. The Legal Basis Of Social Enterprises

. Other Str...
  There is no particular 'rule-of-thu...
3 : Community Interest Company (CIC)             Setting Up A Social Enterprise...
Ownership                                      Registration
There are two optio...
Partnerships                        ...
Employee-Owned Businesses                       Some of the advantages of emplo...
Some advantages of having charitable            To help you set up a charity, t...
Unincorporated Associations                     -neede...
Issues In Establishing                         B : Benefit
A Community Business...
Egalitarian Organisations/Structures              In each case the way in which...
What Is A ...
Steps In Establishing                            3 : Empowerment
Typical Structure Of                           Managing The Enterprise
A Commun...
Advantages Of The                                 . The profits made from any t...
Stages In The Development                      7 : Planning In Detail
. New projects with social benefits are            Community Enterprises. Invol...
Planning A Community                             Human Resources 2 : Newcomers
Forming A Steering Group                         Other Resources
There is no ce...
Using Experts                                      as one year, after which the...
. It brings publicity to the work.           Setting Up A
. It dispels myths ab...
Options For Charitable Structures               Charity Supporting An Organisat...
Social Enterprise Coalition             Inland Revenue
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71 Different Structures


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71 Different Structures

  1. 1. MANAGEMENT STRUCTURE 7 7.1 DIFFERENT STRUCTURES; LEGAL STRUCTURES . The Legal Basis Of Social Enterprises . Other Structures For Social Enterprise . Choosing A Legal Basis . Advantages And Disadvantages Of Models Of Organisation . Community Enterprise - A Model For Local Economic Regeneration . Reasons For Setting Up A Charity . Useful Contacts P 247
  2. 2. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 THE LEGAL BASIS OF SOCIAL ENTERPRISES There is no particular 'rule-of-thumb' on which legal structure is best for your project. . Small projects that want to operate Incorporating A Social Enterprise in an informal way and are not likely There are three main ways to ’incorporate’ to need an overdraft or enter a social enterprise, giving the project a legal into contracts can remain as status and limiting liability of members for Unincorporated Associations. the project’s debts (if any). . People who want to work together 1 : Industrial And Provident Society as equals and share the benefits of The project can incorporate under the their activities often choose to be a Industrial And Provident Society Acts as Partnership or Co-operative. either a ’Bona Fide Co-operative’ or a . Longer-term projects which employ ’Society For The Benefit Of The Community’ people, which enter into longer-term - a minimum of 7 people are required. If agreements or are acting on behalf of the aim of your project is charitable and its other people adopt a set of rules and members wish to share in the benefits then claim ’limited liability’ by incorporating you should register as a ’Society’. as either a Company or a Friendly Society. 2 : Company Limited By Guarantee . If you aim to operate altruistically, A Community Enterprise or Co-operative for the benefit of other people not can become a Company Limited By yourself, then you may seek Registered Guarantee - a minimum of 2 people are Charity status, though not all economic required. As a Company Limited By development or regeneration activities Guarantee, the company has a separate are charitable. legal identity and the individuals will not have to use their personal possessions to pay off the debts of the company in the The main decision to make is whether to event of liquidation: the members are remain informal (Unincorporated) or - in therefore said to have limited liability. On exchange for regulation by law - claim joining the company, a member ’buys’ a limited liability status (by Incorporating). nominal share - usually of £1 - this is the extent of the member’s financial liability for outstanding debts on liquidation (providing that company law has been followed). P 248
  3. 3. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 3 : Community Interest Company (CIC) Setting Up A Social Enterprise There are two main features that distinguish When establishing a social enterprise, there the CIC from other corporate forms. The are a number of legal structures to choose compulsory asset lock and the community from, defined by: interest test. The asset lock will ensure that . Its aims, and the beneficiaries assets may only be distributed to a similar of its activities organisation and not to members or investors. The community interest test must . Who owns the social enterprise and be passed by all organisations wishing to can benefit from its success; and register as a CIC. CIC’s must be registered . Who has the final say or authority in it with Companies House and will either take the form of company limited by guarantee Whatever the mix of these three, a social or company limited by shares. enterprise can be incorporated - that is established legally as a distinct and separate Both Co-operatives and Community thing from its founders or members - in one Enterprises exist to promote social as of three ways. It can be: well as commercial objectives and part . A company limited by guarantee of the annual profits should be used for social activities. . A company limited by shares . An industrial and provident society (IPS) Membership is restricted to those who share the same interest or relationship to - see below the organisation, for instance employment or living in the same area so the members control it. If they raise loans or grants Aims And Beneficiaries the funder doesn’t usually get a vote. In The decisions you make about aims and Co-operatives members are equal partners beneficiaries often determines what your and people work co-operatively. Both are social enterprise is defined as legally, run democratically (in theory!) on the basis what rules it can adopt and how it can of one person - one vote. Community operate legally. Enterprises are usually run by a small group or committee representing the ’community’ For instance, a social enterprise to benefit and employ people to do the work - they are the workers in it is often called a ’worker’s therefore hierarchical, unlike Co-operatives. co-operative’ or ’employee-ownership enterprise’ and registers under one set of If the project closes down, the assets go rules. A social enterprise formed to benefit first to meet its debts and the remainder disabled people is called a ’social firm’ and passed on to other similar projects or go often operates as a charity. back to funders. P 249
  4. 4. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Ownership Registration There are two options: Companies must register under the . Common Ownership - this is the usual Companies Act. Co-ops can register as companies (see above) or register with the basis of charities and companies limited Financial Services Authority (FSA) under by guarantee: profits or surpluses can the Industrial and Provident Societies Act. only be used to support the aims of Community Interest Companies must the organisation (i.e. not distributed to register with the CIC Regulator. An members) and if the organisation is wound organisation that wants to be a Registered up, its assets cannot be shared out but Charity must do so via the Charity must be given away to a designated Commission (see below). organisation or one with similar aims. . Co-Ownership - profits and assets can be divided amongst members, usually Action Plan in proportion to their involvement . Get advice on which legal structure to use. in the organisation or their investment in it. This is often used for partnerships . Ask for model rules for your organisation. between social enterprises or There may be a charge, but this is cheaper ’for profit’ co-operatives. and quicker than asking a solicitor to draft a new set of rules. . Get advice on the different options for Control raising finance. Who you want to control the organisation . Incorporate your organisation or ask often determines its structure and your business adviser or professional legal basis. registration service to do it for you. If, for instance, you want the employees to own and control the organisation and benefit from its success, you are probably setting up workers co-operative on either a common or co-ownership basis. If you are a group of social entrepreneurs who want to control the organisation but not benefit from it you’re probably establishing a social business company limited by guarantee. A charity can benefit only its beneficiaries but if its controlled by members it usually registers as a company; if controlled by a smaller group who are self-appointing (the ’trustees’), as a trust. P 250
  5. 5. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 OTHER STRUCTURES FOR SOCIAL ENTERPRISE Partnerships Company Limited By Shares A partnership is a collection of individuals A company limited by shares is a or organisations rather than a separate legal separate legal entity formed by individuals entity. The business is not separate from the or organisations who want to operate a partners and their finances; each partner is business together and for their ownership liable to pay for all the outstanding debts in to match their investment. the event of a liquidation. If a partner runs Shareholders own the company - having up debts and disappears, the other partners provided the capital - and their liability is are liable for all those debts. This usually limited to the amount of share capital they only becomes clear when the tax man or hold. They have the overall right to control Customs And Excise present a bill for money the company’s affairs by voting at the not paid. general meetings but it is the directors who In theory, if a member joins or leaves the are entrusted with the task of managing old partnership is dissolved and a new one the company on a day to day basis. formed which can cause headaches. You may need to draw up a new agreement One of the major differences between between the partners (a Partnership Deed) Co-operatives and both Community or re-do your letterheads. The normal Enterprises and share-based Companies maximum size for a partnership is is that in the latter cases, control of the 20 partners. organisation is in the hands of people who often don’t work for the company. The partners generally have a say in running the business in proportion to their In the event of liquidation, the directors investment in it and therefore may not be are not generally liable for the company’s debts unless they act outside their powers, equal; the partners share the firm’s profits recklessly or fraudulently. The shareholders in proportion to their investment. are liable only to extent of their investment There is no reason why a group of social in the company. enterprises shouldn’t form a partnership, especially a temporary one, but if they want In return for their investment, shareholders to co-operate on a long-term basis they are are awarded dividends on a yearly basis out of the profit that the company is making; more likely to establish a jointly-owned company limited by guarantee or be shares. generally no dividends are awarded if the company is making a loss. P 251
  6. 6. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Employee-Owned Businesses Some of the advantages of employee-owned businesses include: In an employee-owned business all employees control and/or own shares . Start-up businesses can raise cash in the company - or have the chance by selling shares to employees. to do so in the future. You can create . Employee ownership helps a growing employee ownership: business recruit and retain key employees. . By selling shares to employees . Improved employee motivation leads . Through schemes that allow employees to better performance. to buy or own shares when key targets . Tax incentives are available for businesses or a fixed date are reached that encourage employee ownership. . Through governing rules (e.g. for companies limited by guarantee where One disadvantage of employee-owned all members have equal voting rights) businesses is that it dilutes control of the business and profit share away from the These formats are useful for high-growth original owners as it grows. start-ups, social enterprises, and employee Setting Up An Employee-Owned Business buy-outs. In large social enterprises, the individual member’s share is often less than If you want to set up an employee-owned £100. In employee-owned firms it may be business, your business adviser or large (£2,500 to £10,000 plus). accountant can advise you on the most suitable structure or employee share Employee-owned businesses can adopt scheme. You can also find a specialist one (and sometimes more) of the adviser at the Employee Ownership Options following structures: website or through the Co-operatives . Company limited by shares UK website. . Industrial and provident society (IPS) . Company limited by guarantee Charities . Partnership To be a charity an organisation must have . Co-operative aims - charitable purposes - that are exclusively charitable. These can be: . Employee share ownership plan (ESOP) . The relief of financial hardship The choice will depend on available finance, . The advancement of education number of employees, business size, desired . The advancement of religion management structure, and the purchase . Certain other purposes for the benefit price of the existing business (if relevant). Find out more about business structures of the community for employee-owned businesses from the Learn more about charitable purposes and Employee Ownership Options website. rules and find out which organisations are not suitable for charitable status from the Charity Commission’s website. P 252
  7. 7. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Some advantages of having charitable To help you set up a charity, the Charity status include: Commission provides model documents . Charities enjoy a wide range of tax for the above structures. Some national charities also produce a standard governing benefits and business rate discounts document, for use by organisations . Their status helps them raise funds associated with them. more easily than non-charitable bodies . They get free advice from the Charity Commission Registering A Charity You must register with the Charity Some limitations of having charitable Commission if your organisation is set status include: up under the law of England and Wales, . Activities are restricted to those for is established for exclusively charitable charitable purposes purposes, and either: . Strict campaigning, trading and financial . Has an income of more than £1000 a year reporting rules apply . Uses or occupies land or buildings . Trustees are subject to certain rules . Has assets that constitute and restrictions permanent endowment Read more about the advantages and Find out about exemptions from registration limitations of being a charity on the from the Charity Commission website. Charity Commission website. Chapter 8, schedule 6 of the Charities Bill 2004 has put forward a new form Choosing A Governing Document of incorporated form for charities which will offer the same protection as other There are three main types of governing incorporated structures (that is limited document. Which you choose determines liability and a separate legal identity). the type of organisation the charity will be. The perceived advantage is that this form will remove the dual registration that exists Governing Organisation with charitable companies that register Document Created with both the Charity Commission and Companies House. At the time of writing, Constitution Unincorporated this structure has not been passed or rules association by parliament. Memorandum Company limited and articles by guarantee of association Trust deed Trust P 253
  8. 8. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 CHOOSING A LEGAL BASIS Unincorporated Associations -needed goods and services. Profit can only be used for the benefit of the community. A very common form for smaller groups and Members may be the general public, service associations. Sets own aims and objectives, users, funders, supporters and/or staff. One members decide things on an on-going person, one vote. Residual assets only to basis, owns assets and liabilities jointly a similar organisation. and severally. Holding Companies Conventional Companies (Public And Private) The community business may operate as a holding company for several ’micro Main aim is to maximise return on -business’ projects. Though the micro investment. Profits are divided on the -business may be trading, its profits are basis of shareholding. Those who own guaranteed to return to the community. shares have a proportionate voting power. The parent organisation can exercise Members, users or clients who own no supervisory control and step in if things go shares have no say except through wrong. Typically, the holding company will (possibly) an advisory committee. Assets be a company limited by guarantee with can be divided up amongst shareholders charitable status. The community trading after company is dissolved. projects covenant their profits to the charity. The holding company may act simply as Co-operative, Mutual the means by which trading ventures make Or Friendly Society efficient use of profits to achieve their Although registered and set up in (often charitable) aims or may act to different ways, these structures have develop new micro-businesses. similarities. Aims are to maximise benefits for members whether housing, employment, Charitable Status health, social or economic benefits. Profits Charities, whether companies or not, may are usually reinvested but can be divided themselves trade where the sale of goods amongst members according to shares or directly furthers the charity’s main aims. contributions. Only members control the But when trading activities become a large organisation. One person, one vote. Residual part of the charity’s activities it is probably assets after dissolution may only be best to set up trading subsidiaries. transferable to another similar organisation. Community businesses may covenant profits to a charity they have no connection with; Community Business, or to a charitable holding company; or set Enterprise Or Co-operative up a charity itself. Aims to maximise training and work opportunities and/or to provide socially P 254
  9. 9. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Issues In Establishing B : Benefit A Community Business . How are the benefits of the organisation’s operations to be shared out, whether A : Ownership And Control work, training opportunities, management . People involved must decide what responsibilities, money etc.? constitutes the ’community’ - a . How are profits to be shared out? geographical area or a community . What balance should there be between of interests. income-generation, profit-making and . Does control belong solely to the employment and socially-necessary community or can other groups be activities and services? accepted as members. If so, what is the balance of control between C : Financial Structures various groups. . How is the community business to be . Can experts or important financed and what implication does this organisations be members? Again, what have for the organisation? is the best balance of control between . What contribution is expected from different groups. members, whether finance, labour, . What is the size and composition goodwill etc and what is their liability of any managing committee? in case of debt? . What role do workers or volunteers have in . How will financial control and reporting the day-to-day running of the organisation be exercised? And what other measures and its long-term plans? of performance (for instance job creation) will be used to assess the organisation’s performance? P 255
  10. 10. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 ADVANTAGES AND DISADVANTAGES OF MODELS OF ORGANISATION Formal Organisations/Structures There are 3 ways in which organisations that are common in Advantage : Good at covering everything; community environments can be Structured decision-making may help; defined. They are: Provides clear roles and authority; Better at representing and maintaining a diverse 1 : Formal or informal group; Provides familiarity or security. 2 : Hierarchical or Disadvantage : Slows down new ideas; democratic/egalitarian Puts many people off; Resistant to change; Restricts Roles and Tasks to particular 3 : Open or closed (membership) people (officers, old timers etc). Informal Organisations/Structures Advantage : More energy; Open to new ideas and members; Able to allocate tasks flexibly. Disadvantage : Information/Decisions may get lost; Easily manipulated/diverted; Not good at reviewing progress; shorter life. Hierarchical Organisations/Structures Advantage : Quicker decision making; Clear authority/responsibility; Better delegation; Information flows controllable. Disadvantage : Inequality of participation and reward; Formalised decision making; Can’t always accommodate differences; Information is controlled. P 256
  11. 11. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Egalitarian Organisations/Structures In each case the way in which the organisation actually operates may be Advantage : Greater participation levels; stated or unstated. Very often community Better ideas generation; More familiar to organisations are theoretically or formally most people; Able to generate approvals. one thing and practically or informally Disadvantage : Doesn’t allocate tasks another. They often have unstated rules, easily; Dispersed authority and responsibility; sub-cultures, a language often varying from Consensus may result in bad/poor decisions; what they do or how they act. Vulnerable to faction forming. Anyone working in the community needs Open Organisations/Structures to first analyse the real structure of the organisation, work out from its history or Advantage : Greater participation; Better activity why the organisation operates this representation; More welcoming; Greater way, and assess whether its structure is diversity of aims and objectives. positive or negative and the cost benefits Disadvantage : Vulnerable to take-overs; of proposing or initiating change. Members don’t always share aims; More likely to have poorly focussed priorities or objectives; Less loyalty from members. Closed Organisations/Structures Advantage : Unity of culture and participation; Clear status of members; clearer boundaries of organisation. Membership confers clear rights/duties. Disadvantage : Inward looking; Relatively immune to new ideas/criticisms; Vulnerable to decay from within; Can create/maintain a destructive culture. P 257
  12. 12. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 COMMUNITY ENTERPRISE - A MODEL FOR LOCAL ECONOMIC REGENERATION What Is A Community Enterprise? The Role Of Community Enterprise Defining The Community Enterprise The Community Enterprise can act as catalyst, advisor, financier, sponsor or A Community Enterprise is an organisation initiator. Whatever its activities, the which provides a legal framework for a Enterprise must be based on and group of people who wish to create social actually practice these principles: and economic benefits for the community . Wealth created is kept in the community in which they live. There can be two kinds of ’community’: and used for its future benefit . A geographic community, . Democracy and local participation such as a housing estate reduce dependency . A community of interest, perhaps people . Skills are acquired and passed on who share a common cause or culture. to benefit the whole community . The enterprise must be accountable How Do Community Enterprises Achieve to the community Economic Regeneration? . Plans and projects meet the needs and A Community Enterprise succeeds by interests of the whole community reflecting the needs of the community it serves. It must take into account all social, economic and cultural factors that are important to it. It is usual for two main targets to emerge: 1 : The Creation Of Economic Wealth The creation of economic wealth for the benefit of the community can involve the establishment of projects to stimulate the local economy, the financing of local employment initiatives and the provision of facilities to help create employment opportunities for people in the community. 2 : The Creation Of Social Wealth Social wealth is created through environmental improvements, provision of amenities such as childcare, and services such as community transport. P 258
  13. 13. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Steps In Establishing 3 : Empowerment The Community Enterprise model is A Community Enterprise Or an empowering framework that actively Community-Based Enterprise works against discrimination, disadvantage The Holding Company and neglect. The model proposed makes use of the idea 4 : Mutual Support of a holding company or charitable trust The protective management and financial (commonly called a Community Enterprise umbrella allows projects to develop securely or Community Business) which is a stimulus and get encouragement from mutual for a variety of estate-based projects, mostly support among members. economic but others which are mainly social in nature but may generate income through 5 : Good Employment Practice surpluses. The holding company owns all Because working life is part of the overall assets and is democratically-controlled by quality of life we enjoy, Community members from the local community. Its Enterprises typically try to be good aims are primarily to provide opportunities employers and promote this concept for work, volunteering or training. in their activities. 6 : Social Accountability Main Features Of A Community Enterprise Social audits and councils, typically part 1 : Enterprise And Social Development of the internal structure of the Enterprise, A Community Enterprise is concerned with allow both the registered objects and the the creation of community wealth, both yearly objectives to be reviewed and the social and economic. Therefore, it can effectiveness of their implementation to sponsor projects that are subsidised but be measured. provide a useful service and support small business ventures which provide local employment. Community benefit ranks equally with commercial and employment objectives. Profits generated by trading are fed back to the community to benefit all. Improving the quality of life of people is the motivating force behind all Community Enterprise ventures. 2 : Democratic Accountability The membership of a Community Enterprise consists of local residents who run the organisation on a democratic one person/one vote basis. The activities of the enterprise are under the direct ownership and control of people actively seeking to promote the well-being of their community. P 259
  14. 14. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Typical Structure Of Managing The Enterprise A Community Enterprise The members of the holding company annually elect a Council of Management. Owning And Controlling Community Assets The constitution of the holding company The Community Enterprise acts as a may ensure that residents of the community holding company for assets such as always have at least 50% representation. buildings and vehicles for the benefit of The Council of Management can support the community. It tries to set up a number or create businesses by: of small businesses and community . Employing staff to provide projects which are independently run common services but which rent community-owned assets. . Employing staff or using specialist Independent projects may adopt any agencies to provide advice legal form (charity, a workers’ Enterprise, . Raising funds through grants or loans a partnership, private company, an unincorporated voluntary organisation . Applying rental income to subsidise or another company limited by guarantee). certain projects Each project or business is free to develop and move out of the community, but the Making The Enterprise Socially Useful assets remain in the community to be used The Community Enterprise must be socially by new groups. accountable. It should define its social aims and audit these aims annually and publicly. Involving People In The It should ensure that its members and Life Of The Enterprise employees are part of a democratic Employees of all parts of the Enterprise are organisation practising equal opportunity encouraged to take up membership of the procedures. It should make the enterprise holding company whether they live in the accountable to its community and to the community or not. Additionally projects consumers of its goods and services. that provide work for volunteers or the volunteers themselves can take up shares. The Enterprise may require independent Users of the services provided and for ventures to act for the social good by community organisations may take up writing in conditions in any agreement shares if appropriate. made for the renting of assets or in any loan or grant agreement. P 260
  15. 15. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Advantages Of The . The profits made from any trading business within the Community Enterprise Community Enterprise Concept can be distributed according to the wishes . Any well-run Community Enterprise of the workers or volunteers who created contributes to the strengthening of the the profit. A profitable business can loan economy of a community by circulating money to the holding company to support money within a locality and by bringing other ventures. assets under community control. . Any venture can decide to move away . There is a high degree of worker control from the Community Enterprise in order in day-to-day running and participation to develop, leaving the assets with in longer term policy-making. The skills the community. and experiences of workers are always available to the Enterprise and they have a direct incentive to work for success. . The two tier structure maximises the sources of revenue for the community - the holding company can attract grants and as a private company can also raise share capital or loans. If a charitable structure exists, independent but associated enterprise can covenant profits back to the Enterprise in a tax-efficient way. . The total flexibility of the Community Enterprise allows for outside professionals and local people to participate fully for the benefit of the community: Professionals can be brought in to advise and support either the autonomous projects or the holding company itself; Local people have the advantage of being able to become involved as volunteers on one of the projects, developing skills and confidence before becoming either employees or elected Council of Management members. P 261
  16. 16. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Stages In The Development 7 : Planning In Detail Members form into sub-committees, Of A Community Enterprise project teams or action groups to establish Initial Steps projects or to deal with constitutional and fund-raising matters, led by members of the 1 : Choosing A Steering Group steering group. A steering group of between 10 - 20 residents and professional workers form a 8 : Getting Additional Help company limited by guarantee and become Local professionals should be co-ordinated the founder directors. by the manager and there should be formal agreement about the roles of experts and 2 : Defining/Establishing The Vision the boundaries for their activity on behalf Members decide on initial or priority of the Community Enterprise. projects, balancing need with a program of development that attracts resources, Years 1 - 3 support or funding. . Membership has expanded and Directors 3 : Is It Feasible? are now elected after the first AGM The steering group draws up a list of . As the role of the Manager expands, required community assets (e.g. premises more staff should be employed to form or transport) and negotiates transfer a management team that services the of ownership. board of directors and provides ’common 4 : Gathering Resources services’ to all projects. The steering group builds resources through . The first trading company has been set a fund-raising and resourcing strategy. up as a wholly-owned subsidiary in which 5 : Legal Status - Charitable? members work democratically and take The steering group draws up and adopts charge of the day-to-day running of the a legal structure for owning and controlling trading company. The workers are either assets on behalf of the community. The the members of the original project team constitution should ensure that the or sub-committee or are recruited, or controlling body (for instance, a Board both. The workers automatically become of Directors) will never be dominated by members of the Community Enterprise. workers within the project and that . The trading company eventually becomes community interests are safeguarded. independent after 2-3 years, with a legally incorporated constitution but renting 6 : Making Decisions assets, which remain within the Community The steering group widens its membership Enterprise. A licence agreement is and develops and executive body to get drawn up. things done on a day-to-day basis or, if . A Credit Union is formed, members funded, appoints a manager or co-ordinator to manage the whole Community Enterprise. are automatically members of the The post should have both business and Community Enterprise. community work skills. The manager is entitled to join the controlling body. P 262
  17. 17. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 . New projects with social benefits are Community Enterprises. Involvement in formed to deliver services to the local the projects entitles individuals to become community (for instance, welfare rights members of the Community Enterprise. advice) and provide opportunities for . Subsidiaries continue to exist, either volunteering. Workers are automatically because it is appropriate for projects members of the Community Enterprise which rely on volunteers to have direct and volunteers may be. management support, or it can be an . The management team and directors intermediate stage for some projects continue to set up sub-committees to before they become independent. establish new projects. . Projects leave the Community Enterprise . As activities expand, the Community in increased numbers due to: growth, Enterprise continues to draw in collapse or change in aims. professionals and residents, but now In all cases, the assets remain with the brings in skilled people to enrich the Community Enterprise. residents skills: literacy and numeracy, . The Community Enterprise should job-seeking and vocational skills, advocacy establish some mechanism for setting and and lobbying, communication skills, monitoring its social aims, either regular confidence and assertiveness, childcare. social audits should be carried out or a . By the second year, some founding separate Social Committee set up, or both. members will begin to leave. Some will . New project development should continue, have acquired skills and confidence projects which will expand and assist the and want to move on. Others will find common services being provided. As the themselves less relevant or there may Community Enterprise grows, so will its have been conflicts over direction and confidence in setting up larger and more speed, casualties of growth and change. adventurous projects. . If the Community Enterprise is successful . Residents, volunteers, skilled people and it will attract marginalised or multiply professionals will be recruited now through disadvantaged groups. Such groups and involvement or employment with the individuals should be encouraged to join many projects. to widen its representational base. . There will be a high turnover of members Years 4 - 10 and the Community Enterprise must by now have a pool of talent available and . Membership is now large. The board of be able to accept departure as a natural directors confines itself to policy decisions phenomenon: the Community Enterprise and continues to set up sub-committees. must plan for this, accept the positive Membership ceases to be individual but leavings as part of achieved social aims representational. The projects themselves and seek to minimise the negative leavings. are the members and send delegates to . The common services should expand the board of directors. to provide extra facilities such as training, . The independent projects have developed advice, project development and a into 4 types: Project Teams, Wholly-Owned loan fund. Subsidiaries, Worker Enterprises, New P 263
  18. 18. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Planning A Community Human Resources 2 : Newcomers Enterprise In More Detail A forming group (a steering committee) must find room for inexperienced members, Human Resources 1 : Experienced People since it is often these people who continue It is probable that, in the early stages, longest with the project. But they will not members of the initial steering group develop organisational skills unless provided will be recruited from the membership with the active example of well-run meetings of Community and Tenants’ Associations, and activities. Later, as new projects are political and campaigning groups, or active launched, prospective members of each interest groups such as social clubs or group must be given training appropriate event-based groups. It is vital that residents to each activity. with experience of community and collective There is value in providing as action are interested and involved in the many opportunities as possible for new activities of the steering group at this time members to join the enterprise, perhaps for the following reasons: as volunteers, and a Community Enterprise . They will find it easier to accept the holding company may sometimes be procedures necessary to create and pursuing a local activity mainly, if not establish the organisation, especially solely, to offer this way in. if it is to be legally incorporated. . They will have experience of the formation Warning : There is no evidence that process and the means to make decisions. residents of an estate who have no Their presence is vital to establishing the experience of community and collective ’culture of enterprise’ and organised action will spontaneously take on activity amongst the members, as well responsibilities or possess the necessary as providing a sense of respectability confidence or skills to establish or to outside observers. maintain a Community Enterprise. Such people may be moving on from established projects or ones winding down and see the new group as an opportunity. Or they may join, work within the group and then move on once it is well-established. Warning : Every community contains its share of busybodies, people who may be active and involved, but unpopular with their neighbours or negative in outlook, and therefore destructive to organisations. Great care must be taken in recruiting people who can not only do the work, but are acceptable to the local community and will contribute to the Community Enterprise’s positive image and good reputation. P 264
  19. 19. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Forming A Steering Group Other Resources There is no certain mix of people who should Premises go to make up an effective steering group. Community Enterprises and projects on Commitment, energy, vision and enthusiasm housing estates often have the same ’look’ are important but there also need to be to a visitor, primarily because so many are people who are practical and determined, based in Local Authority converted flats and people who possess good communication shops. This occurs because on such estates and presentation skills. it is often the only property that can be Professionals assisting the development acquired. Premises are a vital component of a Steering Group should carry out an of any Community Enterprise, and if none assessment of the group’s abilities and try are available in the area, it is unlikely that to get the forming group to accept and projects can start. identify with the Group’s needs for particular kinds of people and skills. Vehicles And Other Assets Since one role of the holding company What is certain, however, is that there are is to build up a stock of assets under two key factors which can undermine the community control, the Community development of an effective Steering Group Enterprise will need access to money or and, indeed, the whole project. They are: goodwill in order to acquire vans, cars . Every estate has ’subcultures’, and their and equipment such as photocopiers and priorities and perceptions will affect the computers. The enterprise may be able to types of projects chosen for development obtain grants from say, the Local Authority, and help to determine the level of sympathetic charitable trusts or local involvement people are prepared to offer. fund-raising bodies, but if no sources . Every estate has established cliques, often of funds are readily available, the group grouped around points of activity such as may well never take off as a viable the local community centre, labour club Community Enterprise. or tenants’ association. If people with established jobs or titles feel the new Experts activity threatens their status or position, Estates usually contain a range of they may be apathetic or hostile to the ’professionals’, be they social or community Community Enterprise. workers, teachers, vicars, welfare rights advisors, housing managers etc. The steering group will benefit from having an early sympathetic input from such people, and most successful Community Enterprises have been able to draw on a long-term commitment from one or two professionals. P 265
  20. 20. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Using Experts as one year, after which the professional worker will not be allowed to continue in Such experts may become involved as the role, no matter what the ’need’. part of their work, or the development of a community Enterprise may overlap with part of their workload or they may have a political or philosophical commitment Starting Work to community self-management. A useful first step is to propose and carry out an estate profile covering areas such Their participation should be encouraged, as income and employment, skills and provided, of course, that it fits in with resources, demographic profile, education the overall strategy and structure of the and training, participation and take up of Enterprise; some community development benefits, training opportunities, employment workers may have a different approach opportunities and so on. A review of physical to the one detailed here, and other resources (community and authority held professionals may have differing aims assets) and access to expertise based in the or the sections of the community they feel community could also be included. particularly responsible for. It is important to ensure that all these local experts are made There are advantages and disadvantages fully aware of the aims of the Community in this approach as follows: Enterprise from the beginning and are not allowed to divert or distract the Steering Advantages Group by introducing a different agenda. . Introduces research element, funders feel they can justify any policy decisions they The participation of professionals must be make (in retrospect) and gives them a controlled, a few actually on the controlling clear proposal to vote for. body with more behind in support. Professionals must never be allowed to . Tangible work produced immediately. outnumber local people. Moreover, their . Helps the community to assess the participation should be seen as declining ability of experts, professionals and with time. They must understand that theirs others assisting the process of is an enabling role, providing information, community development. training and support. . Provides a clear assessment of both A good technique to encourage is the the actual and potential capability ’shadowing’ or ’deputising’ role: a of the community. professional worker may take the Chair at . Introduces outside bodies and new early meetings, but appoints a local person members to all activists. as shadow or deputy, who is trained into the . Provides the opportunity for a role and allowed to gather experience and confidence, until they are finally able to take comprehensive survey of the community over the position and the professional can not just the parts those involved are step down. To ensure the procedure is familiar with. followed, a time limit should be set, such . The profile can be used to raise awareness where it counts. P 266
  21. 21. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 . It brings publicity to the work. Setting Up A . It dispels myths about the community Community Enterprise which may set artificial boundaries or How To Get Started lead to a focus on problems that don’t . Form the steering committee - (a group exist or which are less important than other problems. of people representing the range and variety of groups and individuals within Disadvantages the local community) . The profile can become an end in itself . Gather information, carry out research, not a means to secure resources and identify resources, begin training make plans. . Identify ideas for business/projects . It may take too long to produce, sapping . Register the community enterprise as morale and reducing energy levels and a legal entity commitment among community activists. . Raise money, gather resources, . It may seem academic, remote and recruit helpers irrelevant. This is especially true of profiles written for funding bodies that . Choose the first business/project may need a lot of technical information. to develop The community too must be given the . Draw up business/development plan chance to learn about itself. . Raise the money required to finance the first business/project . Launch the first business/project . Choose the second business/project to develop . Hold the first annual general meeting - (hold elections, affirm aims/objectives) P 267
  22. 22. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 REASONS FOR SETTING UP A CHARITY Contacts There are 6 reasons for setting up a charity: Charity Commission 1 : Public benefit 2nd Floor, 20 Kings Parade, Queens Dock, Liverpool L3 4DQ 2 : Relief of poverty 0151 703 1500 3 : Advancement of education 8th Floor, Clarence House, Clarence Place, Newport, South Wales, NP19 7AA 4 : Advancement of religion 0845 300 0218 5 : Other beneficial services National Council For 6 : Recreational facilities Voluntary Organisations Regents Wharf, How Could A Charity Help? 8 All saints Street, London N1 9RL 0207 713 6161 . A charity for the relief of the poor could give cash or other benefits. Welsh Council For Voluntary Action . A charity to advance education could 13 Wynnstay Road, Colwyn Bay, operate vocational training facilities Conwy, LL29 8NB . A charity to provide recreational facilities 01492 539800 could only do so if it was open to the general public Directory Of Social Change . A charity for other beneficial Radius Works, Back Lane, London NW3 1HL purposes could help the mentally 0208 435 8171 or physically handicapped Charities Aid Foundation 48 Pembury Road, Tonbridge TN9 2J2 0732 771333 P 268
  23. 23. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 Options For Charitable Structures Charity Supporting An Organisation The obvious way to ’launder’ money in Not For Profit, Not A Charity a tax efficient way. Profits made by the An organisation that is not-for-profit and organisation are given to the charity does not distribute benefits to members tax-free and this money is then used to and which, because of this, is able to claim benefit members directly or indirectly. But some discretionary help such as rates relief. this relationship could not be sustained in Would not be recognised as a charity by the long-term and the only contracts that Charity Commissioners or Inland Revenue. could be awarded would be for clearly charitable work only. Worker/Member Owned (Not Managed) Charity Charity With Trading Subsidiary Members of the organisation work for it Increasingly common structure but appoint trustees from outside. It would enabling charities to trade without danger therefore be co-operative in spirit but not of incurring tax or losing charitable status. legally. Extremely unlikely to be recognised Although the trading subsidiary is as an acceptable charitable structure. independent of the charity, the charity exercises ultimate control through Worker/Member Controlled shareholding. It will probably appoint some Exempt Friendly Society members of the trading organisation’s Charitable objects but controlled by the management. But separate accounts must members. The Commissioner does not be kept and the charity should not pay any accept it as a registered charity; Inland of the trading organisation’s bills - it needs Revenue gives it charitable status for to be kept at arms’ length. tax purposes. Organisation Sponsoring A Charity The organisation could sponsor a charity and money could move between them (unless members of the organisation were also trustees). Members of the organisation could earn money from their work and receive charitable donations providing the work they did for the charity supported its charitable aims. P 269
  24. 24. DIFFERENT STRUCTURES; LEGAL STRUCTURES 7.1 USEFUL CONTACTS Social Enterprise Coalition Inland Revenue Enquiry Line 020 7968 4921 Self Assessment Orderline 08459 000 404 Financial Services Authority Consumer Employee Ownership Options Helpline 0845 606 1234 Enquiry Line 0845 603 9197 Companies House Charity Commission Contact Centre 0870 333 3636 Contact Centre Enquiry Line 0870 333 0123 CIC Regulator 0292 0346228 P 270