more awkward moments for CIC Regulator?

OK - so this post is in my bucket of 'more likely to cause upset and controversy', but sometimes you have to be unpopular for the sake of trying to further a debate or conversation, in trying to figure something out for yourself...

I've never hidden my confusion about CICs since they were first mooted by a drunken solicitor, as to what it is that they actually add to the social enterprise sector (there's nothing unique in them that you can't have in any other legal form, they're no more attractive or eligible to apply to grant making bodies than a 'regular' company, and don't enjoy any of the tax breaks that charities do).

But I was always encouraged by the CIC Regulator in its early days - for its being open to engage in critical debate, and willingness to hear and receive arguments that there may be parts of the CIC design which needed to be reviewed.

However, in more recent years, I can't help but start to think that the CIC Regulator is increasingly doing not just itself a disservice, but also the CICs that it oversees, and the wider social enterprise community:

In the past the CIC Regulator has:

• Publicly stated that in order to protect trust in the CIC brand, that it will never disclose or reveal any investigations it opens, or actions it takes, against any CIC (including to the persons who may have initially raised concerns about it with them). But such secrecy surely only builds mistrust, especially as its in complete opposition to the position of every other regulatory body.

• Stated untruths about the general public's relative trust in CICs over Charities.

• Created a governance code for CICs, to help guide and inform Directors of them as to best understanding the legal duties associated with being such, and how to effectively lead a CIC in this capacity - but never told any CIC about it (and it's not even hosted anywhere in their website pages).

• Admitted that there are parts of the CIC legislation that don't make sense, and shouldn't be as they are, but don't have any direct powers to act on this when it's brought to their attention.

And more recently: 

from late 2023 to the present - I've noticed that I'm increasingly meeting more 'new' CICs (registered in last few years) who are missing core details in their registration documents which should have meant that the CIC Regulator automatically rejected their application: 

• they don't have any stated social objects clauses in their Articles; 
• they don't have any statements about how their profits will be used; 
• there's contradictory details about the named recipient in their asset lock.

- These are part of the key features of being a CIC, which are apparently regulated and assured by the CIC Regulator (except they're obviously not).

in 2024 - the BBC exposes a the illegal, unethical, and questionable management practices of a CIC that have been taking place over several years. The feature drew national interest, response, and comment from the Fundraising Regulator, Police, safeguarding bodies, and even the Charity Commission. But there were no responses from the CIC Regulator to any requests made to it for comment (including not even an acknowledgement of the request).

in the spring of 2025 - I've just been approached by a CIC who's annual accounts were accepted by Companies House, but it's taken the CIC Regulator a further 6 weeks to spot and request that they amend the CIC34 part of their return in relation to an oversight on the CICs parts about a note in the accounts. 

But the CIC has fulfilled its filing obligations with Companies House, so is surely legally compliant - its hard to understand how the CIC Regulator would then take nearly another 2 months to check what was submitted: a Regulator is surely supposed to check everything is in order before accepting them as being filed? So if Companies House have already accepted the accounts (which the CIC34 forms part of), then it's hard to see what/how the CIC Regulator can do to enforce getting any such oversights subsequently resolved, as they relate to documents that have already been legally accepted? 

The only resolution I can currently think of to this contradiction is that CICs are subject to even more confusing regulation, which means that even though they've been told by one regulator that they're compliant, another could then overrule that decision - which in this instance would mean that the CIC in question is suddenly and unexpectedly facing backdated fines, prosecution, and being struck off the register by Companies House for not submitting compliant accounts when they were supposed to have (even though they were told they had at the time), because the 2 regulators that CICs are subject to, don't seem to be able to work that well together as we all think they do?

I know many people extoll CICs as a great legal form - and I've always been open to hearing their arguments, experiences, and evidences. On occasion, I've also agreed with them that this legal form really was the best choice for them. But when the regulator of a legal form that was so publicly marred in controversy as it was in the national media last year; and when so many 'advisers' seem to keep reiterating 'truth illusions' about CICs; and that their Regulator seems to be increasingly 'asleep at the wheel', surely only makes us more concerned about how far we can trust and have confidence in any enterprise adopting this status?

But as always, I'm open to people helping me spot what I've otherwise missed, and if the weight of evidence so compels me as it has in the past, to once again change my mind...

  

  

could legal company forms help protect my mental wellbeing?

The date of my publishing this post on my blog (Oct 10th) marks World Mental Health day - a time when there are floods of other posts, tweets, emails, etc being circulated, so I don't expect that this will catch too many people's attention, but I've always stated that this blog is in part my 'thinking aloud space' - and this post relates to me 'thinking aloud' about an aspect of my mental wellbeing, and how I try and best manage it.

Firstly - as background to to the title of this post, I've always said that I prefer being a sole trader instead of incorporating myself as a limited company (as conventional wisdom would suggest I should). 

This isn't just because I try and be unconventional, but also in remaining a sole trader, I have to pay more tax on my income and earnings that a company director or salaried employee would (and I think that paying tax is actually a good idea). It also means that technically, I've unlimited personal liability - I can't easily "wash my hands" of a problematic contract by simply dissolving a company (in whose name the contract etc, would be, meaning that nothing of the fall out would legally stick to me). As such, it forces me to try and take greater care in how I approach my work and also hopefully sends a message to those I work with that in seeking to establish trust and rapport with them, I'm willing to make myself very vulnerable personally. This element of personal risk is something I also try and further manage through my professional insurance policies, and how I seek to structure and maintain relationships with each person and organisation I find myself working with.

But it's world mental health day, so I'm taking this opportunity to revisit the above position about my not being incorporated to review it from a new perspective - my mental wellbeing.

As a sole trader, parent, carer, etc etc (we all have multiple identities - some of which are more secret than others...), I'm very conscious of trying to best manage my own health and wellbeing, including my mental health. And this list of roles I hold each brings its own tensions, stresses, anxieties, etc that aren't always easy to 'turn off' - but I've always sought to harness what some might see as negative or harmful emotional states that arise from them, to generate responses that help motivate and keep me moving forwards.  

Now, from time to time, I try and take stock of how I'm doing in managing the above - always with a view to trying to see if there might be ways to change a practice or habit that could help  further mitigate or reduce a recognised stressor in/on myself.

And it's the idea of company forms that I'm currently trying to consider to this end - a limited company exists as a 'person' separate to me. It's therefore that person, not me, who would sign contracts, agree terms and conditions, etc - so in the event of the worst coming to pass in my delivering a piece of work (the client decides to sue me), then I could give notice of dissolving the company, and not be concerned about the spectre of potential personal bankruptcy.

However... that's something of a 'nuclear option': I'd only be able to use this fall back position once, because if so 'activated' in that worst case scenario, then all my other business activities linked and associated to and through the company would also cease to be.  And if I then recontacted everyone in my current/original guise of being a sole trader, it would look like I was trying to duck responsibilities, be unethical, and generally exhibit the sort of behaviours that as a society, we decry when we see some larger corporates doing...

And then there's the question of how I'd mitigate the risk that having such a legally distanced structured from the people I'm working with might mean in terms of my becoming complacent in my relationships with them - one of the main reasons I'm currently maintaining my status as a sole trader.

 

So, on balance, I'm not sure that having identified this option I can actually adopt it - in theory it would offer me an assurance against the 'worst case scenario', and so help reduce a stressor and anxiety. But in practice if I ever needed to enact it, it would mean that I'd have to shut all my work down and not be able to easily restart working in the way I am now - in much the same way that if I were sued as a sole trader (and my insurance providers felt I'd not acted with sufficient degree of professional conduct with the upset client in order to cover the claim), I'd not be able to easily restart working in the way I am now. 

'Killing' a company that I owned could also impact on my personal credit rating (in the same way that getting personally sued might also) - so that consideration also balances itself out.

  

But it's an interesting perspective on the question that every sole trader and freelancer faces at some point - of whether to incorporate themselves as a limited company; but from a very different starting point. A perspective that seems timely with it being world mental health day.

However, as will all of my 'thinking aloud' posts that I make here in this blog, I'd be interested and keen to hear what holes people might be able to pick in my above 'workings out', and if there's anything that I've missed in thinking this through?  

social enterprise legal structures for humans

Some people regard me as an expert authority on legal and governance forms for social enterprise, community businesses, and co-operatives - and while I always encourage people not to trust any guidance I offer them on this topic (because I'm not academically accredited in legal stuff, and more importantly because I'm not the one who's going to be legally responsible for administering the chosen form), people take encouragement from my achievements in changing company law, navigating Society Rules with the FCA, and finding paths through charity legislation.

Over the decades that I've been supporting people understand these choices, I've created a few tools/prompts to help focus discussions and reflections ('CHAMP' and 'Adrian's 4-boxes') - but this post isn't about those tools - instead it's about a 3-part limited youtube series I was invited to be part of the 'main cast' for.

A contact through one of my networks had approached me to ask if I could help them explore and understand what the best legal form for a new social enterprise they were developing might be. And as we talked about how I might offer guidance and assistance, we hit on the idea of making this a 'performance piece' - drawing back the curtain on how people usually go through this process as an encouragement to the wider sector, and also a working out of some of their (and the emerging enterprises') values.

So we scheduled 3 afternoons to talk though approaches to not only understanding why this legal form question is so important to get right, but the different ways we can pick and choose between them, and finally, applying all of this learning in real time/live to their nascent social enterprise.

There's an 'official' long post on LinkedIn by Matthew Bellringer (the contact that sparked this) where you can get the official story of how this series came to be: https://www.linkedin.com/pulse/foundations-thriving-social-enterprise-matthew-bellringer/ but I wanted to take the opportunity to reflect on how I found this process, in it being different to the ways in which I usually offer this type of support - to pull out what surprised me that I hadn't considered before, what was an encouragement in allowing more time and space to explore than is usually available, and some of the things which you don't normally hear or read about in this area.

So - the below points are what I think are useful framing/warm-up for anyone thinking of approaching either choosing or reviewing a legal or structural form for their social enterprise - if you want to know more about them, you'll have to follow the links to youtube and watch all 3 episodes...

- Comparing legal structures to buying second-hand car: you wouldn't buy a car without wanting to know some of its history to assure you that it's been built well, and looked after, so why don't we seek the same assurances when deciding between legal forms?

- The risks of using data that maps legal forms used by social enterprise in helping us choose one for our own: as part of the episodes, we looked at research into how far different legal forms are popular/less popular by the wider social enterprise sector. But as you'll see as you watch this segment, this mapping - as undertaken by national sector bodies, often presents a contradictory picture of findings. As with all research, what you find depends on how you ask the question, and whom you ask it of. And it seems that our sector leaders can sometimes do this in ways that might not seem to be that robust..?  

- None of the existing tools designed to help you plan your social enterprise model (social enterprise canvases, specialist business plan templates, etc) help you relate your ethos and values to the legal form you'll pick. Which seems a bit bonkers, because your chosen legal form is probably one of the best ways you have to make sure said ethos and values can be best protected into the future. That's why I developed my 'CHAMP' framework, which is profiled in detail through these episodes.

- Your legal structure as a social enterprise can influence your credibility to lobby and speak out on social issues. For example, charities and CICs are banned from undertaking political activities: but if we're serious about creating systemic change as a social enterprise, then at some point we have to engage with the policy and law makers (which perversely, our chosen form may actually prevent us from being able to do!).

- The problem with all of the toolkits designed to help making the process of picking a legal form easier is that they assume you understand the jargon, and underlying concepts associated with legal forms and governance. Which most of us don't, which explains why these toolkits are so underutilised by the wider sector.

- There's a confusion about Members, members, and membership, that knots so may people up when approaching social enterprise legal forms: one has legal power over you, one is a supportive friend, and the other is about collective activism that influences your decision making. Can you tell which is which?

- Stickers and badges, or legal power – which would people prefer to have in your social enterprise? And which would you want people to have? (remember that there are wider trends going on in society that means formal membership bodies are generally seeing their numbers start to plateau and decline - people may be more interested in being part of you for specific periods, rather than for life).

- We managed to compress over 400 years of legal structures for social enterprise into just over 10 minutes. A new personal best for me!

- How the regulator for your chosen social enterprise legal form can strengthen others' trust in your venture. None of the toolkits or other materials 'out there' that I come across to help you decide about legal forms ever talk about the regulators: what they can do to you, how they can support and protect you, and how they may influence how others see you. But this is also a far wider issue and problem: I also see it a lot of start-up programmes, where social entrepreneurs are supported and encouraged to start-up and incorporate their ventures, but then given no support in knowing how to 'look after it' with their respective regulator - leading many early stage social enterprises to suffer fines, penalties, and even enforced winding up because no-one explained to them about the regulators... 

- It turns out that knowing how to bake cakes can be very helpful in informing how we approach designing different membership models in social enterprise legal forms.

- Campfire songs can be equally important in the selection of choosing a legal form for a social enterprise.

- and finally - why every social enterprise should be wary of S&M clubs if they’re going to be a CIC.

I've found myself enjoying this process of working with a group to find an answer to a question, and also that it's encouraged us to take more time in how we consider the options and implications - despite doing the whole thing remotely to each other with video calls, etc, it's felt like it's helped to make choosing a legal form a process that's allowed us to be more human. 

Episode 1: what's a social enterprise, and why do I care?  

https://youtu.be/5T7TzanQh0s 

Episode 2: what do social enterprise legal structures mean to me? 

https://youtu.be/EaRRsWPfDK0

Episode 3: social enterprise in the real world. 

https://youtu.be/JmEi3b6f9_g 

how the law is perversely stopping charities and social enterprises from being able to 'trade they way out' of the crisis (unlike private businesses...)

I blogged recently about why we need to stop using the word 'pivot' - but we should keep encouraging everyone to think about how they might make changes to what they do and how they do it (one thing most people seem to agree on is that whatever world we emerge into from this pandemic, it won't be the one we were in when it started...).

And for private businesses, this is fine - they're designed to be orientated to changing marketplaces, and their legal forms mean that they can diversify (relatively) easily.

But this isn't necessarily the case for charities, and social and community enterprises - many of whom are on the 'second line' behind the NHS in supporting communities and people in need.

Now, just as there have been lobbies on government to widen the eligibility of business support schemes that have been introduced, and to introduce new ones, so there have been attempts to get the State to also develop support packages for social and community businesses to help them get through these crisis months.

But there's something else that this all brings up that no-one seems to be talking about (or maybe doesn't want to, because it's too uncomfortable?) - MANY CHARITIES AND SOCIAL ENTERPRISES ARE NOT ALLOWED BY LAW TO CHANGE HOW THEY TRADE. 

Let me explain: 

- private businesses are usually incorporated with governing documents that say they can trade however they want (as long as it's legal).

- charities have to prove to the Charity Commission when they form, that what they are being set up to do (and how they will achieve this) is in keeping with charity law. And there are clear and strict rules about how they can approach undertaking or developing trading activities within these. Even if they think they will be able to make a change within these, then they need to get the agreement of the Charity Commission first. If they fail on either of these points, then what they're doing will be technically illegal - I don't know of any grant making bodies who would be happy to fund a charity that was doing something illegal. The same also goes for insurance policies: if you needed to make a claim and its discovered that you weren't supposed to be doing that activity because of charity law, then the policy becomes void and the charity is left exposed to its Trustees carrying unlimited personal liability...

- But this doesn't just apply to charities - Community Interest Companies (CICs: the much hyped and promoted legal form for social enterprises) has similar restraints as set out and enforced by the CIC Regulator (albeit with much less clear guidance).

* The Charity Commission shows that there are over 150,000 charities in the UK

* Social Enterprise UK says that of the nearly half a million social enterprises in the UK, nearly 1 in 4 are CICs (so roughly another 170,000)

That means that of the organisations who are stepping up the most in this global emergency to support local communities, roughly 320,000 of them are constrained by law from being able to easily adapt to introduce new trading services or to best respond to meeting the changing needs of people.

And that's why there needs to be more explicit and dedicated support to the sector from the State.

the problems with prioritising social value maybe aren't that straightforward...

Having worked in the 'social value' arena for about 20 years now in guises ranging from developing reporting toolkits for national sector bodies, supporting national programmes from the likes of nef and Social Investment Business, and delivering masterclasses with commissioners and individual groups, there seems to remain a widespread frustration as to why more charities, social enterprises, businesses, and others simply aren't getting on with just (fukcing) doing it...

And I have an idea (well, several in fact) as to why despite the rhetoric and good intentions, it's proving so hard for so many to start with even the first steps of starting to think about how they capture and report the impact they're already making, let alone start to grow it to benefit more people and communities in need:

1) most groups and businesses face a daily trade-off between investing in systems and processes, and being able to 'keep the lights on' - until we can find better ways of presenting the imperative of social value reporting in the context of their current operating pressures and immediate consequences, then it'll always be being put off to the next month...

2) despite social value now being a compliance thing for charities, companies, and even societies (public benefit reporting requirements, legal responsibilities of company directors, and such like), there's little by way of enforcement by these respective regulatory bodies - so if there's no stick, then what's the motivation..?

3) the introduction of the social value act in 2012 was going to herald a new era of social value in public procurement - except it's not that obvious or widespread yet (with most contracts only giving a 5% weighing to social value)

4) we see grant making trusts and bodies seemingly at odds with each other in how they're prioritising social value and impact, with some being so vague as to leave the applying groups more confused, and others contradicting each other, so is it any wonder that charities applying to them are focusing more on outputs and budgets than outcomes..?

5) and the 'professionalisation' of reporting our social value (despite it originating within the social enterprise sector) is starting to see our own people becoming disenfranchised and demotivated when they're asked to start to report and manage it, according to recent research papers...

So is it any wonder why despite the efforts of nationally funded programmes, sector bodies, and rhetoric of others, that 2 decades in, we're still seeing so many groups struggling to begin to even engage with social value, let alone report, manage, and develop it..?

Maybe we need to create more carrots to incentivise and nudge behaviours and thinking, rather than relying on an approach of 'tell people why it's so important, and they're bound to come round...' (after all - how many of us actually manage our recommended '5-a-day' of fruit and vegetables, or religiously floss after every meal, despite knowing how important both are...?)

how the CIC Regulator protects people's trust in social enterprises by not telling anyone anything about the complaints or concerns we make to them...

If the title of this post sounds counter-intuitive, that's because I'm still struggling to reconcile the inspiration for it: a statement by the CIC Regulator in their latest annual report about how they strive to help protect the CIC brand:

"our approach is to neither confirm nor deny whether an investigation is taking place...to protect the integrity of the CIC." (p.12)

and if you follow this through to the CIC Regulator's published guidance on making complaints about CICs, you'll find that if you do raise a concern, you'll find that this opaqueness goes ever further in that they won't "publish or tell the complainant about the outcome." (p4)

This seems to be a little odd at best for a number of reasons:

1) all other regulators are usually transparent about investigations they opened and reached a decision on (unless there are over-riding legal reasons or concerns);

2) a 'back of the envelope' study I did into CIC complaints a while ago found that we, the general public, were increasingly raising concerns about them to the Regulator, year on year - and...

3) ...as most complaints received by the Regulator relate to a CICs governance, then why not share some of the details of these with us all, so we can better structure and manage CICs to avoid common pitfalls and mistakes in better protecting the shared brand and respective integrity of the wider CIC community..?

Worryingly, the CIC Regulator also reveals in this latest annual report, that for the first time since CICs were introduced (14 years ago) they've actually acted on a complaint to investigate the affairs of a CIC. (Although they don't disclose any details of this, so we can't learn from other's mistakes in strengthening our own respective understandings and practices).

There's a relationship between trustworthiness and transparency, and if the CIC Regulator isn't being transparent about how they're handling the concerns people are raising about individual CICs, then there's a limit to how far we'll not only be able to feel we can trust them to protect the reputation of the social enterprises they're responsible for, but also how much faith individual CICs will have in them to act with any integrity themselves as their regulator.

All of this isn't meant as another CIC-bashing post (goodness knows, I seem to make enough of those already!), but part of my questioning aloud about some of the wider practices in the social enterprise sector that more of us should surely be aware of and asking about, if we're to make sure that as a movement, we're as credible and impact-ful as we have the potential to be.

But, all in all, I'm reminded of a post I made about the CIC Regulator a few years back, wondering aloud why it was that they were giving away so many free branded air fresheners...

what I'm doing to help fix a £14.9bn problem that's killing our economy...

There's a problem in the wider business community that's affecting everyone (and our livelihoods), and it's getting worse every year.

It's a problem that people struggle to feel able to talk about or openly challenge.

And it's a problem that's increasing the risk of pushing us back into recession, and leading to further business closures and job losses than we're already seeing and hearing about in the media.

And it's not red tape or (mental) health - it's money. More specifically, the challenge of late payment: customers who commission us to deliver work and goods for them, and then suddenly get out the big book of excuses when it comes to paying us what was agreed, so that they can hold onto the money that's rightly ours for longer.

It disproportionately hits small businesses and the self employed like me, as we don't have big financial reserves to cash flow the work, or employ finance teams who can chase up the money on our behalf (we have to take time out of earning from other work to do that ourselves). We also can't easily use the courts to chase the money, as that costs more cash and time to pursue, and also risks damaging our public reputation.

Late payment is also stifling the wider economy - most small businesses now don't feel that they can raise the money they need to invest in their growth and maintaining their competitiveness because late payment is causing problems for their cash-flow (which makes it harder to repay any loans), and they're having to take out more time to chase customers, rather than deliver more paying work elsewhere (further reducing their cash in, and profitability). And such declines in economic activity, production, and employment are often cited as causes of recession...

And when the cash runs out for us because we've not been paid the money we're owed - it's game over. Our enterprises fold, and we lose our livelihoods along with anyone we're employing. And for what reason? So that some larger corporate can hold onto the cash (which they already have plenty of) for a little longer.

Sadly it's not just big bad private businesses who are guilty of this. Government and the public sector are amongst amongst the worst offenders for not paying on time; and some of my work with charities and social enterprises has also seen this sector being guilty of not paying when bills fall due as well...

It's currently a £14.9bn problem, with the typical small business owed £11,000 and spending nearly a day a week trying to get the money paid that they're owed.

£14.9bn seems an overwhelming amount that nothing can surely be done about. Government have created a post of late payment commissioner to help change this culture, but they've had little (if any?) impact.

So what can a sole trader like me do about it? Well, I can make a pubic commitment to always and openly paying my suppliers on time (if not early) through being certified as a 'Pay On Time' supporter.

I can constructively challenge customers and clients who start to drag their feet in paying me what they owe me for my efforts on their behalf by using the Late Payment Act legislation (very easy and surprisingly effective!).

And I can do this openly and in a way that hopefully encourages others to start to do the same - and if you're reading this, that that means I'm challenging you to do the same!

Government have shown that they can't fix this problem, but the tools are there for us if we have the conviction, leadership, and resolve to get the job done ourselves. 

Who's with me?

does anyone really care how far we're open and transparent in how we do business?

In recent news, there's been a furore of activity over leaked papers about tax havens and money laundering by an international finance firm on behalf of the rich and famous, (allegedly). 

This comes on the back of various campaigns and calls for big business to be more responsible in paying tax and treating employees and people in their supply chain with dignity and respect.

And all of this comes on the back of previous movements around fairtrade, environmental impact, sustainability, and such like.

You would think that all of the media coverage of these themes means that as consumers we've a keen interest in how responsible the businesses we spend our money with are acting, and calling them to ever greater account through demanding that they're more open in how they work.

And yet, anecdotally despite petitions and campaigns, most people I know still shop with the likes of Amazon, buy coffee from Starbucks, and similar... so my question is that while we're outraged when we hear of such unethical corporate behaviour, if it doesn't change our own personal behaviours, actions, and shopping choices, do we really care that much?

Because if we don't, then why should firms strive to be more open and transparent in how they do business?

Many of the businesses I support are social and charitable enterprises, and there's been various encouragements to them over the years to show such openness through reporting on their social impact. And yet researches and surveys show that increasingly, when they do, it's making less of a difference to their customers in influencing their purchasing from them.

For myself - as the only freelance consultant globally (to my knowledge) to openly publish an impact report on myself with openness about my supply chain and other business activities, I know that doing so has never made any difference to my clients and customers final decisions about engaging and commissioning me (I know this, because I ask them!).

So with all the calls for more openness and transparency, I'd like to start another call - this time to start a conversation about what we as consumers really would like those businesses and firms to be open and transparent about, and if they start to, if we'll actually read and act on them...

is the honeymoon for CICs over?

I’ll begin by outing myself (again) on the subject of Community Interest Companies (CICs) – I’ve personally never been a big fan of them for all sorts of reasons that include:

• their not offering any features that are truly unique,
• are generally not advantageous in securing income,
• usually allow very weak governance to emerge,
• offer little security for their Members and Directors in light of their regulators’ powers to overrule them...

(all of which are detailed in previous blog posts), BUT I have supported some clients to gain this ‘hallowed status’ and am always pleased (really!) when an enterprise proves me wrong on why it’s the best form for them to adopt.

However, I’m wondering of the wider world may be catching up with me now in light of trending data published by the CIC Regulator themselves that suggests CICs may be increasingly seen as a ‘bad apple’ by those who set them up, and those they engage with...

You see, I’m a geek in oh, so many things, but particularly in the governance of organisations of all types, and as a result, find the annual reports from regulatory bodies fascinating reading. And despite my personal misgivings about the CIC form, I’ve always said that the CIC Regulator published perhaps the best designed and most accessible annual report of all the regulators. And this year I decided to dig into some of the stats they publish in a little more detail –

I looked at the period 2011/12 to 2013/14 (3 years) to see what trends there might be amongst CICs that are emerging and it’s not an encouraging picture:

• as context, over the last 3 years, the total numbers of CICs have increased by 44%;
• but last year, over 10% of all CICs on the register were wound up – a figure that’s also growing year on year (and has floated around the 9% mark in previous years);
• and the biggest reason (70%) for CICs being wound up is that they’ve been struck off the public register by Companies House for failing to meet their associated statutory legal duties! - which amongst other things means that the Directors of them may subsequently face difficulties with being able to act as Directors or Trustees of other organisations as well as against their own personal credit ratings;
• and the number of formal complaints being made about CICs to the CIC regulator has also been doubling year on year as a proportion of all CICs on the register

So – is all well in the land of CICs? More are currently registered every year than are being wound up, but the trends in each suggest that most CICs currently don’t make it past 5 years. And with a growing trend of CICs failing to fulfil their basic statutory legal responsibilities, it’s perhaps illustrative that many are adopting this legal form on the basis of poorly informed advice and guidance. It also perhaps suggests that CICs are approaching a plateau in terms of their prevalence, and are not in fact the ‘magic bullet’ to solving the sectors’ woes and concerns that many have presented them as being? (but as with all things, I’m open to being proved wrong of this...) 

UPDATE - 6th Nov
after sharing a link to this post with the CIC Association, there's been a clear response offered against my closing invitation to 'be proved wrong about this': http://cicassoc.ning.com/profiles/status/show?id=2691611%3AStatus%3A72861

can we really trust people who tell us they do good things?

Having recently published my annual social impact report (still the only freelance consultant on the planet to do so...) I was challenged by none other than Liam Black, one of the godfathers of social enterprise, as to why it wasn't independently audited.

 

And rather than get upset and start to doubt the veracity of my findings, the robustness of the methodology, (all of which I've always been very open about), it gave me pause to wonder why, after 9 years of my reporting on my social impact that no-one has ever asked me who they've been verified by before.

 

After a morning of tweeting each other about this, I've come to the following position given that:

1) the vast majority of financial accounts of all types of enterprise (private, social, and charitable) aren't audited, and yet we accept them willingly enough;

2) the tax office and regulatory bodies accept our returns without question or asking for them to have been independently verified and audited;

so why then, should there be a different standard applied to our social impact reports (which are subject to far less regulatory rebuke if we're found to have 'cheated' on them)?

 

Audits take time and energy that might be better spent elsewhere (if we can even afford them in the first place!); and I've never know any commissioner to ever not accept a social impact report on the basis that they've not been independently audited.

 

 

So - should social accounts be audited before we can have any trust in them?

 

No - because we take far more important and risky things on trust all the time; with regards to social accounts, as long as they're transparent and open, then surely we risk losing our trust in ourselves and erode the value of that same trust that underpins everything we do and achieve if we can't accept them on the basis of our own judgement and common sense?

the paradox in exposing corruption...

I recently had the opportunity to hear a presentation fromLaurence Cockcroft, one of the founders of Transparency International, on the progress made over the last 20 years in exposing and challenging corruption around the world.

And while it was encouraging to hear about the introduction of various pieces of legislation, regulation, and how the rise and rise of social media has enabled instances of corruption to be highlighted much more quickly and easily, I was left wondering if the drive to expose corruption isn’t somehow normalising it...

You see, we increasingly hear of instances of corruption in business, government, and even charities, but the sanctions levied against them subsequently only seem to fuel our outrage further for their seeming insignificance in light of the original transgression. And that’s what’s concerning me – it seems that whenever an MP might fraudulently over-claim their expenses, or companies dodge their taxes, when they’re caught and exposed, their ‘punishment’ seems trivial of how much they’ve originally defrauded others by.

And that starts to create a wider narrative which says: if you cheat, you’ll be caught – but it’s OK as the cost of your punishment will be far less than you’ve gained by illicit means, so why not do it anyway?

Exposing corruption isn’t enough. We also have to fight to ensure that the punishments on those found guilty far outweigh what they hoped to gain by cheating others for their own personal gain.

 

 

Global Corruption: a lethal mix of politics, money and crime was one of a series of lectures organised by RSA Yorkshire

Why we’re to blame when our leaders fail us

A lot of media coverage has been given in recent weeks to an ex-chair of a national ethical bank, and it strikes me as interesting for a couple of reasons that you might not expect –

1) what finally ‘tipped the balance’: this is someone who’s expenses claims on the boards of several charities where they served as a trustee were seriously questioned over the years, and who’s Council computer they used in their duties as an elected councillor were apparently found to contain images that would breach most company’s IT usage policies... but it was only after they were ‘caught’ buying (not taking!) drugs that they were ousted: both as Chair of the Bank and as a Minister of the Church.

Does this mean that as a society we have a scale of (un)ethical behaviours that we’re prepared to accept? (probably - I've written about how pornography is more ethically acceptable than tobacco before...)

2) And given the above, how were they allowed to keep holding (and gaining) the positions of power and authority that they did?

And these questions get me thinking about how they were able to fall so far – why did no-one intervene sooner or spot warning signs?

I think it may be something to do with the way we treat and support those in authority: the higher up an organisation you rise, the less support you have available and offered to you.

For example: think about volunteering for a charity, or being the shop-front worker in a small business – there’s clear induction to make sure you know what you’re doing, regular check-ins to see if everything’s going well, and lots of legislation to make sure that employers are properly looking after you. But become a Director or a Trustee and all that seems to vanish... there are few formal inductions or reviews at the Board level in private, social and charitable enterprises I've walked alongside over the years – and this is echoed by the Charity Commission who've found that the majority of complaints they investigate are due to governance failings, and the need in the private sector over the years to introduce Codes of Conduct for Directors.

So – as the troubles of an ailing bank are heaped upon one person who succumbed to human weaknesses, do we really only have ourselves to blame when we've set them up with no means of helping to support them do the jobs we're asking and expecting of them?

what’s worse than not getting a grant? – having to pay it back...

I've always held that grants are probably the riskiest type of money you can try and get – not just because of the time you need to spend researching and writing applications, then waiting for trustees to read your submissions, then responding to requests for more information, and eventually being awarded it (only to find that you can only spend it in certain ways), but for the reason that no-one ever tells you about: CLAW-BACK...

Within any grant awarded, you, the recipient, will sign an agreement and somewhere in the small print of it will be a clause that says if you fail to keep all the paperwork you’re supposed to, or don’t spend it on the things you said, or fail to engage with as many people as you thought you would, then you have to pay it back (after you've already spent it...)

And in my experience, advisors, grants officers and others will never stress upon you how real this risk is. And that’s a real concern as I know of several charities and groups over the years who've gone to the wall because they've been found wanting by the funder when it came time to file their reports and paperwork, and they've had to wind up in order to clear the arising debt.

From time to time, I'm invited to support various grant making programmes and initiatives – and I currently find myself having to serve notice on some local, fantastic groups who didn't keep their admin up to date and so now have to find a way to repay thousands of pounds. At its heartbreaking. So please, if you’re applying for grants – make sure you have proper admin systems in place to keep all the paperwork up to date that you’ll need as evidence for the funder. It may be glamorous or sexy or exciting, but it’ll mean you can keep meeting the needs in your community and stay credible in the eyes of everyone.

chase the money and don’t worry about keeping it legal – the new world of Charity Trustees...

I generally have a lot of admiration for Charity Trustees: people who are willing (and able) to commit their time and energy in pursuit of a dream of a supporting a better community, without expectation of reward or recognition of any type.

There will always be odd ‘rogues’ who see being part of a Charity’s governing body as a means to add a gloss to their career aspirations, but such people are usually the exception, and don’t usually stick around long enough to do too much damage...

However some recent research published by the Charity Commission suggests just how far Trustees of Charities are feeling compromised and pressured in a context of government cuts, recessionary pressures, and generally rubbish weather (2012 being one of the wettest on record!):

• last year, the biggest cause of complaints investigated by the commission (86%!) related to charities’ governance: how well (or not) they’re acting within their legal powers and rules, as well as those of the wider legislative framework that charities exist within. You’d therefore imagine that Governance and the law would be the area that most Board of Trustees are concerned with? Wrong – they list support with fundraising as being the most important thing. And 1/3 don’t offer new Trustees any support in understanding their role or responsibilities. http://www.charitycommission.gov.uk/RSS/News/pr_birth.aspx

 

• it also appears most charities are also recruiting new Trustees from within their own staff and volunteers (always highly risky owing to the heightened associated risk of conflicts of interest, amongst others...) . This means bad habits, mis-information and stagnation are all therefore likely becoming increasingly rife in charities as there’s little ‘fresh blood’ to challenge long-held assumptions that  may no longer hold true, or practices that need to be changed.

Is it any wonder then that charities’ reputations are increasingly under scrutiny and their reputation and place being questioned? Especially when a wealth of support exists for charities to recruit Trustees with little/no cost, and inductions for new Trustees can be structured very easily and cheaply using the materials freely available from the Charity Commission.

So what’s going wrong? Why aren't charities making the most of this (free) support? Why are bad practices emerging on such a large scale that risk damaging this sectors’ credibility? Could it be because the world they’re used to – the world where there were local funded advisors who would pro-actively keep them aware of issues, opportunities and risks through the likes of CVS’ is fast disappearing and they've not realised just how bad the fallout could/will be? Or more frighteningly, have charities always prioritised the money over compliance, and it’s only recently that we've noticed it due to more insightful research being undertaken and published?

Charities now being created at more than 1 every hour!

The charity commission published its annual survey of what’s happening on the Charity register recently, and I think it makes for slightly concerning reading.

With 3,003 new charities being ‘approved’ in the last year this means that charities are now being created at more than 1 per hour! (assuming 252 working days and 8 working hours a day).

What’s more, the median income of these new charities is less than £30,000 – suggesting that they’re what I refer to as ‘pet’ charities.

In an age of austerity measures, when resources for charities are getting harder and harder to come by, why are so many people feeling the need to form new charities, rather than engaging with, and supporting, exiting ones who are crying out for new blood on their boards and struggling to raise sufficient finance. Surely we need to be better educating people who are thinking of setting up a new charity to encourage them to consider carefully if their energies wouldn’t in fact be better used in supporting those that already exist; or perhaps, as I’ve argued before, charity legislation isn’t flexible enough to reflect our changing society and so people are being forced to create new charities to continue to meet the needs of those most vulnerable in our communities?