Compare Legal Structures
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LEG AL STRUCT URES FOR SOCI AL ENT ERPRISE AT A GLANC E Th i s i s a rough guid e t o t h e l e gal st ru c t ur e s mo st c ommonly a ss o c ia t e d wi t h s o c ial e n t e rpri s e . For mor e informa t ion on t h e m , s ee t h e w e b s i t e s li st e d b e low . For mor e g e n e ral informa t ion abou t bu s in e ss st ru c t ur e s , in c luding o t h e r op t ion s s u c h a s par t n e r s hip s and limi t e d liabili t y par t n e r s hip s , s ee h tt p: // www .bu s in e ss link .gov .uk . How e v e r , t h e r e ar e a vari e t y of l e gal r e quir e m e n ts a ss o c ia t e d wi t h s e tt ing up t h e st ru c t ur e s d e s c rib e d b e low and you s hould c on s id e r s ee king prof e ss ional advi ce b e for e your organi s a t ion adop ts any on e of t h e m . Legal structure Summary: most typical features Ownership, governance and constitution Is it a legal person distinct from those who own and/or run it? Can its activities benefit those who own and/or run it? Assets 'locked in' for community benefit? Can it be a charity and get charitable status tax benefits? Differences in the law as it applies in Scotland or Northern Ireland? Unincorporated association Informal; no general regulation of this structure; need to make own rules. Nobody owns - governed according to own rules. No, which can create problems for contracts, holding property and liability of members. Depends on own rules. Would need bespoke drafting to achieve this. Yes, if it meets the criteria for being a charity. No specific differences. Trust A way of holding assets so as to separate legal ownership from economic interest. Assets owned by trustees and managed in interests of beneficiaries on the terms of the trust. No, which means the trustees are personally liable. Not usually. Trustees/directors can only benefit if trust, court or Charity Commission give permission. Yes, if trust established for community benefit. Yes, if it meets the criteria for being a charity. No, subject to differences between English and Scots trust law. Limited company (other than Community Interest Company) www.companieshouse.gov.uk Most frequently adopted corporate legal structure; can be adapted to suit most purposes. Directors manage business on behalf of members. Considerable flexibility over internal rules. Yes, members' liability limited to amount unpaid on shares or by guarantee Yes, but no dividends etc to members if it is a company limited by guarantee. Would need bespoke drafting in articles, which could be amended by members. Yes, if it meets the criteria for being a charity. Scotland: no. Northern Ireland: separate but similar legislation. Community interest company (CIC) www.cicregulator.gov.uk An effective limited company structure for social enterprise with secure 'asset lock' and focus on community benefit. As for other limited companies, but subject to additional regulation to ensure community benefits. Yes, members' liability limited to amount unpaid on shares or by guarantee. Yes, but must benefit the wider community. Can pay limited dividends to private investors and directors can be paid. Yes, through standard provisions which all CICs must include in their constitutions. No, but can become a charity if it ceases to be a CIC. Scotland: no. Northern Ireland: legislation not yet in place. Industrial & Provident Society (IPS) (Co-operative) For bona fide co- operatives that serve by trading with them or otherwise supplying them with goods or services. Committee / officers manage on behalf of members. One member, one vote (regardless of size of respective shareholdings). Yes, members liability limited to amount unpaid on shares. Yes, but should do so mostly by members trading with society, using its facilities etc, not as a result of shareholdings. Would need bespoke drafting in articles, which could be amended by members. No, would have to be constituted as community benefit type of IPS. Scotland: no. Northern Ireland: separate but similar legislation. Industrial & Provident Society (IPS) (Community Benefit Society (BenComm)) Benefit community other than just own members and have special reason not to be companies. Like Co-op type, but new legislation provides option of more secure form of 'asset lock'. Yes, members liability limited to amount unpaid on shares. Must primarily benefit non-members - 'asset lock' applies. Yes, asset lock only survives dissolution if new statutory form of asset lock adopted. Yes, if it meets the criteria for being a charity. Scotland: no. Northern Ireland: legislation not yet in place. Charitable Incorporated Organisation First ready-made corporate structure specifically designed for charities. Similar to company but with different terminology , eg 'charity trustee' instead of 'director'. Yes, members either have no liability or limited liability. Members are not permitted to benefit and charity trustees are only able to benefit if constitution, court or Charity Commission give permission. Yes. Cannot be anything but a charity, and must meet the criteria for being a charity. Scotland: separate but similar legislation and regulator. Northern Ireland: legislation not yet in place. http://www.fsa.gov.uk/pa ges/doing/small_firms/ms r/societies/index.shtml http://www.charity- commission.gov.uk/regist ration/charcio.asp
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Transcript of Compare Legal Structures
8/6/2019 Compare Legal Structures
http://slidepdf.com/reader/full/compare-legal-structures 1/2
LEG AL STRUCT URES FOR SOCI AL ENT ERPRISE AT A GLANC E
Th i s i s a rough guid e t o t h e l e gal st ru c t ur e s mo st c ommonly a ss o c ia t e d wi t h s o c ial e n t e rpri s e . For mor e informa t ion on t h e m , s ee t h e w e b s i t e s li st e d b e low . For mor e g e n e ral informa t ion abou t bu s in e ss st ru c t ur e s , in c luding o t h e r op t ion s s u c h a s par t n e r s hip s and limi t e d liabili t y par t n e r s hip s , s ee h tt p: // www .bu s in e ss link .gov .uk . How e v e r , t h e r e ar e a vari e t y of l e gal
r e quir e m e n ts a ss o c ia t e d wi t h s e tt ing up t h e st ru c t ur e s d e s c rib e d b e low and you s hould c on s id e r s ee king prof e ss ional advi ce b e for e your organi s a t ion adop ts any on e of t h e m .
Legal structure Summary: mosttypical features
Ownership,governance and
constitution
Is it a legal persondistinct from
those who ownand/or run it?
Can its activitiesbenefit those whoown and/or run it?
Assets 'lockedin' for
communitybenefit?
Can it be acharity and get
charitable statustax benefits?
Differences in thelaw as it applies in
Scotland orNorthern Ireland?
Unincorporatedassociation
Informal; no generalregulation of thisstructure; need tomake own rules.
Nobody owns -governed accordingto own rules.
No, which cancreate problems for contracts, holdingproperty and liabilityof members.
Depends on ownrules.
Would needbespoke draftingto achieve this.
Yes, if it meets thecriteria for being acharity.
No specificdifferences.
Trust A way of holdingassets so as toseparate legalownership fromeconomic interest.
Assets owned bytrustees andmanaged in interestsof beneficiaries onthe terms of the trust.
No, which meansthe trustees arepersonally liable.
Not usually.Trustees/directorscan only benefit if trust, court or CharityCommission givepermission.
Yes, if trustestablished for communitybenefit.
Yes, if it meets thecriteria for being acharity.
No, subject todifferences betweenEnglish and Scotstrust law.
Limited company
(other than CommunityInterest Company)
www.companieshouse.gov.uk
Most frequentlyadopted corporatelegal structure; can
be adapted to suitmost purposes.
Directors managebusiness on behalf of members.
Considerableflexibility over internalrules.
Yes, members'liability limited toamount unpaid on
shares or byguarantee
Yes, but no dividendsetc to members if it isa company limited by
guarantee.
Would needbespoke draftingin articles, which
could beamended bymembers.
Yes, if it meets thecriteria for being acharity.
Scotland: no.Northern Ireland:separate but similar
legislation.
Community interestcompany (CIC)
www.cicregulator.gov.uk
An effective limitedcompany structure for social enterprise withsecure 'asset lock'and focus oncommunity benefit.
As for other limitedcompanies, butsubject to additionalregulation to ensurecommunity benefits.
Yes, members'liability limited toamount unpaid onshares or byguarantee.
Yes, but must benefitthe wider community.Can pay limiteddividends to privateinvestors anddirectors can be paid.
Yes, throughstandardprovisions whichall CICs mustinclude in their constitutions.
No, but canbecome a charity if it ceases to be aCIC.
Scotland: no.Northern Ireland:legislation not yet inplace.
Industrial & ProvidentSociety (IPS)
(Co-operative)
For bona fide co-operatives that serve
by trading with themor otherwise
supplying them withgoods or services.
Committee / officersmanage on behalf of members. Onemember, one vote(regardless of size of
respectiveshareholdings).
Yes, membersliability limited toamount unpaid onshares.
Yes, but should do somostly by memberstrading with society,using its facilities etc,not as a result of
shareholdings.
Would needbespoke draftingin articles, whichcould beamended by
members.
No, would have tobe constituted ascommunity benefittype of IPS.
Scotland: no.Northern Ireland:separate but similar legislation.
Industrial & ProvidentSociety (IPS)
(Community BenefitSociety (BenComm))
Benefit communityother than just ownmembers and havespecial reason not tobe companies.
Like Co-op type, butnew legislationprovides option of more secure form of 'asset lock'.
Yes, membersliability limited toamount unpaid onshares.
Must primarily benefitnon-members - 'assetlock' applies.
Yes, asset lockonly survivesdissolution if newstatutory form of asset lockadopted.
Yes, if it meets thecriteria for being acharity.
Scotland: no.Northern Ireland:legislation not yet inplace.
Charitable IncorporatedOrganisation
First ready-madecorporate structurespecifically designedfor charities.
Similar to companybut with differentterminology, eg'charity trustee'instead of 'director'.
Yes, memberseither have noliability or limitedliability.
Members are notpermitted to benefitand charity trusteesare only able tobenefit if constitution,court or Charity
Commission givepermission.
Yes. Cannot beanything but acharity, and mustmeet the criteriafor being a charity.
Scotland: separatebut similar legislation andregulator. NorthernIreland: legislationnot yet in place.
http://www.fsa.gov.uk/pa
ges/doing/small_firms/msr/societies/index.shtml
http://www.charity-commission.gov.uk/registration/charcio.asp
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