A decision will need to be taken as the CCLH group develops regarding incorporating as a legal entity.
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The group’s registration as a legal entity, known as incorporation, is what makes the organisation a legally recognised body, and what provides the members and governing body members their limited liability. CCLH groups are unlikely to be able to enter into legal agreements with other organisations until they have become incorporated.
When to register as a legal entity
By becoming incorporated, the CCLH group takes on legal responsibilities, such as the requirement to hold an Annual General Meeting, to have an official registered address, and to operate the CCLH’s governing body and membership in accordance with the constitution that is registered.
Because of taking on these responsibilities, it is best practice that incorporation should happen later in the group development process so that CCLH scheme members are sure that the structure they are registering under is right for them, and that they are willing and able to take on incorporation responsibilities.
The initial choice that needs to be made is whether the CCLH group wishes to register as:
A Society is a legal form designed for community or co‑operative organisations. Societies register with Rules and there are requirements about what societies can and cannot do because the model is intended to be about providing benefit either to its members (a Co-operative Society) or to a wider interest group (a Society for the Benefit of the Community – a bencom).
Societies are registered with the Financial Conduct Authority (FCA) who check that the rules comply with their requirements. This can take some time, and so some Model Rules are registered with the FCA through sponsoring bodies. Providing a CCLH scheme does not want to make major changes, registering with Model Rules becomes more of a formality.
The CCH (and Radical Routes) have developed Model Rules for co‑operatives and some of the other models in this guide with Co‑operatives UK, the national trade body for the co-operative movement. Once incorporated, the CCH makes those co-ops who have become their members aware of any changes to Society Law that could affect them.
A Company is a legal form designed for most businesses in the country. Whilst Companies Limited by Shares are companies listed on the stock exchange, the company models used by CCLH schemes include Companies Limited by Guarantee (possibly appropriate where membership is primarily for residents of schemes) and Community Interest Companies (possibly appropriate where membership is primarily for a geographical community or other interest group).
Companies register with Companies House using Memorandum and Articles (Mem and Arts). This is easier to do than society registration, because Companies House do not check the Mem and Arts registered. However, this means that responsibility for getting the Mem and Arts correct lies with the CCLH group. Off the shelf Mem and Arts exist, and the more complex that CCLH groups make their Mem and Arts, the more possibility there may be that they could contravene Company Law. This means that CCLH groups may need to take legal advice before registering non-standard Mem and Arts. Once incorporated, the CCLH group will be responsible for ensuring that it is aware of any changes to Company Law that could affect them.
There are advantages and disadvantages to each type of incorporation, and it is suggested that each CCLH group take legal advice from someone qualified to provide it before incorporation.