Our charity governance team regularly registers new charities with the Charity Commission including both charitable companies and charitable incorporated organisations (CIO). We are increasingly finding that it is taking the Charity Commission significantly longer to respond to charity registration applications. Whilst 18 months ago it would often take two to three months to register a new charity, we now find the Commission's average response time to be about five to six months. There are clearly exceptions and we have been able to register straight forward grant making charities within a few days, but this is no longer the norm.
A significant loss of funding and cuts in staff have meant that the Commission is struggling to manage an increasingly heavy workload. This appears likely to continue with the Commission dealing with more regulatory issues such as serious incident reports and safeguarding issues.
Impact on charities
Delays in registration can have a serious impact not only for new charities but for charities considering incorporation. Long delays can result in a loss of funding if the charity is required to be registered by a certain date. Where a new charity is being registered to enable a merger of charities to take place delays from the Charity Commission can result in the timeline previously agreed by the merging parties being unachievable.
The likelihood of a significant delay needs to be factored in when establishing a new charity.
Alternative structures
A potential solution, if you need a legal entity establishing quickly, is to set up a charitable company rather than a CIO. A charitable company can be established with Companies House within a few days (or even faster if required) and, as long as it has exclusively charitable objects for the public benefit, the company will be considered legally charitable from the date it is established. It is also possible for the company to register as a charity for tax purposes with HMRC. However, registering with the Charity Commission will take just as long as for a CIO and it may be that this registration is required in order for the company to become fully operational, for example if this is condition of funding.
It is also possible to set up a charitable trust or unincorporated association quickly, although registration with the Charity Commission will take just as long. These types of organisation are often not suitable for new charities, as they do not offer the protection of limited liability to the trustees that companies and CIOs offer.
A CIO will only come into existence when the Charity Commission registers it, so if you need an organisation to come into existence quickly, a CIO may not be the best option. If timing is less of an issue a CIO is often the preferred option. There is no requirement to provide proof of income to the Charity Commission in order to register a CIO, whereas other legal forms must provide proof of at least £5,000 of income.
Potential actions
It is always possible to note special circumstances in the charity registration application form, which the Commission will consider when making its initial assessment of the application. If there are sufficiently serious reasons, generally involving a potential loss of charitable funds or a risk to children or vulnerable persons, the Commission will prioritise the application.
Whilst there is no harm in including a reference to special circumstances, in our experience the Commission is reluctant to prioritise cases even where good reasons are stated, given the volume of their workload.
The Charity Commission continues to be under increasing financial and workload pressure and with its continuing focus on regulatory aspects it is unlikely that charity registrations will take place at a quicker rate any time soon. Potential trustees of a new charity need to factor this into the timeline process and realise that charity registration will no longer be the relatively quick process that we once had.