A new legal structure for charities, to be called the Charitable Incorporated Organisation (CIO), should be set up, according to a Law Reform Commission paper being published today.
This would allow for the better regulation of charities, which are virtually unregulated at present.
The new structure would replace the various legal forms of organisation used by charities, which include charitable trusts, limited companies and unincorporated associations.
The various forms of organisation makes the regulation of charities difficult, and also makes it difficult to codify any set of rules across all the different structures, none of which were designed specifically for charities.
The proposed organisation would be specifically tailored to reflect the nature of charities, and would provide a separate legal entity for its members, give them limited liability, and have a model constitution designed in consultation with the charity sector, according to the paper.
It also suggests a minimum of three trustees on each charity, and the possibility of a one- or two-tier structure, with either charity trustees alone, or a structure with both trustees and members.
The commission recommends that the proposed CIO structure should be an additional option for incorporated charities and that the other existing methods of incorporation should continue to be available for a period.
Existing trusts and unincorporated associations should be given the option of converting to the CIO structure, and that this should be provided for in any proposed legislation in a simple, cost-effective manner. Charities carrying on trading activities directly related to their charitable purposes should also be allowed to avail of the new structure.
The commission points out that a company is a legal structure established with a view to distributing profits to its members, which is not consistent with the pubic-benefit purposes of charities.
The new structure should be reviewed five years after its introduction, and at that time the option of allowing the other structures to continue should be reconsidered.
The paper being published today complements a consultation paper on the duties of charitable trustees published last February. That was published in conjunction with the Department of Community, Rural and Gaeltacht Affairs, which is involved in establishing a new statutory regulatory framework for the charities sector.
It published its own report in December 2003.