8.3. Legal Structures

Once a group has made the decision to incorporate as a legal entity, they need to decide which legal structure is most appropriate to achieve their vision.

See this page in: Cymraeg

Choosing a legal structure can be daunting and groups shouldn’t rush to incorporate, a project can progress with an informal steering group. Once you start entering into contracts e.g. with landowners, architects, developers, you need to become a legal entity.

It is important to choose a legal structure that will allow the group to achieve its vision, aims and objectives. Key things to consider include;

  • Who are the members / beneficiaries?
  • How will the organisation be run / governed on a day to  basis?
  • Where will the funding come from?
  • How will the organisation protect assets for community benefit in perpetuity?

Depending on the project, a number of legal structures may be appropriate, they are outlined below.

Incorporated: Yes

Limited liability: Yes

Regulator: Companies House

Can apply for charitable status? Yes (if income is greater than £5,000)

Set up: Memorandum and Articles of Association are registered with Companies House. There is a relatively small registration and annual filing fee.

Suitable for: Organisations that need maximum flexibility at the early stages. The company could later amend its structure.

Incorporated: Yes

Limited liability: Yes

Regulator: Companies House and CIC Regulator

Can apply for charitable status? No

Set up: Memorandum and Articles of Association are registered with Companies House, along with a Community Interest Statement. Relatively small registration and annual filing fee.

Suitable for: CIC’s are a specific form of company limited by guarantee; the organisation is governed by its guarantors and acts in the community interest.

Incorporated: Yes

Limited liability: Yes

Regulator: Charities Commission

Can apply for charitable status? Yes (regardless of income)

Set up: A Constitution will be submitted to the Charity Commission. Registration can take between 6-8 weeks but there is no fee to set up a CIO or annual filing fees.

Suitable for: There are no shareholders; the organisation is governed by its trustees and acts in accordance with its charitable objects.

Incorporated: Yes

Limited liability: Yes

Regulator: Financial Conduct Authority (FCA)

Can apply for charitable status? Yes

Set up: Organisations have to register model rules with the FCA. Registration costs start at around £350. There are ‘off the shelves’ rules available to use. Costs will increase dependent on the number of amendments that need to be made. Community benefit societies must file their annual accounts yearly.

Suitable for: Organisations that are set up to benefit a particular community (of interest or geographical). Organisations that wish to be governed by co-operative principles e.g. democratic control, one member, one vote regardless of shareholding.

Incorporated: Yes

Limited liability: Yes

Regulator: Financial Conduct Authority (FCA)

Can apply for charitable status? No

Set up: Organisations have to register model rules with the FCA. Registration costs start at around £350. There are ‘off the shelves’ rules available to use. Costs will increase dependent on the number of amendments that need to be made. Co-operative societies must file their annual accounts yearly.

Suitable for: Housing co-operatives whose only members will be their tenants and wish the organisation to be governed by co-operative principles e.g. one member, one vote, regardless of shareholding.