As the Bill is currently drafted, it is not clear whether or not the CIO is to be a limited liability vehicle. If it is not, then the directors (i.e. charity trustees) will be personally liable for their CIO’s debts. In circumstances where the value of the CIO’s debts is greater than the value of its assets, this could result in the directors meeting the shortfall out of their own pockets. This is the position currently facing trustees of charitable trusts and is undoubtedly the main reason why the charitable trust is unpopular with charities whose activities involve exposure to liability. Such charities are invariably established as companies limited by guarantee, a format that benefits from limited liability.

If the directors and members of CIOs will not benefit from limited liability, the new CIO format is likely to be unpopular. For this reason, it is important for the Bill to make it clear that the liability of CIO directors and members is limited, which is what this amendment achieves.