A brief description of: trusts, unincorporated associations, companies limited by guarantee, charitable incorporated organisations, and community interest companies.
Category: Organisational Structures
When setting up your social enterprise it is important to have the right legal structure. Luckily there is clear advice online:
for your social enterprise.
- The governing document is a trust deed or a will.
- There is no protection
from liability for the trustees.
2. Unincorporated association
- A group of individuals who come together to pursue a shared goal.
- Such an organisation is not subject to any regulation by company law and its liabilities are
- The governing document is a constitution or rules and there is usually a membership.
- The trustees are often referred to as the management committee. There is no protection from liability for the trustees, and consequently the Members can be personally liable.
- With the relative informality and
flexibility afforded, an Unincorporated Association may offer an appropriate structure for
3. Company limited by guarantee (CLG)
- A Company which does not feature any Share Capital (subject to historic exceptions).
- The Members of a CLG undertake to pay an amount (usually a nominal sum e.g. £1 or
£10 etc) to contribute to the assets of the CLG in the event of it being wound up.
- As there are no shares, a CLG cannot pay Dividends. Consequently,
a CLG is unlikely to be suitable as a vehicle for distributing Profits to Members or other
investors, which may make it suitable as a vehicle for Social Enterprise.
- A CLG can become a registered Charity if its objects are exclusively charitable, unless it is a CIC.
- The trustees (or directors) are protected in most circumstances
against contractual liabilities. Charitable companies must register with
Companies House and, usually, with the Charity Commission.
4. Charitable incorporated organisation (CIO)
- The CIO was created in response to requests from charities for a new structure which could provide some of the benefits of being a company, but without some of the burdens.
- The governing document will be a constitution.
- The trustees will be
protected in most circumstances against contractual liabilities.
- A CIO is registered with the Charity Commission and has a two level structure with Trustees governing the day-to-day activities of the CIO who
are accountable to the membership.
5. Community Interest Company (CIC)
- A Company subject to additional requirements (over and above those for registering a CLG) and the Community Interest Test, acting for the benefit of a defined community.
- A CIC is intended as a specialist vehicle for Social Enterprise and cannot register as a
- A CICs Articles of Association must contain certain prescribed provisions, including a
statutory Asset Lock.
- Subject to the approval of, and on-going regulation by, the CIC Regulator, and is also
registered with Companies House.
- A standard CLG can be converted to a CIC if appropriate amendments are made to
- A CIC limited by shares can potentially pay Dividends to Shareholders, subject to restrictions.