Setting up a Social Enterprise
The Government has recently updated its guidance on setting up a social enterprise. A social enterprise is a business that aims to generate social or environmental benefits as opposed to profits for its owners. Most of its income should be through trade rather than donations or grants and the majority of its profits should be reinvested to further aid its mission.
It can be set up under a number of legal forms; limited company, charity, mutual, sole trader or business partnership.
A community interest company (CIC) is a special type of limited company which is particularly well suited for social enterprises. These exist in the same legal form as a limited company with a few additional features:
- They require a community interest statement, this details what the business aims to do and how it will be of social or environmental benefit to the community.
- They also require an asset lock; this is a legal statement limiting the use of the assets to the social objectives.
Applications to form a CIC are made in the same way as a standard company to the Registrar of Companies, this application is then forwarded onto the CIC Regulator who considers whether a reasonable person might consider that the CIC’s activities are or will be carried on for the benefit of the community.
Once incorporated a CIC can trade like any other company and must file annual accounts along with an annual CIC
report which details how it involved its stakeholders in its
activities during the year.
For more information on setting up a social enterprise or a CIC please go to www.gov.uk/set-up-a-social-enterprise and, of course, we would be happy to talk to you at Mercer & Hole.
Date: 25th July, 2014
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