The Economic Crime and Corporate Transparency Act 2023 (ECCTA) is ushering in the most significant overhaul of Companies House in decades. While the reforms aim to combat fraud and enhance transparency, they are poised to create new challenges for charitable companies limited by guarantee, especially smaller ones already operating with limited administrative capacity. Against this backdrop, many charities are reconsidering their legal structure and asking: Is now the right time to convert to a Charitable Incorporated Organisation (CIO)?

What’s changing under ECCTA?

ECCTA introduces a broad range of changes designed to clamp down on economic crime and improve the integrity of the companies register. Key changes rolling out through 2024–2026 include:

• Identity verification (IDV): All company directors, People with Significant Control (PSCs), and those who file with Companies House will need to verify their identity, starting voluntarily from March 2025 and becoming mandatory by late 2025. Around seven million people are expected to be affected.
• Greater powers for Companies House: The registrar now has legal powers to reject or query filings, remove misleading information, and work more closely with law enforcement.
• Stricter registered office rules: PO Boxes are no longer acceptable. A physical, verifiable address is mandatory, and new address suppression mechanisms are coming into effect for those at risk.
• Increased financial disclosure: Smaller companies will no longer be able to file abridged or ‘filleted’ accounts. Profit and loss information will be required, impacting how much of a charity’s financial performance is made public.
• Higher filing fees and penalties: From May 2024, Companies House fees increased (e.g. confirmation statement up from £13 to £34), and penalties for non-compliance (up to £10,000) are set to become more routine.

These measures, while essential for tackling fraud, significantly raise the compliance bar for small charitable companies that are already balancing tight budgets and volunteer-driven governance.

What does this mean for charitable companies limited by guarantee?

Charitable companies face a ‘double burden’ of regulation. They are subject both to company law (via Companies House) and charity law (via the Charity Commission). With ECCTA, the administrative load on the company law side increases significantly, especially for smaller charities. Annual filings will become more complex and potentially more costly, trustees may need to undergo ID checks, and the risk of penalties for administrative oversights will rise.

For small charitable companies, these added layers of red tape could divert time and resources away from their charitable objectives. It’s no surprise, then, that many are revisiting the option of converting to a Charitable Incorporated Organisation (CIO).

The CIO advantage

CIOs are legal entities specifically designed for charities. They offer the benefits of incorporation, such as limited liability and the ability to enter into contracts, but with simpler reporting requirements.

Here are some reasons why a small charitable company might consider switching to a CIO:

• Single regulator: CIOs report solely to the Charity Commission. No Companies House filings. No confirmation statements. No ID verification under ECCTA.
• Lower administrative costs: Without the Companies House overheads, CIOs reduce annual compliance costs, which is particularly valuable for small charities.
• Transparency without complexity: CIOs still file accounts and annual returns, but they do so under charity law, avoiding duplication and the new Companies Act rules.

Of course, the CIO structure isn’t perfect. Banks are less likely to lend to CIOs unless it is through the traditional route of a loan being secured by a legal charge against a property. If a charity needs to borrow working capital, a company may be a more suitable route. Converting from a charitable company to a CIO, while relatively well-trodden, is still a formal process involving the Charity Commission, member resolutions, new governing documents etc. It can take a long time with significant delays at the Commission.

Should you convert?

For many small to mid-sized charitable companies, switching to a CIO makes a lot of sense. It brings long-term simplicity, cuts down on admin, and lets you focus more on your mission than on meeting the demands of two regulators.

While the ECCTA reforms are a positive step in tackling fraud and improving transparency, they also add extra layers of complexity for charitable companies limited by guarantee. If your charity is looking to reduce the compliance burden, converting to a CIO could be a smart move.

Next steps

If you're thinking about conversion or just want to explore whether it’s right for your charity, please get in touch – we’d be happy to help guide you through the process.