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Legal and Organisational Structures for Local Food Initiatives

When to think about your structure

If you're in the process of setting up a community food enterprise, you will probably have considered some or all the following common questions. You may even have created a steering group to consider these questions.

  • What local food need are you addressing?
  • Who else is already supplying that need (if anyone)?
  • What do you actually want to achieve?
  • How are you going to do it?
  • Why are you doing it?
  • Who will your potential members and other stakeholders be?
  • What are the possible sources of start up funding?
  • Do you intend to be a registered charity?
  • How will you be funded in the long-term?
  • Will you be a not-for-profit organisation?
  • If for-profit, then what will you do with the profit?

At some point during this process and informed by the answers to the questions above, it would be as well to start thinking about what organisational and legal structures would be suitable for your organisation.

A thorough and inclusive discussion of exactly what you intend to do, how you are going to achieve it and what your ethos and motivation is, also ensures that your organisation starts with a common focus and a commitment to good governance.  There is a tendency to skip over this process and then discover down the line that the members actually want different things from the organisation.

 The choices you make will have a profound on the future of your organisation and the answers to the questions above should inform that decision. Having said that, don't get bogged down in the detail of your structure at the expense of getting your organisation up and running. But you shouldn't put off the decision on whether to incorporate or not.

What is Incorporation?

Incorporation means creating a legal entity that is separate from its members – a ‘corporate body’ that is formally recognised in law. In the case of an unincorporated organisation, the law does not recognise any distinction between the organisation and its members.
If a group of people get together for a common purpose, they will automatically be an unincorporated organisation in the eyes of the law. Any contracts entered into will have to be in the names of some or all of the members of the organisation. Any property will have to be owned by some or all of the members and any employees will be employed by whoever signs the contract of employment on behalf of the organisation.

An incorporated organisation can however own property, employ people and enter into contracts in the name of the organisation.

Legal Form and Organisational Type

These two ways of defining your organisation are often confused. Legal Form is how the law views your organisations, whereas Organisational Type relates how you and your stakeholders view your organisation and how you run it. It is also important to note that charitable status is neither a legal form or an organisational type, but a status in addition to both.

Click here to download a two page pdf guide to Legal and Organisational Structures for local food initiatives.

Examples of Incorporated Legal Forms

Legal Form

Regulatory Body

Can the organisation be a charity?

Are the company assets locked for Community Benefit?

Company Limited by Guarantee (CLG)
more info...

Companies House

Yes

No

Company Limited by Shares (CLS)
more info...

Companies House

Yes

No

Community Interest Company (CIC)
more info...

CIC Regulator

No

Yes

Industrial and Provident Society (IPS) Bona Fide Co-op
more info...

Registered with Financial Services Authority

No

Yes and No (asset lock can theoretically be removed by the membership)

Industrial and Provident Society (IPS) Society for the Benefit of the Community
more info...

Registered with Financial Services Authority

Yes

Yes they can be

Limited Liability Partnership (LLP)
more info...

Companies House

No

No

Charitable Incorporated Organisation (CIO)

new legal status expected 2009
more info...

Charity Commision

Cannot be anything else

Yes



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Good Food, Good Governance

It's not just what you do.
It's the way that you do it.

 

 

Click here to download our Simply Legal guide to legal structures for community enterprises.

Click here to download our Simply Governance  guide to the systems and processes concerned with the running of  a sustainable community food enterprise.

 

Click here to download our Simple Finance guide to the options for financing a community enterprise