• One set of accounts to file, not two.

Here’s a quick comparison for context:

The short version: CIOs try to keep things simple but safe. They appeal to small charities and those starting out, especially anyone nervous about putting their own pocket on the line. But this model isn’t free from headaches—just a different set compared to the old-school trusts and companies.

Hidden Red Tape of CIOs

At first glance, setting up a Charitable Incorporated Organisation feels like a shortcut—just one regulator to deal with, no Companies House forms, and everything online. But once you’re in, the paperwork and delays can sneak up on you. The big problem? The Charity Commission has the final say on every change your CIO makes. If you want to change your constitution, spell out your charity's objects, or update trustee details, you’re left waiting for official approval. It’s not uncommon for basic changes to take months.

Need to merge with another charity? Prepare for even more steps. Unlike charitable companies, which file fast changes with Companies House, CIOs are on Commission timeframes, which can be painfully slow. In 2023, the average processing time for amendments at the Charity Commission was nearly 2 months, and that’s if you didn’t run into requests for more documents or clarifications.

Here’s a look at how CIO red tape compares to other structures:

It’s not just the speed. If your CIO holds valuable assets or receives restricted grants, every alteration or big decision must tick all the right compliance boxes. The Commission is known for detailed scrutiny—one missed document, and your application sits on ice until everyone’s satisfied.

This extra CIO admin means more time lost and more risk of running into problems when you least expect it. If you’re juggling a busy charity, that kind of hold-up can stall real projects, not just paperwork.

• Stay on top of document requirements—read every guideline before you hit “submit.”
• Keep a clear paper trail of trustee decisions and changes in case the Commission requests them.
• Don’t assume quick fixes; build delays into your project plans if the change is crucial.

It's easy to overlook the admin work when you're setting up, but once your CIO is rolling, it's this red tape that slows you down most.

Fundraising and Asset Hurdles

Raising money and handling your charity’s stuff sounds like it should be straightforward, but with a CIO (Charitable Incorporated Organisation) it’s rarely as simple as people hope. One of the first hiccups many charities run into is that certain funders and banks still see CIOs as the “new kids on the block.” Even though the CIO model has been around in the UK since 2013, not all institutions are fully comfortable with it, especially compared to charitable companies or tried-and-tested trusts.

If you want to borrow money or get a mortgage for property, CIOs can find themselves jumping through extra hoops. Some banks still have stricter rules, maybe even more paperwork or higher requirements for guarantees—because creditors can only go after charity assets, not personal ones. This sounds protective, but can make lenders nervous and less willing to take a chance.

Let’s not forget about fundraising. Some grantmakers and traditional donors hesitate if your structure is unfamiliar. A 2023 survey from UK Funders’ Association showed that close to 20% of large grant-giving bodies had ‘internal paperwork’ or checks for CIOs that didn’t exist for charities using older formats. It’s like being asked for your ID at the bar when you’re clearly over 30.

Another geeky problem: registering your assets. Transferring buildings, investments, or even a van into a CIO’s name comes with red tape. Land Registry can treat the process differently than with a limited company or trust, which could delay things for weeks or months. And if your charity owns property jointly with another organisation, things get stickier—because few people are sure how to handle joint ownership under CIO law.

Here are a couple of practical tips to avoid these traps:

• Before transferring any major assets, talk to a solicitor who actually knows CIO law—not just a regular charity adviser.
• Check with your bank (and a few others) about their lending policy on CIOs before you need to borrow anything big.
• When applying for grants or pitching to big donors, be upfront and give a super-simple crib sheet of what a CIO actually is; it saves confusion and builds trust.

There are ways to make it work, but if you thought CIO status meant “easy street” for assets and fundraising, it’s smarter to go in with your eyes wide open.

Governance and Control Issues

Here’s a reality check: the structure of a CIO means you don’t always get the control or decision-making speed you expect. Trustees are still central, but the model locks you into legal and regulatory routines you might not see coming at first.

With CIOs, all power officially sits with the trustees, not with any outside members (unless you set up a CIO with a wider membership, which most don’t). This can cause frustration for founders or wider volunteers who want a say, but find the rules won’t let them. Want to change your charity’s rules or swap trustees? That usually needs Charity Commission approval. And as many have learned, approvals can drag on for months.

There’s sometimes confusion between trustees and members, because some CIOs are ‘foundation’ style (trustees only), while others are ‘association’ style (members and trustees). This isn’t just red tape—mixing these up can lead to real arguments. For example, a 2023 review from the Charity Law Association pointed out that more than 30% of newly registered CIOs made governance errors in their first year, mostly from misunderstanding their rules.

Another pain point: if you want to merge with another charity, transfer assets, or wind things up, the process goes through the Charity Commission. You don’t get the same flexibility as traditional charitable trusts or companies—no quick boardroom votes here. Decisions can get stuck in the pipeline, especially if your documentation isn’t 100% perfect.

Here’s a glance at what commonly catches people out with CIO governance:

• Unclear distinction between trustees and any members
• Delays in making urgent decisions while waiting for approvals
• Disagreements about who has the final say, especially during conflicts
• Harder to bring in or remove trustees swiftly
• No easy route for members or supporters to hold the board accountable

To put things in perspective, check out this data from Charity Commission records:

So, before you jump in, ask yourself how much control and flexibility you really need. If you value quick decisions and simple changes to your charity’s structure, the CIO route might not meet your expectations.

Reporting and Compliance Demands

This is the part where a lot of folks running a CIO get caught off guard. You’d think one regulator—the Charity Commission—means a smoother ride, but it’s not always that simple. For starters, every CIO has to file an annual report and annual accounts, even if you’re running a tiny operation on a shoestring. Skipping a deadline? That’s not forgiven easily; late filings are visible on the public register and can make your trust look less trustworthy to both donors and grant-givers.

Unlike regular charitable trusts, CIOs must be on top of the Charity Commission’s digital system for submitting documents. For some smaller trusts, especially those run by volunteers, that means a learning curve with online forms and strict formats for accounts—even if money is tight or your numbers are simple. It’s all official and public, so you can’t fudge it.

Here’s a practical kicker: every trustee’s details have to be kept up-to-date. If one trustee leaves or changes their address, the records at the Charity Commission need updating, or you could run into problems down the line, like banking headaches or legal mix-ups. Changing your rules or trustees? That’s a process—usually online and waiting for the Commission to approve changes, which isn't always quick.

On top of regular reporting, CIOs are required to keep statements about their public benefit and must explain clearly how their work is actually helping people. The Commission can (and sometimes does) ask for extra information if something doesn’t add up. It’s not just box-ticking; there’s a real expectation to be transparent and detailed.

If you’re used to minimal paperwork as a traditional trust, this can feel like a big step up. So before jumping into the CIO pool, get ready for more admin, more deadlines, and more time spent on compliance than you might expect. It’s the price tag that comes with modernizing your structure.

Is a CIO Right For Your Trust?

Choosing whether to set up as a CIO can really shape how your charity runs day-to-day. It’s not just a paperwork choice—it alters everything from how you handle money to how free you are to make changes later. So, how do you figure out if this structure fits what you actually want to do?

First off, if your trust is tiny and only moves small amounts of cash, the CIO route could spare you hassle with Companies House (since you report just to the Charity Commission). That saves admin hours. But if your plans involve owning property, complicated fundraising, or merging with other groups, you could hit some roadblocks. For example, some larger grantmakers and banks still view CIOs as new and might give you the side-eye about bigger transactions or mortgages.

CIOs lock your trust into a specific legal form that can be hard to change. If you one day want to switch to a charitable company, you’d need to close the CIO and transfer all your assets—a process that’s not fast or cheap. Plus, dissolving a CIO isn’t like simply quitting; you have to follow a formal ‘winding up’ with the Commission, and this eats up more time and effort than many expect.

Here’s a quick checklist to help you figure out if a CIO makes sense for you:

• Will you mainly raise funds from the public, or do you want the option to seek large grants or loans?
• Are your trustees okay with higher admin around changes, like updating your governing document or merging?
• Do you expect to own property or enter into contracts over a certain value?
• Would you ever want to restructure or change your legal model easily?

If most of these spark worry rather than comfort, a traditional charitable trust or an incorporated company might be a better fit. If, however, staying simple is your main aim and your activities are pretty standard, then a CIO could work.

Don’t forget, all the rules and quirks we’ve talked about above relate to CIO charities registered in England and Wales. Scotland and Northern Ireland use different systems, so double-check if you’re based there.