Specialist knowledge to help your social enterprise thrive
Social Enterprises come in all sorts of shapes and sizes and requires specialist knowledge and understanding to enable them to thrive. It is important to ensure that your operating structure is appropriate to your aims and objectives, as social enterprises use a variety of legal forms.
- Community interest companies (CICs) – this type of entity was set up in The Companies Act 2006 and was created specifically for social enterprises, organisations that have a social objective. There is additional regulation for a CIC to ensure that they satisfy a community interest test and it has an “asset lock” to prevent assets being distributed, except as permitted by legislation. A CIC cannot itself have charitable status. More information on CICs can be found by contacting the CIC regulator.
- Industrial and provident society (IPS) – many older co-operatives and community benefit societies use this form of entity. They are democratically controlled by their members in order to ensure their involvement in the decisions of the organisation.
- Companies limited by guarantee – these are often used as a legal structure for companies with a social mission, which can be written into their Memorandum and Articles of Association. Companies limited by guarantee can also apply for charitable status if they meet the relevant criteria.
- Companies limited by shares – these are, perhaps, the most flexible legal structure for business, and, whilst they are not regulated in the same way as a CIC, they can have a social aspect written into their Memorandum and Articles of Association.
- Charitable incorporated organisation (CIO) – for those entities which have purely charitable objectives, meet the criteria for public benefit and wish to avoid dual reporting to Companies House as well as the Charity Commission, the CIO may be appropriate. New charities may be formed using this structure and unincorporated charities can convert, although existing charitable companies are not currently able to convert. For all charitable entities the tax breaks associated with charitable status can be an important factor, click here for more information.