Sarah Stevenson Social Enterprise Session 4

Module Aims to support the learner in identifying the legal models and governance available to Social Enterprise to facilitate exploration of the learners’ immediate and wider work context in order to promote professional developmentObjectives By the end of this session you will be able to: Identify the different legal models available to Social Enterprise and understand the benefits of each Appreciate the need for Governance in Social Enterprise

What is a legal structure The legal structure is the thing that defines the activities and decision-making process of a Social Enterprise. This can be from members' voting rights to how a board of trustees conduct meetings, to how generated surplus is invested In addition the structure will define how the enterprise will need to operate within the law.

Why is a legal structure needed? To protect individuals from personal liability To allow for the employment of other people To allow you to trade as you need to To give your enterprise credibility

What to consider What is the enterprise being established to do? What is your trading activity? What is your social purpose? For whose benefit is the enterprise being established? Are your objects purely charitable? Are you being set up for the benefit of a community Who will you be trading with? Who will own the enterprise: now; in 5 years; in 10 years? How will the enterprise be managed? ◦ on a day to day/operational basis ◦ on a month to month/strategic level How will your Board of Directors or Committee be appointed?

What to consider Who will make decisions about profit distribution or policies? How will decisions be made? E.g. One member one vote? Majority or consensus? Will your enterprise be entering into contracts, taking on leases, owning anything, employing people, taking out loans? Will the enterprise and its property be jointly owned (that is, can be split up and distributed) or commonly owned (cannot be split up)? Do you want to lock the assets – to ensure they can only be used for a specific purpose in the future regardless of what the members decide? What benefit do you want to achieve with the profits? Do you need to raise start-up capital? If so, how much is your requirement likely to be?

Legal structures at a glance There are a number of possible legal structures: Unincorporated association Trust Limited company Community interest company (CIC) Industrial & Provident Society (IPS) (Co-operative) Industrial & Provident Society (IPS) (Community Benefit Society – BenComm Charitable Incorporated Organisation

Legal structures at a glance  Activity 1 Review the characteristics of these main legal structures by downloading and reading the summary table using this link:  Activity 2 Identify the legal structures of some social enterprises with which you are familar, you may wish to use those that you identified in earlier modules

Governance “Issues regarding legal and governance structures are central to the social enterprise movement. As businesses driven by their social mission, social enterprises often seek to protect their mission through their choice of legal or governance structure. As a growing movement, good governance is essential if the movement is to thrive and be sustainable. It provides legitimacy, accountability and transparency for all stakeholders as well as the consumers being served”. Social Enterprise Coalition governance.htmlhttp:// governance.html Accessed 22/7/11

What is a Board? The group of people who are there to provide the enterprise with strategic direction and ensure compliance with the law. The board ensures that the social enterprise:- is well run and solvent and that funds are not misused or placed at undue risk is legally compliant remains true to the original vision and mission acts with integrity and is not at risk of conflicts of interest has a clear strategy

A Board – yes or no? Not a legal requirement for a Social Enterprise but this may depend on your legal structure Can be evidence of a good governance system Helps provide strategic direction Provides stakeholders with additional confidence Brings in additional skills, experiences and business skills

Boards vs Management Management – deals with operational matters, the day-to-day running of the Social Enterprise. They are responsible for implementing the policies that are set in place by the board. Board – has more legal responsibilities than management and deals with strategic matters. They need to ensure that there is compliance with the legal constitution and memorandum of the Social Enterprise

Constructing a board There is no clearly defined model for a Social Enterprise board. The most effective boards are made up by bringing together a group of trusted individuals with relevant skills, experiences, interests and contacts, who share the passion and the vision of the social enterprise. Boards should neither be too large or too small – generally between 3 and 9 people, depending on the size of the enterprise The board may consist of: ‐Employees, members of the enterprise ‐Members of the local community ‐Local business people ‐Somebody with financial / legal expertise ‐A representative of your service users

Constructing a Board  Activity 3 Identify the qualities, skills and knowledge that members of the Board likely to need for your social enterprise Which of these qualities are you able to offer? Which are the areas where you need to seek additional help?

Useful Links Business Link – The Charity Commission - commission.gov.uk/registration/charcio.aspwww.charity- commission.gov.uk/registration/charcio.asp Community interest Company Regulator - FSA - Companies House - Social Enterprise Coalition –

This resource was created by the University of Plymouth, Learning from WOeRk project. This project is funded by HEFCE as part of the HEA/JISC OER release programme.Learning from WOeRk This resource is licensed under the terms of the Attribution-Non-Commercial-Share Alike 2.0 UK: England & Wales license ( The resource, where specified below, contains other 3 rd party materials under their own licenses. The licenses and attributions are outlined below: 1.The name of the University of Plymouth and its logos are unregistered trade marks of the University. The University reserves all rights to these items beyond their inclusion in these CC resources. 2.The JISC logo, the and the logo of the Higher Education Academy are licensed under the terms of the Creative Commons Attribution -non-commercial-No Derivative Works 2.0 UK England & Wales license. All reproductions must comply with the terms of that license. Author Sarah Stevenson Institute Plymouth University Title Legal Models and Governance for Social Enterprise Description PowerPoint Presentation Date Created May 2011 Educational Level Level 4 Keywords UKOER, LFWOER, UOPCPDLM, Leadership, Management, Legal Models, Governance, Social Enterprise Creative Commons License CC-BY-NC-SA Back page originally developed by the OER phase 1 C-Change project ©University of Plymouth, 2010, some rights reserved