A guide to third sector trading - WCVA

It’s an idea, but is it business? A guide to third sector trading
1: Getting
started
2: First steps 3: Business
planning
4: Legal and
governance
5: Funding
and
resourcing
6: Financial
controls
7: Managing
growth
8: Management
and
governance
9: Social
enterprise
10: Sources
of support
Community Interest Companies CICs
• The CIC has been introduced to help social enterprise
organisations which operate for public benefit to register new
companies easily and cheaply and to provide protection for their
assets and profits when they attract outside investments.
• The memorandum and articles of association specifies that
their assets are ‘locked in’ so they cannot be distributed to
members or transferred to other companies, except to another
asset-locked organisation such as a CIC or charity (as is also the
case for charities).
• CICs must make an annual report to the Regulator
demonstrating that the company is run in the public interest.
• CICs are covered in detail in section 4.5.
Charitable Incorporated Organisations:
• These are a new type of company with limited liability which
come with charitable status.
• Like all charities, they are only suitable for trading in certain
circumstances,
− if they carry out permissible trading activities under charity law
– ‘primary purpose trading’, ‘ancillary trading’ or small scale
trading (see section 4.3 below for the definitions of these terms)
− if they own subsidiary trading companies which are noncharitable.
• They remove the need for the two stage process of registering a
charitable company – first with Companies House and then with
the Charity Commission. If you are starting a charitable company
from scratch this is the route to use. If you are already a registered
charity there is no need to change, but you can if you want to.
Companies limited by guarantee
– advantages and disadvantages
Advantages:
• ‘limited liability’ – protection against directors being held
personally responsible for losses if the company runs into
trouble, provided they have behaved properly
• companies limited by guarantee are very widely used – so
information about them is easily available and there are plenty
of real-life examples to consult
• they are the standard format for charitable companies
• standard sets of memorandum and articles of association are
easily available on the internet at no cost
• the format is extremely flexible, and can fit most types of third
sector trading activity
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