Live Q&A  Social Enterprise   a Guide to Legal Structures - The Guardian: Social Enterprise Network
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Live Q&A Social Enterprise a Guide to Legal Structures - The Guardian: Social Enterprise Network

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A fascinating account of the online Q&A that took place on 20 January 2011 by The Guardian - Social Enterprise Network

A fascinating account of the online Q&A that took place on 20 January 2011 by The Guardian - Social Enterprise Network

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Live Q&A  Social Enterprise   a Guide to Legal Structures - The Guardian: Social Enterprise Network Live Q&A Social Enterprise a Guide to Legal Structures - The Guardian: Social Enterprise Network Presentation Transcript

  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Live Q&A: Social enterprise - a guide to legal structures Which legal structure best suits your new social enterprise? Does it fit your long-term vision for the business? Ask our panel of experts on 20 January Eliza Anyangwe Guardian Professional, Tuesday 18 January 2011 10.18 GMT1 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... What impacts can legal structure have on your social enterprise? Photograph: Sang Tan/AP Which legal structure best suits your new social enterprise? Does it fit your long-term vision for the business? Ask our panel of experts on 20 January Just how much profit can a social enterprise make before it is no longer a social enterprise? Can a limited company that starts a venture with a social or environmental purpose then call itself a social enterprise? The question of what exactly is a social enterprise is an age-old debate and there seem to be few in the sector who are not exasperated with it. While you may share Jonathan Jenkins "ambivalence about which legal form any social venture takes," it is nevertheless important that some sort of classification occurs: your legal structure has a significant impact on your money and assets. How much of it you need to have; what you can do with it and who manages those decisions. Social enterprises can come under one of four legal structures as identified by the Social Enterprise Coalition:2 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Community Interest Company (CIC) - a regulated social enterprise with protected assets Industrial and provident society (IPS) - member-controlled organisations such as co-operatives Companies limited by guarantee or shares - business with a social and/or environmental mission written into its memorandum Group structures and charitable status - for an organisation that needs to benefit from tax breaks to fulfil its purpose Given the predictions about the year made by experts in the sector, there could be more opportunities that budding social entrepreneurs can capitalise on, and need an understanding of which forms best suit their proposed venture, management style and mission. So join our panel online from 1pm to 4pm on 20 January to ask questions, seek advice and share experiences about legal structures for social enterprises. Anthony Collins Solicitors We have three representatives from Anthony Collins, who will joining us throughout the session: Gayle Monk Gayle works at Anthony Collins Solicitors, where she advises clients from the public, private and third sectors on all aspects of UK and EU public procurement law, State aid issues, and commercial contracts for the discharge of public functions. Gayle has particular expertise in all the issues relating to sustainable procurement, where she assists partner Mark Cook."3 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Gemma Bell Gemma is a solicitor at Anthony Collins Solicitors LLP, specialising in advising housing associations, charities and other third sector organisations on a variety of governance, constitutional, regulatory and commercial issues. She has experience of setting up social enterprises using a range of corporate vehicles. Sarah Patrice Sarah is an Associate at Anthony Collins Solicitors who provides support and advice in relation to legal structures, governance and contractual arrangements for a variety of organisations, including social enterprises. Sarah has significant experience in providing and presenting detailed advice in a user friendly style and was the lead lawyer in the completion of the community asset transfers that have been carried out by Anthony Collins to date. Bate Wells & Braithwaite Alice Faure Walker Alice is a solicitor in the charity and social enterprise department at Bate Wells & Braithwaite. She frequently carries out training on legal structures for voluntary and community organisations, and for social enterprises. She is co-author of Charities, Trading and the Law, published by Jordans in March 2009. Stephanie Biden Stephanie is a solicitor in the charity and social enterprise department at Bate Wells & Braithwaite. She works in the areas of establishing new charities and social enterprises, mergers and restructuring, giving general company, commercial and charity law advice to charities and social enterprises, including grantmaking international activities, intellectual property and finance and advice to charities and registered social landlords on regulatory issues.4 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Ceri Jones, Social Enterprise Coalition Ceri is head of policy and research at the Social Enterprise Coalition and leads on all areas of policy development work including public service delivery particularly focussing on health and social care. Linda Barlow, Coop UK Linda has been a legal officer for Co-operatives UK for the last 5 years. In that time Linda has advised and registered 100s of Charities, Co-operatives and other forms of Social Enterprise Penny Fell, Social Investment Business Penny recently joined The Social Investment Business as head of new business. She has held a range of roles in both civil society and the health and social care sector, having previously worked in West London as the first cirector of Chelsea Care, a local authority trading company, and in the North West of England as Chief Executive of Liverpool Crossroads, director of corporate affairs at the Alternative Futures Group, and regional consultant for childrens charity Home-Start. Sally Reynolds, Social Firms UK Sara Burgess, CIC regulator Sara was appointed regulator of Community Interest Companies in September 20075 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Steven Leach, UnLtd Steven has 20 years in global IT included sales, marketing and reengineering management. This was followed by a few years as an independent management consultant firstly for private sector and latterly for the third sector. The last two years he has been working with social enterprise at UnLtd. This content is brought to you by Guardian Professional. To get more articles like this direct to your inbox, sign up to the social enterprise network. Ads by Google Co-op Remortgage FIXED Rates from 2.4%-Compare Deals You Wont Find Elsewhere-Free Quote CoopRemortgage.Lendgo.co.uk Support Charity - UNICEF Support UNICEFs work in over 150 countries. Please Help Us Today! www.unicef.org.uk/donate-now Refund of Bank Charges? Are You Owed Money by Your bank? Check If You Are Due A Refund Here www.claimsfinancial.co.uk Comments in chronological order (Total 81 comments) Staff Contributor Go to first 50 comments | Showing all comments6 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... adrianashton 18 January 2011 3:09PM looking forward to reading this one (sadly will be locked away with client that afternoon) - in my various guises Im increasingly meeting social enterprises who have adopted a legal form based on less than complete information and so either arent fully aware of how to make best use of it, or, in some cases, actually have a completely inappropriate legal form; I was also involved with a social enterprise a few years ago whod been rejected by a national social enterprise loan fund because "they werent a true social enterprise because they had share capital" despite their winning acclaim from various sector bodies both inside and outside of government for their innovative work as a recognised social enterprise... Recommend? (0) Report abuse | Link JeffMowatt 18 January 2011 5:24PM Theres another model not listed above which is known as the UK LLP. Its a shared ownership investment structure, conceived after the collapse of Barings Bank with the aim of providing limited liability in a partnership which would offer protection against vicarious liability. We faced this decision in 2004 when introducing our business model to the UK. In essence this was a for-profit business with its articles modified to reflect a primary social mission. At least 50% of profit would be re-invested in a community with the7 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... remained retained for growth and employee profit share. We had by then developed a business plan for community broadband and the purpose was to serve a community rather than a membership. For this reason the I&PS model was avoided, choosing instead a guarantee company. As with the organisation Adrian mentions above we then found ourselves rejected by several loan funds. First was ICOF for the reason that we werent an I&PS and they were restricting loans for broadband project s to this model, then there was Triodos and the Charity Bank who refused us on the grounds that we werent a registered charity. Finally wed excluded ourselves from private investment by becoming a guarantee company. Like the model Mohammad Yunus describes as social business, ours is a non-loss non-dividend distributing approach. Neither have a formal legal structure which reflects the true nature of the model. . Recommend? (0) Report abuse | Link urbanmythos 19 January 2011 1:58PM Id second Jeffs comments concerning LLPs. As a Co-operative support organisation we have increasingly been using this structure with Co-operatives, particular small Worker Co-ops and small Co-operative consortia. The LLP is fundamentally collective in nature and combines the protections associated with being a company with the tax efficiency of being a partnership. Recommend? (0) Report abuse8 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... | Link GayleMonk 20 January 2011 10:21AM Looking forward to contributing this afternoon. Adrian - its a shame youre coming across too many examples of social enterprises that have inappropriate structures. Perhaps this is something we need to tackle in the debate - not just choosing the right structure, but what to do if its gone wrong. Gayle. Recommend? (0) Report abuse | Link athertonjohn 20 January 2011 11:29AM HI im also looking forward to this Q&A one of Co-operatives UK legal officers will be on hand. To answer questions specifically about co-operative legal forms, but also has experiance with charities and other social enterprises. Question: Although the CIC exists in law, and their is a "traditional" legal form for co-operatives in the form of IPS (agree point about company and LLP co-ops). "Social Enterprise" isnt a protected or legally defined term (is it?). "Co-operative" is a bit better, and I think "Mutual" is in a similar position. But none are as protected as "Charity" in their use. Do panelist think it would be more or less helpful to have these words more strongly9 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... defined and protected in the law, like "Charity" is. Recommend? (0) Report abuse | Link Bankzy 20 January 2011 1:03PM Hi everyone, looking forward to the Q&A session. I shall be popping and out as I have a glut of mail to respond to - especially new IPS registrations around food, renewable energy and creative co-ops - is there a trend there. I like John As question - even though I think it would be difficult to define such an "ever-shifting concept" of co-operation without it becoming meaningless. What I am really interested to find out is that seeing that LLPs are being used more and more by co-operatives, LLPs are not required to have a governing document - how can we then monitor that they are abiding by teh co-operative values and principles?? Recommend? (0) Report abuse | Link KevinSEWM 20 January 2011 1:06PM Social Enterprise West Midlands, funded by our RDA until March, will become a CIC in the next few weeks. Anthony Collins are helping us with that. But Is anyone aware of sources of financial support that we can promote to other organisations looking to10 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... become a social enterprise but who are put off by some of the initial legal costs they have to pay for. Recommend? (0) Report abuse | Link cicregulator 20 January 2011 1:07PM Hi - re: defined terms - I really dont know how we resolve this one. Charities have had hundreds of years to be established in the public psyche. Social Enterprise is a relatively new descriptor. Co-operatives have had longer so the term is more familiar although the concept may not always be appreciated. Its a bit like everything- for those of us in the club these terms have meaning. I still get stopped in my tracks when talking to people outside the loop who simply dont know what Im on about. Even CIC with its legal structure and message is still relatively unknown to wider society Recommend? (0) Report abuse | Link cicregulator11 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... 20 January 2011 1:11PM Kevin you should not need to spening a lot of money on legal costs to set up your CIC. all the information,forms and model mem and arts are available on the cicrgulator website. It is more complicated if you are setting up a CLS and is probably wise to take additional advice. Recommend? (0) Report abuse | Link GayleMonk 20 January 2011 1:14PM John A / CIC Regulator, Do we actually want "social enterprise" to be a defined term for a particular legal structure? What social enterprise does at the moment is refer to a state of mind and purpose. As you know, there are various legal structures that may serve different purposes and needs, while still being a "social enterprise". Perhaps defining social enterprise means limiting its scope? Gayle. Recommend? (0) Report abuse | Link Dizzel12 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... 20 January 2011 1:19PM Hello, I run a social business run on a not-for-profit basis, but choosing the right legal structure is a real challenge. Were currently set up as a company limited by shares, having trusted our accountants advice. Weve since found that this structure can be somewhat restrictive when applying for grant funding. Were an early stage start-up, all shares are owned by the co-founders and any income is spent on running costs or goes back into the business. What would be the best legal structure to choose for our social business to reflect its not-for-profit ethos? Also, is there anything here in the UK that indicates that you are running your business as a not-for-profit? I look forward to hearing your thoughts, thank you! Recommend? (0) Report abuse | Link KevinSEWM 20 January 2011 1:22PM Gayle - may need some more time to tyhink of this but there are real issues with social enterprise being defined too loosely. The Social Enterprise Mark has as one of its criteia that the social/environmental benefits are written into the mem and arts of the social enterprise. The CIV legal model has an asset lock as part of the legal structure which is crucial i9n defining the model as a swocial enterprise. Recommend? (0) Report abuse13 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... | Link Bankzy 20 January 2011 1:26PM Kevin, regarding sources of financial support - Co-operative Enterprise Hub - http://www.co-operative.coop/Enterprisehub Unltd - http://www.unltd.org.uk/ Co-operative and Community Finance - http://www.co-opandcommunityfinance.coop/ Recommend? (0) Report abuse | Link GayleMonk 20 January 2011 1:27PM Kevin - I agree. We need to find a way of defining social enterprise more tightly - so that people know what it means and what it stands for. At the moment though no one structure is right for everybody (although there are some clear contenders). While this may change over time, I think the Social Enterprise Mark is crucial in helping to define a social enterprise. Recommend? (0) Report abuse | Link14 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... StevenLeach 20 January 2011 1:30PM hello everyone, a lively debate already, I thought I could get a cuppa without missing much... Anyway, to the point about defining Soc ent; I would suggest this is virtually impossible. We are getting so many different models from straight CLS to Charities and all in between. It seems to be a value judgement we feel we need a set of rules for and that rarely works. I suspect, however, there will be the emergence of "classes" of soc ent types, in the same way we see ethical and or green businesses. Recommend? (0) Report abuse | Link JeffMowatt 20 January 2011 1:32PM Social enterprise is or has become a weak branding for a collection of discrete models, with differing perceptions of what is valid in terms of social investment. @KevinSEWM prior to incorporation in 2004 one of the first things wed attempted to tackle was funding for social enterprise. Our answer was a franchise profit-for-purpose business model which would invest in the seed funding of social enterprise, through the vehicle of CDFIs. A franchisee community adopting this community interest approach would be required to invest at least 50% of profit in a CDFI to fund localised economic development, bottom up. To me, social enterprise in general is a bottom-up approach which seems somewhat15 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... incongruent with the typical application of investment, top down via foundations, government and European grants. Were trying to pretend that some of it is business yet propagation remains dependent largely on hand outs. So, may answer would be no, but I know how we could create our own support. Recommend? (0) Report abuse | Link Bankzy 20 January 2011 1:35PM CIC Regulator The model articles provided by the CIC Regulator are certainly a template, but organisations need to talk around the idea of a CIC before setting one up and often this is where legal advisors can help. After all choosing the correct legal structure at start-up is very important for the future of the organisation. Dizzel I sympathise. It is a tricky situation and accountants only know of one legal form - company limited by shares which is the traditional form for companies. You could try looking at converting to a CIC limited by shares - in which the shares are subject to a dividend cap. Or if you are not sure you wish to convert to a CIC, Co-operatives UkKcould (for a fee) work with you to revise what the articles currently say to make it palatable to funders that support not for profits. Recommend? (0) Report abuse | Link16 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... cicregulator 20 January 2011 1:39PM I agree that the "social enterprise" is most effective as an all embracing term which has the various structures as a means of delivering the concept. But capturing the real meaning to ensure it is not being abused or misunderstood needs more time so it can evolve as did the concept of charity. Of course it neednt take a few hundred years for this one! Recommend? (0) Report abuse | Link adrianashton 20 January 2011 1:40PM given that charitable company is the most prevelant form taken by social enterprises (as identified by the SECs mapping of the sector), its a shame that its not been able to get anyone from the Charity Commission on todays panel; but perhaps theyre caught up with managing how theyll maintain their role during a period of reducing resourcing and also having to launch the new legal form of Charitable Incorporated Organisation (CIO) - which leads me into my thought for sharing: what role do/should the regulators play in respect of legal forms adopted? For example, the CIC regulators powers are perhaps the most far reaching of all the regulators, which makes sense in the context of a future (and potentially small - 1 person) membership of the enterprise going awry so needing to step in to get it back on track and protect the social enterprise brand. But do social enterprises take account of the respective regulator (powers, monitoring,17 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... etc) when choosing a legal form? and do we need to have clearer guidance and stories told of when said regulators would and do step in to help social enterprises better understand the boundaries - for example, the Charity Commission publishes reports of investigations it makes into charities where they have a concern of inapproprite actons and behaviours. And picking up on Gayles points about nailing the jelly in defining social enterprise - theres a lot to be learnt from how the co-op movement explored and agreed this (its not that long ago that the international definition of a co-op business was first agreed...); but it raises perhaps a more pertinent question: social enterprises are identified and driven by social values - how are those values manifest in the legal strauctures of the legal forms they adopt? I was commissioned to write an article on this question from the perspective of faith-based social entrepreneurs a while back, but to date have seen very little discussion or material that helps a social enterprise to enshrine its values in it legal form (governing docs - with the exception of co-operatives UKs legal team) Recommend? (0) Report abuse | Link StevenLeach 20 January 2011 1:45PM I have wrestled for 18 months to find ways to bring finance into social businesses. On one side the commercial lenders see social business as "charities" and not a good risk. Conversely some of my clients are judged by the likes of Venturesome to be "too18 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... bankable" and thus not for them. At a dinner for angel investors hosted by UnLtd yesterday, it was clear they want social businesses to be businesses first and social second. So, there is a ready investment market for social businesses which can show real returns (for equity or quasi-equity, say). Some businesses are more marginal and require the odd top up (or more) from grant sources, particularly for growth, usually as the business profit will not service a loan. Recommend? (0) Report abuse | Link SarahPatrice 20 January 2011 1:46PM Hello, I think the key to creating any legal entity is for the organisation to take a step back initially and identify what the new organisation is to do and how it is going to do it, considering key aspects such as how it intends on raising funds in the future. Deciding what the organisation wishes to do to and creating an appropriate structure around that (as opposed to putting a structure in place that the organisation then needs to try and work within the constraints of) should hopefully prevent some of the issues raised above. I am sorry to hear that some organisations feel stuck with inappropriate structures; there may be ways of moving around this, depending upon the nature of the organisations created. There are some really useful guidance tools available also on the web, including the CIC regulator website that may help organisations such decisions on19 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... an informed basis. Recommend? (0) Report abuse | Link StevenLeach 20 January 2011 1:46PM Can I be provocative with my friend Adrian and suggest that the charity model (usually good if donations are a major source of income) is not one for social business? Recommend? (0) Report abuse | Link StevenLeach 20 January 2011 1:50PM Can I echo Sarahs point. The advice I get from the legal people consistently is dont think about the incorporation structure think about what you want to do; how you will trade (with whom and on what sort of contract) and how you will raise finance for development and growth (grant, equity, etc.) being the main considerations. Do our learned friends on this conversation have more questions for this checklist for social business? Recommend? (0)20 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Report abuse | Link cicregulator 20 January 2011 1:51PM If concerns are raised the CIC Regulator has and does look into them. We have a policy not to publish the results because we do not wish to jeapordise the business of a trading company by announcing the issues raised. We do keep an eye on this policy though and it is always open to review. Recommend? (0) Report abuse | Link NickPetrie 20 January 2011 1:54PM Hi guys, thanks for all your input so far - i just wanted to highlight Dizzels question again - before it gets lost in the thread What would be the best legal structure to choose for our social business to reflect its not-for-profit ethos? Also, is there anything here in the UK that indicates that you are running your business as a not-for-profit? Does anyone have any specific advice?21 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Recommend? (0) Report abuse | Link CeriJones 20 January 2011 1:57PM Hi, I am going to be in a meeting for a little while, but completely agree with Sarahs point about legal form. I would also say that much of the problems we put down to legal form but could actually be addressed by greater understanding of social enterprise amongst funders, commissioners, etc etc so that legal form stopped being seen as a barrier. this is particulalry important as organisations will need different things at different stages of their life cycle - They could need grant funding initially but as they evolve and decide to grow need a different form of finance. it would be difficult at present for any legal form to be able to do this alone - it has to come from investors, grant makers etc etc understanding social enterprise and therefore be willing to see beyond legal form and measure outcomes or returns in different ways. Apologies am about to go off to a meeting but will be back shortly. Ceri Recommend? (0) Report abuse | Link22 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... JeffMowatt 20 January 2011 1:57PM @ Bankzy, In the paragraph below published online in 1997 after the white paper had been delivered to the White House, P-CED proposed how the conventional share business might migrate: "If a corporation wants to donate to its local community, it can do so, be it one percent, five percent, fifty or even seventy percent. There is no one to protest or dictate otherwise, except a board of directors and stockholders. This is not a small consideration, since most boards and stockholders would object. But, if an a priori arrangement has been made with said stockholders and directors such that this direction of profits is entirely the point, then no objection can emerge. Indeed, the corporate charter can require that these monies be directed into community development funds, such as a permanent, irrevocable trust fund. The trust fund, in turn, would be under the oversight of a board of directors made up of corporate employees and community leaders. " The concept was embedded in the business plan we presented to ICOF, the then cooperative funding body in 2004. This was rejected for loan funding on the grounds that community broadband projects were only being supported for I&PS registered coops. It could still be done, we retain copyright. Recommend? (0) Report abuse | Link23 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... cicregulator 20 January 2011 1:59PM It is really important to think very carefully about what it is you want your organisation to do what you want to get out of it and where you would like it to be in the future, before you start to look at which structure will best suit your needs. There are lots of sources of information on the various structures. I know some people think it old hat but I think it is crucial to have a good strong business plan with a financial strategy. and a marketing strategy. Its not as scary as some people think to put this together and it is invaluable in helping with your thinking about your type of business. Most importantly think about where the money is going to come from. There are some fantastic ideas and innovations around but I do wonder sometimes how on earth the anticipated results will be achieved because I cannot see how the finance is going to work. Recommend? (0) Report abuse | Link JohnMulkerrin 20 January 2011 2:03PM The four legal structures described by the SEC as social enterprise (I would also include LLP myself) above include CIC, but then why do they support and fund a definition of social enterprise via the Social Enterprise Mark that excludes Charities, Co-ops and CICs? By their own definition were not necessarily Social Enterprise, something I found hard to accept. over a million pounds has been given to this project, .........whilst practical development24 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... of badly needed infrastructure has been ignored.....to some extent we collectively have to blame ourselves for the confusion. Most people cite a problem with the legal structure they have chosen when they fail to secure the funding/investment they were targetting, most of the problems arent with the legal structures themselves, rather the infrastructure and business advice surrounding them. The Entrepreneurs are stepping up, and the Investors are out there, lets build pathways, not man gateways. Recommend? (0) Report abuse | Link cicregulator 20 January 2011 2:06PM The CIC model is often used as a not for profit structure, and this can be included in the articles of association. Most funders view the CLG form of CIC as not for profit. I would prefer them to be thought of as not for private profit because these are businesses which need to thrive and be strong in order to achieve their objectives. I dont think they can do that without achieving a profit. In the CIC CLG no individual makes any money out of the company the assets must legally be used for the purpose of the company i.e the community interest. Directors can be paid a reasonable rate for the skills they bring the assets can be used to secure loans, the company can use its funds to grow and develop but in the end the profit is for the benefit of the identified community. Charities also make profit they call it something else. Recommend? (0)25 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Report abuse | Link StevenLeach 20 January 2011 2:06PM On Nicks reminder of Dizzels question What would be the best legal structure to choose for our social business to reflect its not-for-profit ethos? Also, is there anything here in the UK that indicates that you are running your business as a not-for-profit? A social business is "not for profit", at least not in my world view. It is possible to have not for profits operating to business rigour and so they should, but a social business needs to make money to be viabvle and to invest in its future. There is a real risk of bunching the whole contiuum of different for social impact models as one entity and calling these "social enterprise"; I dont believe this is helpful. The question of what is social enterprise is best seen as "being in the eye of the beholder". Thus Dizzel can look at the probable customers and other stakeholders and ask what they would like to see. I think "one size fits all" is impractical and not helpful Recommend? (0) Report abuse | Link DaveKilroy 20 January 2011 2:10PM Further to Dizzels question, I have been in a co-operative Limited Liability Partnership26 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... that did not last - and towards the end when things were getting messy it would have been really useful to have had some rules as to what could and could not be done. If we had been in an ISP or Company Limited By Guarantee things at the end would have been much more straightforward. LLPs are fantastically easy to set up but I would encourage those thinking of using them to make sure the Limited Liability Agreement does not remain silent on too many topics and deals explicitly with the kind of issues found in, for example, the Mem & Arts of a Company Limited by Guarantee as produced by Co-ops UK. I have a feeling that Co-ops UK produce a set of model rules or fact sheet on LLPs - John could you confirm/deny this? Recommend? (0) Report abuse | Link GayleMonk 20 January 2011 2:12PM Dizzel - sadly theres no single answer to your question. Theres already some suggestions above about converting to a CIC limited by shares structure, or altering your articles of association so that, while you are still a share company, your companys rules might be more palatable to the average funder of not-for-profit organisations. In terms of "badging", there is the Social Enterprise Mark or, if you would be eligible, there is the "Social Firms" option (but Im not sure from what you say whether this would be relevant). Recommend? (0) Report abuse27 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... | Link StevenLeach 20 January 2011 2:15PM There are two key questions about social business; what happens to any profit and what happens to any assets? For the social business the profit is the fuel for sustainability, a rainy day and growth; its assets are important for running the business and as collateral. Most of this debate is around grant finance and gaining contracts using the social enterprise tag. So, one at a time: - the grant finance part is easy. If the social business is looking to raise finance (now or future) via a grant it needs a structure and associated lock demanded by the funder it will approach (waiting for them to change is not really a tyactical option, more a long term strategic goal). This usually means CLG or CIC. Both are simple and would give options in the future. I work with social businesses that have had no or very little grant finance as they grow via profits; they are still CIC or CLG as they feel this is the right message to send their supporters and custonmers. - on looking like a social business I suppose that is Social Enterprise Mark territory but I prefer people to ask their customers what they would require as there are options to be a CLS (and pull in equity finance unavailable to say Local Government) and still qualify as a social business. Recommend? (0) Report abuse | Link28 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... GemmaBellACS 20 January 2011 2:19PM Dizzel - I agree with Gayle that theres no single answer - it depends on the nature of the work youre carrying out and also the people involved in your organisation and how they want to work together and what theyre seeking to take out of the business. In relation to badging, a CIC can give reassurances to external stakeholders that assets are locked in for a particular community purpose. However, depending on the sector youre operating in, there can be particular familiarity with certain types of other structures, such as companies limited by guarantee or community benefit industrial and provident societies which are seen as a preferred option. Recommend? (0) Report abuse | Link stephaniebiden 20 January 2011 2:23PM Hi everyone, I just logged in and can see a lively debate is already raging. Isnt the variety of legal structures, some allowing profit distribution and others not, and the wide range of organisations which can identify themselves as social enterprises one of the sectors strengths? It means there are lots of different options for structuring a social enterprise to suit its founders aims and the needs of other stakeholders, and to try to narrow down the definition or regulate use of the term "social enterprise" would erode this choice and flexibility.29 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... The downside it is can be hard to choose the right structure, and also to communicate to funders and other stakeholders how a social enterprises social mission is protected. One resource which people may find useful if navigating the maze of possible legal forms is GetLegal: http://www.getlegal.org.uk/ It includes an interactive "decision tool" which can help find the right structure based on key questions like what finance the social enterprise is looking to raise, whether the people on the board need to be paid for their work, etc. Recommend? (0) Report abuse | Link JeffMowatt 20 January 2011 2:26PM "What would be the best legal structure to choose for our social business to reflect its not-for-profit ethos?" For us, faced with a similar dilemma it was the guarantee company form, as they CIC did not exist. To be a little pedantic social business is something described by Muhammad Yunus as a non-loss, non dividend distributing company which is cause driven. Recommend? (0) Report abuse | Link cicregulator30 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... 20 January 2011 2:31PM Dizzel I dont think you indicated where you are based but your best bet is to spend some time talking with a good local business advisor hwo is familiar with the various structures. There are lots of good business advisors around. Im sure the Social Enterprise Coalition could point you in the right direction most likely in the first instance to your local social enterprise support agency. Recommend? (0) Report abuse | Link NickPetrie 20 January 2011 2:46PM So a question for John / Linda regarding the Coops Further to Dizzels question, I have been in a co-operative Limited Liability Partnership that did not last - and towards the end when things were getting messy it would have been really useful to have had some rules as to what could and could not be done. If we had been in an ISP or Company Limited By Guarantee things at the end would have been much more straightforward. LLPs are fantastically easy to set up but I would encourage those thinking of using them to make sure the Limited Liability Agreement does not remain silent on too many topics and deals explicitly with the kind of issues found in, for example, the Mem & Arts of a Company Limited by Guarantee as produced by Co-ops UK. I have a feeling that Co-ops UK produce a set of model rules or fact sheet on LLPs - John could you confirm/deny this? Recommend? (0)31 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Report abuse | Link Bankzy 20 January 2011 2:46PM @Jeff Mowat "If a corporation wants to donate to its local community, it can do so, be it one percent, five percent, fifty or even seventy percent. There is no one to protest or dictate otherwise, except a board of directors and stockholders. This is not a small consideration, since most boards and stockholders would object. But, if an a priori arrangement has been made with said stockholders and directors such that this direction of profits is entirely the point, then no objection can emerge. Indeed, the corporate charter can require that these monies be directed into community development funds, such as a permanent, irrevocable trust fund. The trust fund, in turn, would be under the oversight of a board of directors made up of corporate employees and community leaders. Great in theory. It is unfortunate that this is not widely known. I would also imagine that the "prior arrangement" would have to be pretty robust so that the members of that company - if it very successful from changing their minds - and invoking their member rights to change this. Would be good to develop a template iron clad "corporate charter" and recommendations on how this is monitored overseen so that the members cannot simply overtturn it. Also another point, should we be twisting the share company model to fit "social enterprise" needs? After all changing one aspect of the structure does not mean it is the most appropriate model for a social enterprise. Recommend? (0) Report abuse32 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... | Link cicregulator 20 January 2011 2:57PM The CIC share model allows a moderate return to investors via the dividend cap while offering the business another way of generating income. This option is less used than the CLG but I think is an opportunity missed for some businesses. Funders are not keen on share companies but then, unless for start up, a CLS can do far more than relying on grant income which is not sustainable Recommend? (0) Report abuse | Link SocialInvest 20 January 2011 2:58PM Hi all, Penny Fell from The Social Investment Business here, just joining the debate! I think a key issue to highlight is that around grant provision being linked with not-for- profit status. Several contributors have referred to the fact that all organisations grow and develop in different ways and that is why grant funding may be appropriate in the early stages to pump prime and enable an organisation - finding the best financial product, whether that be grant or loan to suit an organisations specific circumstances is33 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... what were all about! However, we shouldnt lose sight of alternative structures which can sit under charities and social enterprises - many charities for example develop trading arms in order to exploit commercial opportunities. Its also crucial to focus on the need to function as an efficient and effective business whatever legal structure you are operating within in order to succeed in an increasingly competitive environment. Penny Recommend? (0) Report abuse | Link StevenLeach 20 January 2011 2:58PM I like Bankzys point about twisting the rules in one area to suit social enterprise. In the example quoted this deals with the profit however, it leaves the question of asset distribution unanswered, so would be unacceptable to many funders or social investors. I think we should also recognise that commercial business has many models as seen by investors. Recent conversations revealed that investors look at business as a "package" where the financial return is just one factor; other aspects like knowing the industry, liking the people, close proximity and feeling good about the product all play a part in the decision. Thus I challenge funders and social investors to look in a similar way. However, I also accept they need gateway criteria just like commercial investors (who normally specify a lowest financial return level), so maybe the onus is on the social business to be more savvy about what investment they want and what they have to offer and then match that to the most appropriate investment source. Easily said but outfits like mine and others34 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... can help Recommend? (0) Report abuse | Link cicregulator 20 January 2011 3:03PM I agree with Steven - develop a good sound financial strategy if you want to survive and thrive Recommend? (0) Report abuse | Link JohnMulkerrin 20 January 2011 3:04PM You can achieve CIC status with both Company Limited by Share (CLS) and Company Limited by Guarantee (CLG) structures, but I agree with the Regulator that the CLG structure matches the contemporary understanding of not for profit. The CLG structure also allows a pretty straightforward conversion to Charitable status which may be useful down the road. The CLG structure is also recognised by grant funders such as The Big Lottery, so at the start (making outrageous assumptions and with the caveat that I would need to have a detailed conversation to give my final answer) I would suggest that the CLG structure (whether you go for CIC or Charity status) would allow you the chance to access start up35 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... funds from empathetic organisations. That doesnt necessarily help you Dizzel, but Im happy to have a more detailed 121 on the phone about your individual circumstances, we hve over 1000 members now at the Association and can connect you with other practitioners who should be able to give you their practical experience. Another thing to think about........is there enough money coming out of these Foundations? 96% of funds available to social enterprises comes in grants for less than 5k (The Young Foundation) Recommend? (0) Report abuse | Link StevenLeach 20 January 2011 3:06PM Does anyone else ever find this; that an organisation or idividual sees themselves identified bythe way they are incorporated (i.e. we are a CIC) rather than by what they do (i.e. we get homeless people into work)? I think having rigid definitions of social enterprise reduces flexibility (a point made earlier) and leaves people prone to the above. We are what we do. Recommend? (0) Report abuse | Link36 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... cicregulator 20 January 2011 3:10PM You are indeed what you do but dont you think the term Community Interest Company describes what you are about? Recommend? (0) Report abuse | Link Bankzy 20 January 2011 3:10PM @DaveKilroy I have a feeling that Co-ops UK produce a set of model rules or fact sheet on LLPs - John could you confirm/deny this? Co-operatives UK do not have a factsheet on LLPs - but we are working on a precedent for an LLP co-op - wathc this space! Recommend? (0) Report abuse | Link GayleMonk 20 January 2011 3:11PM John M - Is the funding thats specifically available to social enterprises generally start37 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... up funding? In which case small but quite freely available grants (and I honestly dont know how freely available they are) are sensible in many ways. A social enterprise still needs to have a viable business plan in place which is sustainable if not profitable. Ultimately, if a social enterprise is too reliant on grant funding, it may be losing the "enterprise" element, any may be better off considering charitable status (if possible) or another more strictly "not-for-profit" structure. If the problem is that even start up funding is difficult to come by, then are there alternative funding streams or models social enterprises should be looking at? Recommend? (0) Report abuse | Link SallyReynolds 20 January 2011 3:12PM no need to define social enterprise through a legal structure; we already have a variety of forms and the flexibility to choose whats right for the company is reflective of the diversity of the sector. The Social Enterprise Mark represents the parameters of defnition within which the social enterprise operates so we have that tool already in place. Recommend? (0) Report abuse | Link38 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... SarahPatrice 20 January 2011 3:15PM Hello again, I agree with the point made by Steven, the purpose of the social enterprise as opposed to the way in which it is created should be the more important aspect. The legal structure chosen is vital to ensure the individuals who have created the enterprise are suitably protected through limited liability and to give the organisation a name, brand and identity to build and grow the social enterprise. Noting questions raised earlier in the debate regarding the best structure to adopt, it genuinely is a question of what the organisation is to do, relevant tax considerations (I am definitely not a tax advisor!) and the way in which it raises funds, should be key considerations. As the CIC model was created specifically for the social enterprise sector, it is arguable that this is the most appropriate structure and as a company is fairly flexible, but there lie choices here also, that must be considered. Happy discussing! Recommend? (0) Report abuse | Link cicregulator 20 January 2011 3:16PM Gaylemonk - it is always worth talking to the various charity banks about loans and support. even at start up. Once again it requires a robust business plan Recommend? (0)39 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Report abuse | Link andysharman 20 January 2011 3:16PM I would like to ask the panel for their advise on my current conundrum. I am currently employed by a limited company to run a partnership that is currently set up as an unicorporated association. The partnership is currently undertaking an amalgamation with a neighbouring partnership and I am looking to expanded the scope of our work. Would it be prudent to create the partnership as a form of social enterprise or would that be difficult given the fact that the administration is taken care of by a limited company? And if we can what would be the best guise for the partnership to take? Your comments are welcomed. Recommend? (0) Report abuse | Link cicregulator 20 January 2011 3:21PM If the unincorporated association is to run independent of the limited company please get it incorprated. Up to you what form you choose but dont leave individuals vulnerable if you intend to develop the business. Recommend? (0) Report abuse40 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... | Link StevenLeach 20 January 2011 3:27PM Hi Andy, Having set up a comnmunity group in the past the first question to ask is what do they want to do? If they wish to enter into contracts and thus incur risks then they probably want to be incorporated (not to become a social enterprise, but to give the rpotection noted by Sarah Patrice above). If they are not trading or entering other contracts (e.g. receiving grants) then there is no need, just get an agreed constitution to direct affairs and operations. Recommend? (0) Report abuse | Link GayleMonk 20 January 2011 3:28PM Andy - One influencing factor may be the neighbouring partnership - is it already incorporated? Does it similarly have a Ltd co behind it? It there are two "partners" involved (like two different limited companies), then you need a structure that suitably sets out the rules for what is in essence a joint venture. The usual structures are available to you, and you may need to take tax advice on which41 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... is the most efficient for you. If you are looking to trade for profit (regardless of where that profit is going), then its worth looking at either a share company or an LLP. But if profit isnt the guiding factor, then a company limited by guarantee might work (and a CIC is of course an option). Recommend? (0) Report abuse | Link StevenLeach 20 January 2011 3:28PM As an aside to Saras comment to me, yes, CIC is the one that most effecively does what it says on the tin (so unlike IPS for example). Recommend? (0) Report abuse | Link JonathanJenkins 20 January 2011 3:31PM For me, and apologies if this is brief: 1. Social Enterprise Mark only any use to you if you agree with the underlying SEC definition of social enterprise. Many dont. 2. Why are we so set on defining "social enterprise" by words or by legal structure. Surely we should just drop the word "social" and assume that there are different ways of running your business - a spectrum of finance first, social first or blended? Does it42 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... matter that we dont have a "box" to put us in? 3. Why is the social enterprise "industry" so determined to protect a puritanical definition of whats in and what isnt? Its hardly a way of attracting in more capital, more human resource if we constantly adopt a holier than thou approach to definitions. The existing social enterprise industry doesnt have the scale of the capital or the people to step up to take on the social need that is only going to get worse over the next few years. Why would we turn anyone away, just because we dont quite agree with their interpretation of two little words. I think there is so much wasted time and effort on this (and I really thought twice as to whether to actually enter the debate). We should just concentrate on helping good people do good stuff - whether in charities, CIC, CLSs, LLPs or sole trader. Any time spent doing much else is merely a distraction. Off the soap box now, and will leave you to it - its time for inclusion not exclusion. Recommend? (0) Report abuse | Link andysharman 20 January 2011 3:32PM It wouldnt run independently of the limited company as they are the scheme administrator, and my employer, who still wishes to continue in that role. To run independentally would not be a viable option at this time. However, Im conscious of the fact that how the partnership is set up constitutionally could have an impact of potential funding streams, What would be your advice based on this? Recommend? (0) Report abuse43 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... | Link andysharman 20 January 2011 3:38PM Gayle - The neighbouring partnership was being wound up as part of the local authority cutbacks, so I am taking responsibility for creating a new partnership to look after all the affected areas including my current district. The new partnership would continue to be not for profit as I feel the more co-operative approach would have the more positive results. Recommend? (0) Report abuse | Link StevenLeach 20 January 2011 3:38PM I have to leave this discussion. I think my take is that I am not worried if the term Social Enterprise is not defined, in fact I am happier if it is not. There need to be a variety of different models to tackle the issues and opportunities out there. What I like is that people want to get up and cahnge the world and to make things better for others. I am humbled by most who work hard and rarely pay themselves (I have met two such in the last two days; one gives long term unemployed people jobs and a new life, the other gives people a home). Each example of this desire to help is an individual one and we should be careful not to stiffle this ambition and desire with catch all rules. I imagine it could be similar to the44 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... drop in people giving time to coach sports, think about it). Also, we do well to recognise the investment community have pressures of their own and that to change is tough. We need some meeting in the middle. Having said that it is a pleasure and priveledge to be in this part of business and I wish you all well in changing your part of the world tomorrow and if I can help it is liklely I will be there Recommend? (0) Report abuse | Link cicregulator 20 January 2011 3:47PM I seem to have lost some of the threads here hope I havent missed anything Recommend? (0) Report abuse | Link GayleMonk 20 January 2011 3:47PM Andy S - its worth getting some advice about whether or not to incorporate (a good business adviser, as mentioned in some of the posts here, can do this - or you could seek formal legal advice). But essentially it sounds like youre expanding the work of an45 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... existing unincorporated body. So the activities will stay the same, but cover a wider area. In which case, your risks arent changing. If an unincorporated association has suited you so far, it may continue to work for you. Recommend? (0) Report abuse | Link JeffMowatt 20 January 2011 3:47PM @Bankzy, By now the concept has become fairly widely known I suspect. Id made contact with a lot of people in government and the sector since 2004, starting with Baroness Thornton of the SEC to describe what we were doing. Later to our RDA, Rise-SW, repeatedly.. Both the CIC and more recent SE Mark I understand required some form of modification to company articles. Its something also found in the US B Corporation model. The model was however far more than changing one dimension, or twisting one area. It set out an ethical argument for sharing and making people the central focus of business and economics, which touches some unexpected places, as I describe in this blog By 2006 it had been embedded in an international development strategy paper h which restated the principles of redirecting capitalism to serve a social purpose and proposed national scale deployment of social enterprise and a social investment fund to propagate it. @StevenLeach, .. Like yourself Ive been in the IT industry for some years. We use profit from software development to fund our social cause. A significant part of this approach and our work46 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... has been directed at the role of the web for social change, going back to the 1996 paper: e.g "Top-notch education is leaving the confines of physical campus and four walls. A student in remote Zaire, given an Internet connection, can become a Duke-educated Master of Business Administration, while remaining mostly in his or her home village to the villages benefit. The prospect of such decentralized localization of education and economic activity allows a great deal of autonomy, freedom and self-determinism in the villages own character and identity. It need not be a risk to cultural heritage and integrity to benefit economically; the means by which such benefit will occur, how local citizens can have food, shelter, health care, and a basic sustaining human standard of existence can be determined at the local village level and then communicated at the regional, national, and global level simultaneously at virtually no cost via the Internet and a web site. It is this basic level of human sustenance, coupled with self-sustaining enterprise to provide this basic level of support, that I refer to as sustainable development -- which is just another way of saying "people-centered" economic development." Recommend? (0) Report abuse | Link stephaniebiden 20 January 2011 3:48PM Andy - What does your local partnership do, and how is it likely to be funded? (Grants? Contracts to provide services? Who would be the funding bodies?)47 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... I agree with StevenLeach, the question isnt so much should you set it up as a social enterprise, but should the partnership be incorporated to manage the risks (especially if funding is uncertain). Incorporating it in some way may also help it to develop its own identity when pitching for funding. Otherwise it will need to operate as some kind of contractual consortium between the different partner organisations and one organisation, presumably the company you work for, will have to be the lead member of the consortium which is not just administering the work, but also taking on liability for it all. In either case you need to make sure the relationships between, and the contributions being made by, the different members of the partnership are understood clearly. Problems often arise with this kind of collaboration when the partners havent all reached agreement at the beginning about who is responsible for what. Recommend? (0) Report abuse | Link GayleMonk 20 January 2011 3:49PM Steven Lynch - I wholeheartedly agree with you. Labels are less important than the amazing work that people are trying to do - and legal structure only matters in the sense that (as Sarah P has said above) it can help to protect people. Im honoured to do what little I can to help the people who are trying to do those amazing things - regardless of what they call themselves. Recommend? (0) Report abuse48 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... | Link Bankzy 20 January 2011 3:51PM To all those who are favouring the approach to choosing a legal structure from the point of view of what the organisation is actually doing/will do on the future, we have a wonderful resource - Simply Legal and its free. Link to the publication below: http://www.uk.coop/resources/documents/simply-legal This is going to be part of a wider series, Simply Finance, Simply Governance, Simply Start up Recommend? (0) Report abuse | Link NickPetrie 20 January 2011 3:52PM Hi everyone, thanks for your participation in the discussion - I hope that you all feel that your questions have been answered (if not, drop a note in the comments and I will follow it up) As the session draws to a close, could each member of the panel leave us with a sentence on what they consider the most important issue around structure that Social Enterprise will have to deal with the in the coming years. Whether that is access to grants, loans and finance or if problems will occur around defining Social Enterprise (despite many panellists feeling it is best left undefined)49 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... Thanks Nick Recommend? (0) Report abuse | Link adrianashton 20 January 2011 3:52PM theres another aspect to this discussion that might be worth some conisderation (and is linked back to my earlier musing about roles of regulatory bodies) - legislation changes over time. Time was, if you wanted to form a co-operative of any kind, IPS was the form to take, but changes to company and partnership law have meant that many newer co-ops are incorporating as companies; weve also seen the basis of what it means to be a charity change (to the point that I think theres now a mess hall on an aircraft carrier that has charitable status) and the CIC form has had two change to its rules since it was launched (although theres been a prototype CIC form that some enterprises have been adopting since 1985!) so... what prospects does our panel think will be affecting social enterprises based on changes to legislation that governs legal forms in the coming decade? Recommend? (0) Report abuse | Link50 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... NickPetrie 20 January 2011 3:53PM Ah, some of you got there whilst I was writing that comment - cheers Recommend? (0) Report abuse | Link JohnMulkerrin 20 January 2011 3:55PM I disagree Sally, Govt brought in the CIC legislation to be the recognised legislative tool of social enterprise, the Marks perameters are limited by its requirement to develop a product that they control and monetise as an income stream. I have previously called it a double audit fee for CICs, I already prove my status as a CIC through an annual statement to The Regulator which is far more credible in the real world. Recommend? (0) Report abuse | Link Bankzy 20 January 2011 3:55PM stephaniebiden51 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... RE: Consortium approach. Co-operatives Uk is seeing a growth area in this type of structure. With organisations such as GPs, creatives, charities coming together to create co-operative consortia to access funding and complete joint projects. Obviously, there should be member agreements in place that regulate the relationships between the members and the co-op and include such things as: - time commitment; - commitment to provide/deliver on projects; - procedures for "what happens if a member fails to deliver" etc. Recommend? (0) Report abuse | Link GayleMonk 20 January 2011 3:55PM Thanks Nick, Its not a legal issue, but to me the biggest continuing problem is how to: (a) run a successful business venture, while (b) not losing sight of the ultimate social or environmental goal, what ever that may be for you. So if social enterprise is about both the "social" and the "enterprise", then how does one structure or organise itself so as not to lose either element, as both are vital? Recommend? (0) Report abuse | Link52 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... cicregulator 20 January 2011 3:59PM I think that the one of the biggest challenges is getting the message to wider society about what it is that social enterprise does. There are a number of good options regarding structure and the choice depends on your vision for the business. all social enterprises need to thnik hard about how they will survive. They are innovative and imaginative and should be up to the challenge. lets just make sure we maintain the good reputation of this growing movement. Recommend? (0) Report abuse | Link Bankzy 20 January 2011 4:00PM JeffMowatt Would be interested to see a set of articles that set out the ethical argument for sharing and making people the central focus of business and economics. Can you direct me to a copy or give me the name of a company that has adopted these articles so that i can see what provisions have been included to achieve this. Also, do any of the provisions in the new Companies Act contradict these provisions or imply certain things that would dilute the efforts made? Recommend? (0) Report abuse53 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... | Link shrock 20 January 2011 4:01PM interesting tho this discussions been i do think it illustrates the perennial problem with this sector: continually pleading special case. So 1) I’m with Jonathan , lets drop ‘social’ (hmm sounds familiar) 2) if a business is not for profit its not a business 3) its horses for courses in terms of funding: entrepreneurs and investors will be matched based on need and investment model. as some comments have already noted it would be impossible to have a discussion in any other sector where founders spent so many heartbeats on discussing legal entity. This is a diversion, because in the end the structure you choose is self evident. Its really not that complicated. Recommend? (0) Report abuse | Link JohnMulkerrin 20 January 2011 4:04PM I think Jonathan Jenkins view is the way forward, to reverse the lines from an old favourite song Its what you do, not the way that you do it Recommend? (0) Report abuse54 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... | Link SocialInvest 20 January 2011 4:07PM I along with many other contributors agree that less is more in terms of defining social enterprise. In terms of the biggest issue - finance and funding. New models of finance and new vehicles coming into the market will help ease the pressure. Penny Recommend? (0) Report abuse | Link Bankzy 20 January 2011 4:09PM As the session draws to a close, could each member of the panel leave us with a sentence on what they consider the most important issue around structure that Social Enterprise will have to deal with the in the coming years. "Trying to adapt and be dynamic enough in their business strategy to compete at a meaningful level with the commercial world and be taken seriously and not to forget or ignore the organisations legal structure in the process." Seek advice. Recommend? (0) Report abuse | Link55 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... SallyReynolds 20 January 2011 4:14PM as per Nicks request for closing off here, I think the most challenging area for social enterprise around structure will be doing everything that the business needs in terms of finance whilst being able to prove the social or environmental impact of that organisation. This would be done ideally through the structure and/or by holding a brand, so that purchasers and procurers can recognise and make their choice to buy from social enterprise without having to do all the work that they do at the moment to ensure it does what it says on the tin! making sure that those who advise on legal structures for social enterprise really know their stuff would also be a good start - have heard some worrying stories recently. Recommend? (0) Report abuse | Link CeriJones 20 January 2011 4:27PM Apologies for being missing most of the afternoon. I think agree that being absolutely clear about business strategy is critical before a legal form is selected. I would add to that organisational mission and how involved you want your stakeholders to be. Once your clear about this getting advice from lawyers who have experience not only of legal forms for social enterprise but also of the sector you56 of 57 26/01/2011 17:23
  • Live Q&A: Social enterprise - a guide to legal structures | Social enterprise network | Guardian Profes... http://www.guardian.co.uk/social-enterprise-network/2011/jan/17/liveq-a-legal-structures?showallc... are operating in as there are some areas (particularly health) where the contracts you are bidding form will influence the legal form you choise. Finally remeber you dont have to limit yourself to one legal structure going foward. Many social enterprises and in fact many businesses have groups structures for many of the reasons sighted above. I believe the HCT group have almost every legal form as part of their structure. Recommend? (0) Report abuse | Link Go to first 50 comments | Showing all comments Comments on this page are now closed. On this site About us Advisory Panel All todays stories A-Z of this site Become a member Blog Twitter guardian.co.uk © Guardian News and Media Limited 201157 of 57 26/01/2011 17:23