Thoroughly modern giving

In july, The Home Office published Charities and Not-for-Profits: A Modern Legal Framework. It's the government's response to a Cabinet Office strategy unit report, published in September 2002, on the law for charities and the not-for-profit sector.

The strategy unit's report aimed to modernise the conditions within which charities operate. Its key recommendation – backed by the government – was a new legal form called the "charitable incorporated organisation" or CIO.

The review envisaged that the CIO would be a substitute for the formats currently used by charities seeking incorporation and the benefits of limited liability status, such as the company limited by guarantee or the industrial and provident society. One of the strategy unit's objectives was to clear up the competing legal principles applicable to company directors on the one hand and charitable trustees on the other.

The government has signalled a clear intention to include the CIO in the proposed Charities Bill. The basic framework for the organisation is to be set out in primary legislation while the technical provisions – which will probably need amendment in the light of the experience of CIOs – are to be contained in secondary legislation, which is much more easily and quickly changed.

A key feature of the CIO will be the ease in which organisations can convert to it from other legal forms. Five years after it is introduced, the government will review the need for charities to use the forms of companies limited by guarantee and industrial and provident societies at all. Hopefully, this will apply only to new organisations rather than existing ones. However, for the moment, the CIO would not be a compulsory form for all charities seeking the benefits of incorporation.

This proposal has great potential for the social housing sector, particularly when taken with the review's other recommendations – notably the recommendation to designate social housing as a proper charitable activity in itself, which it currently is not.

The government response also accepts the recommendation that the Charity Commission, with advice from the Cabinet Office's regulatory impact unit, should assess the impact of regulation on charities and other not-for-profit organisations.

The plan is for the commission to monitor regulation over time and publish the results, with a view to highlighting areas where regulation appears excessive. The number of regulators and amount of regulation in the social housing field has been the subject of grumbles for some time, so one hopes there will be some significant changes here.

The plan is for the Charity Commission to monitor regulation over time and highlight areas where it appears excessive

Perhaps this may even have a bearing on the future of the Housing Corporation.

Many charitable housing associations are, in fact, exempt charities by virtue of being industrial and provident societies. The review found that such housing associations are not being monitored in relation to charity law requirements and that, as a result, "some of these organisations" were not aware of the requirement of charity law in relation to such matters as governance and stewardship of funds. The review was concerned that this potentially lays these organisations open to challenge.

The proposed solution to this was to require the "main regulators" of housing associations to assess compliance with charity law as part of their usual monitoring process, but in such a way as to "minimise any additional regulatory burden". The Charity Commission's existing power to give advice to exempt charities on their legal and regulatory responsibilities is to be extended to these main regulators. The main regulators – which would, of course, include the Housing Corporation – will be given the power to ask the commission to investigate any concerns.

It is also worth noting that those housing associations that are not registered social landlords will, on implementation of the recommendations, be required to register with the Charity Commission. This could represent a significant change for many housing groups.

The government's plan is to identify an acceptable main regulator for each charity and, where this cannot be done, the charity will be required (if above the proposed £100,000 annual income threshold) to register with the Charity Commission.

The Housing Corporation may be given the role of main regulator even in relation to charitable industrial and provident societies that are not RSLs but that are part of an RSL group.