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Legal structure and governance arrangements
There are a wide range of legal structures that an organisation can adopt.
The legal structure you choose will determine several aspects of your business compliance including:
- The type of governing document and your governance arrangements
- The regulator of your social business
- The legal context your social business must operate in
- The liability of individual Board members
- Registration process and annual fees.
The table below sets out a summary of the main legal structures and their legal context to help you assess the areas of compliance that relate to your social business as you read through the guide.
Regulator and legal context
There are different regulators and legal contexts for each legal structure. Some structures have dual regulation and must comply fully with the requirements of two separate regulators.
The regulator will set out specific requirements which the social business will need to stick to. Regulation will include a requirement to file (submit) accounts and reports with the regulator as follows:
- Companies House regulation for limited companies
- CIC regulation for Community Interest Companies
- FCA Registered Society regulation
- Charity Commission regulation including CIOs
Governance arrangements for business compliance
The governance arrangements are the systems and processes used by the social business to make sure that it is run effectively ensuring its overall legality, direction, effectiveness, supervision and accountability.
The Board is responsible for the governance of the social business. Governance is distinct from the day-to-day operation and management activity.
Many of the governance arrangements are set out in the social business’s formal governing document which is written as part of its incorporation. The document sets out the rules governing the social business and should contain information about:
- What the social business is set up to do
- How the social business will do those things
- Who will run and manage it
- The administrative arrangements regarding membership, Board appointments of Directors, Members or Trustees, meetings and minutes etc.
- The administrative requirements regarding financial reporting
- What happens if the social business wishes to close?
Governing documents can be called different things, dependant on the type of legal entity created. Your social business will have either a Constitution, Articles of Association or Society Rules. There are model governing documents set out by each regulator. You should be familiar with the rules contained in your governing document and to ensure you stick to them on a day to day basis.
As most governing documents tend to be written in formal legal wording, you may wish to translate the rules into a practical guide or ‘aide memoir’ summary for easy reference and understanding by your Board and staff, drawing out the key rules that must be followed.
Want to discuss further? Contact firstname.lastname@example.org or your dedicated Business Advisor.