Monday, December 21, 2009

Are nineteen-century legal forms more appropriate for social enterprise than we might think?

I recently blogged about legal forms that social enterprises are adopting, drawing on published figures from the respective regulatory bodies, in an attempt to see if the hype surrounding certain forms is matched by reality.

Recognising that as great as this blog is, not everyone subscribes to it, I also posted it into a few other forums and got some really useful comments which have made me revisit this subject; this time comparing new registrations against the current make-up of the social enterprise sector (as identified by the Social Enterprise Coalition's research paper published earlier this year) and also Dave Hollings' experience as a leading practitioner in the make-up of new social enterprise registrations that he deals with.

For the sake of ease of comparison, I've looked at how the 'big 4' (companies limited by guarantee, charities, community interest companies, and Industrial and Provident Societies) square up against each other according to each of these sources by ranking of popularity.
And actually, there's a high degree of consistency - CLGs are by far the dominant choice between all. The averages then show its charities, followed by CICs and in a respectable 4th place, IPSs.

While the CIC statistically outnumbers IPSs, the gap between these two forms is not as great as might be imagined: the SEC research shows only 5% difference between their current use, and its 4% by new registrations.
Could this be indicative that a legal form created in the nineteenth century to explicity support the co-operative movement is still resonating with the wider social enterprise sector today; and that as people explore their choices in detail, they're finding that the CIC model, while obvioulsy attractive in some instances, isn't the be all and end all that its presented as in some quarters?

(NB: interestingly, the SEC research also identifies and lists sole trader and unincorporated association as legitimate forms for social enterprise...)

Tuesday, December 8, 2009

what's the most popular?

I've often found myself in politically tense positions over supporting groups to identify and adopt their legal form, particuarly where there's a funding/commissioning body/'mainstream' support agency in the wings encouraging them to pursue a particular formb with little regard to others.
My standing line in such instances has always (and will always) be: inform yourself, consider what you feel imporatant in relation to your values, governance, accountability and future direction and then pick a form that best matches.

And its therefore heartening (to me at least) to look at some recent statistics on the formation rates within the third sector by legal form as reported by the various regulatory bodies:

in 2008/9:
4,953 new charities,
appox. 9,500 not-for-profit companies (companies limited by gurantee rather than share, although this is a very crude measure as there are social enterprises with private and public share capital),
227 Industrial and Provident Societies,
814 CICs
(LLPs are not included due to their not being as easy to seperate out those LLP's operating as social enterprise/co-ops/etc from legal firms, accountants, etc, as it is by looking at the 'overview' of other legal forms: also, this is the first time I've compliled this list, so will try and include when I review it next year?)

It seems to endorse my position about legal structure: - the figures show that there is still a great variety of legal form being adopted with the most popular being a CLG - the form that I usually suggest as a 'default position' as its the quickest, easiest and cheapest to set up (or should be...), and also the most compatable with CIC and Charity forms, as well as being the easiest to change the rules of, or to change to another form from, at a future date.
But what of your experinces? I'm open to being challened on my interpretation of these figures (as I am on just about all views I hold), so feel free to post a comment below...