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Social Enterprise companies are formed for the benefit of the community. Over 60,000 such companies have been set up so far in the United Kingdom. They are not set up to make a profit in the normal business sense, but established to operate for a social purpose, benefiting the community as a whole. Working beyond what the government and public sector can. They are similar in nature to charities and although some choose to set up a social enterprise in the form of a charity, doing so is not always the best choice. Charities are far more strictly regulated than the other possible options.
Social Enterprises come in various forms. Depending on the people that set them up and their intentions, a social enterprise might be formed using a Limited Liability Company, a Company Limited by Guarantee or a Community Interest Company. Depending on the legal structure of the enterprise it may be owned by the employee’s, trustees, public bodies or community stakeholders. Whatever the case, social enterprises are set up for the benefit of the community. They are looked upon favourably by the government who see the benefits of the social enterprises in their various forms, offering employment to people willing to help and improving the community where the official bodies cannot.
In terms of the community, social enterprise companies set up for many reasons. Helping the disadvantaged and needy by offering training or education, helping to regenerate a poor area of the community and for many other reasons. Profits generated are used to these ends, re-invested in the community rather than distributed to the shareholders.
Some social enterprises choose to set up as a Limited Company, In registering, they draw up “objects” in their memorandum of association which establish the intentions of the company to operate in a “social” manner for the benefit of the community. The common choice here is to register a company limited by guarantee. Due to the nature of this company its liability is limited, but it can operate without the intention to make a profit. Companies limited by shares are a less likely choice as generally speaking they are intended to make a profit to distribute to their shareholders.
In some cases social enterprise companies are set up in the form of a charity. A charitable company limited by guarantee, established for exclusively charitable and public benefit reasons. Assets and profits must always be used for the benefits the charity has been set up for, these will be stated in the “charitable objects clause” drafted into the memorandum and articles of association. Governed and monitored by both the Charities Commission and Companies house, its not always the best choice for a social enterprise, but many find it works well as they both have charitable intentions.
Most often the best choice for a new social enterprise, a Community Interest Company is a body specifically created for the benefit of the community. Such a body must satisfy the “community interest test” to demonstrate their social interest purpose and to assure the company registrar that their objects are for the benefit of the community. CIC’s must also have what is called “asset lock” to ensure that the company cannot sell its asset for less than their true value. Thus protecting the assets of the company. They must also draw up an annual report of their activities to show the public that the company is carrying out what it was set up to do. CIC's are regulated by the Community Interest Company Regulator as well as Companies House.
The Government is in the process of creating a new body which will be available for formation in the spring of 2010. Charitable Incorporated Organisation is a new form of enterprise built to allow bodies to be formed and regulated less strictly and by only one regulatory body instead of two. The idea is to encourage more people to start social enterprise bodies and benefit the community further.
The Company Warehouse is here to help people establish business within the UK. Our specialist team know what is required to form each of the various bodies commonly chosen to start a social enterprise. For further guidance contact one of our team.
Business Link Guide To Social Enterprises
Social Enterprise Coalition
Office Of The Third Sector – Social Enterprise
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