A guide to third sector trading - WCVA

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It’s an idea, but is it business? A guide to third sector trading Appendix 1 Appendix 2 Appendix 3 Summary – most typical features Ownership, governance and constitution Is it a legal person distinct from those who own and/or run it? Can its activities benefit those who own and/or run it? Assets “locked in” for community benefit? Can it be a charity and get charitable status tax benefits? Differences in the law as it applies in Scotland or Northern Ireland? Limited company (other than Community Interest Company) Most frequently adopted corporate legal structure. Can be adapted to suit most purposes. Directors manage the business on behalf of members. Considerable flexibility over internal rules. Yes. Members’ liability is limited to amount unpaid on shares or by guarantee. Yes (but no dividends etc to members if it is a company limited by guarantee). Would need bespoke drafting in articles (which could be amended by members). Yes, if it meets the criteria for being a charity. Scotland, no. Northern Ireland, separate (but similar) legislation. Community interest company (CIC) www.cicregulator.gov.uk Limited company structure for social enterprise with secure ‘asset lock’ and focus on community benefit. As for other limited companies, but subject to additional regulation to ensure community benefits. Yes. Members’ liability is limited to amount unpaid on shares or by guarantee. Yes, but they must benefit the wider community as well. CICs can pay limited dividends to private investors. Yes, through standard provisions which all CICs must include in their constitutions. No, but can become a charity if it ceases to be a CIC. Scotland, no. Northern Ireland, no specific differences. 246
It’s an idea, but is it business? A guide to third sector trading Appendix 1 Appendix 2 Appendix 3 Summary – most typical features Ownership, governance and constitution Is it a legal person distinct from those who own and/or run it? Can its activities benefit those who own and/or run it? Assets “locked in” for community benefit? Industrial & Provident Society (IPS) (Co-operative) www.fsa.gov.uk/Pages/Doing/Info/MSR/ For bona fide cooperatives that serve members’ interests by trading with them or otherwise supplying them with goods or services. Committee/ officers manage an IPS on behalf of its members. One member, one vote (regardless of sizes of respective shareholdings). Yes. Members’ liability is limited to amount unpaid on shares. Yes, but they should do so mostly by members trading with the society, using its facilities etc, not as a result of, for example, shareholdings. Industrial & Provident Society (IPS) (Community Benefit Society (BenComm)) Benefit the community rather than just their own members and have special reason not to be companies. Like Co-op type, but new legislation provides option of more secure form of asset lock. Yes. Members’ liability is limited to amount unpaid on shares. Must primarily benefit nonmembers; asset lock applies. Would need bespoke drafting in articles (which could be amended by members). Yes (asset lock only survives dissolution if new statutory form of asset lock adopted). Can it be a charity and get charitable status tax benefits? No. It would have to be constituted as community benefit type of IPS. Yes, if it meets the criteria for being a charity. Differences in the law as it applies in Scotland or Northern Ireland? Scotland, no. Northern Ireland, separate (but similar) legislation. Scotland, no. Northern Ireland, separate (but similar) legislation. 247
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A guide to third sector trading - WCVA

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