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...)


  1. Adrian

    Looking at the SEC's research, I could see how an unicorporated association could possibly be a SE (albeit on a fairly small scale, as 'serious' trading activity would prove the form to difficult to use).

    However, while a sole trader could operate a business with philanthropic aims, surely the ability of a proprietor to do exactly what they want with surpluses (including the possibility of withdrawing any/ all profits) excludes sole traders or partnerships from the SE sector in the view of most people.


    Steve Miller

  2. hi Steve - thanks for the notes;

    there's been a pretty thorough discussion about sole traders and their 'legitimacy' to present themselves as a social enterprise over on third sector forums (,
    as for partnerships - I suspect that MJRay, a member of an LLP, as well as the late Tool Factory (also a partnership) would love to take you up on that stance as they've both argued extensively elsewhere (and succesfully too) that Partnerships can be a legitimate form for social enterprise.

    I take the position that any legal form can be acceptable for social enterprise (including plcs) - as long as certain defining characteristics and values are entrenched in their rules.

  3. for those of you who might be interested, the following was recently posted by George Leahy, Director of Research & Policy at the Social Enterprise Coalition, to this piece on the Social Enterprise Network Group on LinkedIn:

    "Adrian, I justwant to pick-up on a factual point re our research published in November. We did not identify sole traders and unincorporated associations as 'legitimate' (I really think this is an inapporpriate phrase in any case) forms for social enterprise. We simply asked the question 'what is your legal form?' and what is reported is the answers we received. You also need to be cautioius on interpreting the CIC information as we did a 'booster' sample of CICs rather than a random sample in order to get usable data. George "

  4. Great article and good research. Do you have a blog or newsletter I can link to? legal forms