I’m currently looking into different models of entities and was wondering if anyone has any experience with the different ways of structuring social enterprises.

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There are a number of different options for structuring a social enterprise in the UK.  Commonly used legal forms include Limited company, Community Interest Company (CIC), and Industrial and Provident Society. However some social enterprises may also take on an unincorporated legal form such as an unincorporated association or a trust (or a combination of the two).  Details about this can be found here.

I don’t know much about Industrial and Provident Society and I will assume that you are interested in options that involve being incorporated so I will give you a few details about Limited Company and CIC’s.

Firstly, the Community Interest Company (CIC) which was first established in 2004 and is growing in recognition.  A CIC is a special type of limited company which exists to benefit the community rather than private shareholders. It differs from a normal limited company because by law it must include:

  • a ‘community interest statement’, explaining what your business plans to do
  • has an ‘asset lock’- a legal promise stating that the company’s assets will only be used for its social objectives, and setting limits to the money it can pay to shareholders
  • be approved by the community interest company regulator

Another option is to set up as a limited company. However a limited company does not obviously lend itself to automatically being a social enterprise which was shy the CIC was established. It is however possible to add a provision in its articles of association that define its social purpose. But it is important to note that it will always be possible for these provisions to be overturned or amended by a special resolution of the company’s members. However, there are ways to protect this one option is for the the company to be a wholly owned trading subsidiary of a charity, or for a charity (or another independent body) to own a ‘golden share’ which creates a mission lock. Big Society Capital and law firm Hogan Lovells have recently co-published a paper detailing this option which is definitely worth considering if you want to guarantee the companies social mission but do not want to be restricted by the asset lock of the CIC.

You might also be interested in exploring B-corp registration but this is not currently a legally recognised entity and is more of a certification of intent to be a socially minded company.


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