Legal structures

We don’t really understand why everyone gets so fixated about legal structures when these is probably the least important aspect of setting up a social enterprise. Still it is a popular request and at the risk of providing some free legal advice (and we aren’t lawyers – honestly), the following resources should help you work out what is the right legal structure for you. Bearing in mind that there is no perfect legal structure and they all have advantages and disadvantages (and nearly all of them can be made to work).

You may find Podcasts 7 and 8 useful which cover:

  • The history and development of Community Interest Companies
  • Why you should never chose your legal structure based on someone else telling you that's what you should be
  • Companies limited by guarantee are not a bad default structure
  • CICs are a "bolt on" to existing limited company structures
  • The key elements of a CIC
  • Limited by shares vs limited by equity
  • Why children should not be listening to this podcast
  • Limitations on the community you are set up to benefit
  • Issues around the asset lock and how you can incorporate this in any company
  • Co-ops are not legally defined in the UK
Main pros of being a CIC
  • Kite-mark that you are a social enterprise
  • Provides assurances with public sector commissioners
  • The CIC regulator is very helpful and supportive
Main cons of being a CIC - part 1
  • Much more bureaucracy in setting one up and in annual reporting
  • The Chair has much more power than the other Directors
  • The role of alternate directors

Main cons of being a CIC - part 2

  • The power the regulator has to remove directors, appoint directors and dissolve the CIC without any consultation
  • The regulator can overule the wishes of the CIC's own community
  • The power the regulator has to restrict your trading activity
  • The power the regulator has to instigate civil proceedings (i.e. sue people) on your behalf without your consent
  • The asset lock restricts the level of interest payments to an outside investor or institution

Click here to access the first part (Podcast 7)

Click here to access the second part (Podcast 8)

If you have suggestions for new content, resources or information, then please pop it in our suggestion box. The current most popular suggestions for this section are:

  • What is the right legal structure for my social enterprises
  • The pros and cons of CICs (Community Interest Companies)
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