Karina MacRitchie from Senscot Legal outlines the issues charities must think about when becoming a social enterprise.
OSCR has answered some frequently asked questions about social enterprises.
TFN has a useful article on everything you need to know about social enterprises.
Community Interest Company (CIC)
Please note that a CIC cannot be a registered charity.
Community Interest Companies (CICs) are limited companies, with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage.
Information about CICs can be accessed on the website of the CIC Regulator.
A co-operative is an association or corporation established for the purpose of providing services on a nonprofit basis to its shareholders or members who own and control it.
Co-operatives UK is a national trade body that campaigns for co-operation and works to promote, develop and unite co-operative enterprises. They define a co-operative as:
A group of people acting together to meet the common needs and aspirations of its members, sharing ownership and making decisions democratically.
If a co-operative’s membership is closed or restricted, and profits are divided amongst the members, then it cannot be a charity.
Further information is available from Co-operatives UK or Tel: 0161 246 2900
Industrial and Provident Society (IPS)
The industrial and provident society represents a halfway house between a registered company and an unincorporated association. It has rules of association in much the same way as an unincorporated association, yet it is an incorporated body with the benefit of limited liability. To qualify for registration as an IPS a body must either be a co-operative society for the mutual benefit of members, or for the benefit of the community. Only those set up for the benefit of the community, and not members, will be eligible for charitable status.
The IPS offers the benefit of limited liability, but the incorporation procedure can be expensive and time-consuming, and few professional advisers will be familiar with the regime for such societies.
Industrial and provident societies are registered with the Financial Services Authority and are regulated by the FSA under a regime which is similar to that for registered companies.
Originally, the friendly society was an unincorporated association formed for the mutual relief and maintenance of its members, primarily in sickness and old age. While many of the functions of friendly societies have been taken over by the State, a number of large insurance organisations still retain their mutual status and are registered as friendly societies.
A friendly society was unincorporated but, like Industrial and Provident Societies, became subject to a regulatory regime similar to that governing registered companies. There was no limited liability for members.
While many charitable organisations still exist as friendly societies, it has not been possible to create a new friendly society of the original type since February 1993. All friendly societies are now regulated by the Financial Services Authority.