Overview of organisational structures for cultural organisations

A brief description of: trusts, unincorporated associations, companies limited by guarantee, charitable incorporated organisations, and community interest companies.

When setting up your social enterprise it is important to have the right legal structure. Luckily there is clear advice online:

DLA Piper and UnLtd. have put together a comprehensive document including a flowchart, comparison table and detailed guidance so that you can  assess which is the right legal structure for your social enterprise.
National Council for Voluntary Organisations have online guides around governance and appropriate legal structures to employ when setting up an organisation.
We've listed the five organisational structures here...

1. Trust

  • The governing document is a trust deed or a will. 
  • There is no protection from liability for the trustees.

2. Unincorporated association 

  • A group of individuals who come together to pursue a shared goal. 
  • Such an organisation is not subject to any regulation by company law and its liabilities are usually unlimited. 
  • The governing document is a constitution or rules and there is usually a membership. 
  • The trustees are often referred to as the management committee. There is no protection from liability for the trustees, and consequently the Members can be personally liable.
  • With the relative informality and flexibility afforded, an Unincorporated Association may offer an appropriate structure for Social Enterprise.

3. Company limited by guarantee (CLG) 

  • A Company which does not feature any Share Capital (subject to historic exceptions).
  •  The Members of a CLG undertake to pay an amount (usually a nominal sum e.g. £1 or £10 etc) to contribute to the assets of the CLG in the event of it being wound up. 
  • As there are no shares, a CLG cannot pay Dividends. Consequently, a CLG is unlikely to be suitable as a vehicle for distributing Profits to Members or other investors, which may make it suitable as a vehicle for Social Enterprise. 
  • A CLG can become a registered Charity if its objects are exclusively charitable, unless it is a CIC.
  • The trustees (or directors) are protected in most circumstances against contractual liabilities. Charitable companies must register with Companies House and, usually, with the Charity Commission.

4. Charitable incorporated organisation (CIO)

  • The CIO was created in response to requests from charities for a new structure which could provide some of the benefits of being a company, but without some of the burdens. 
  • The governing document will be a constitution. 
  • The trustees will be protected in most circumstances against contractual liabilities. 
  • A CIO is registered with the Charity Commission and has a two level structure with Trustees governing the day-to-day activities of the CIO who are accountable to the membership. 

5. Community Interest Company (CIC)

  • A Company subject to additional requirements (over and above those for registering a CLG) and the Community Interest Test, acting for the benefit of a defined community. 
  • A CIC is intended as a specialist vehicle for Social Enterprise and cannot register as a Charity.
  • A CIC’s Articles of Association must contain certain prescribed provisions, including a statutory Asset Lock. 
  • Subject to the approval of, and on-going regulation by, the CIC Regulator, and is also registered with Companies House. 
  • A standard CLG can be converted to a CIC if appropriate amendments are made to its Constitution. 
  • A CIC limited by shares can potentially pay Dividends to Shareholders, subject to restrictions.
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