New legislation concerning insolvent charities came into force on 2nd January 2013. The Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012 (SI 2012/3013) makes it possible for a charity to be treated as a limited company for the purposes of
insolvency. Company Voluntary Arrangements (CVAs), Creditors Voluntary Liquidations (CVLs) and Administration are now options for charities which are no longer financially viable.
Trustees of struggling charities will be able to think in terms of recovery and restructure, as
opposed to simply winding-up the organisation if sufficient funds cannot be found. It is also welcome news for creditors of charitable organisations: creditors can, understandably, be reluctant to instigate more aggressive collection methods against
charities and the new regulations offer new avenues, with greater chances of debt recovery.
To be eligible for the restructuring options, charities must be registered as a Charitable Incorporated Organisation (CIO), a new category of charity which came into being on 2nd January 2013. Currently, only new charities may opt for this categorisation,
instead of the previously available options of a Society, a Trust or a Company Limited by Guarantee. Measures are being put in place for existing charities to alter their categorisation later in 2013.