Legal structures: which one?

Erica CrumpJoanna Stokes

Charitable Company Limited by Guarantee

Key points:• Established as a company limited by guarantee at Companies

House (no shares, just members)• Needs to have exclusively charitable purposes and be for the

public benefit• Then apply to the Charity Commission to become a registered

charity• Regulated by Companies House and the Charity Commission

Charitable Company Limited by Guarantee

May be the right choice for you if:• What you want to do falls within a charitable purpose and benefits the

public• You need charitable status to obtain funding• It is important for you to be able to claim tax reliefs• You want to raise money through donations from the public, and need

a registered charity number

May not be the right choice for you if:• You want to be employed by the organisation and be a director• You want to carry out extensive commercial activities or activities

which are not charitable • You want to make all of the decisions in relation to the organisation

yourself

Community Interest Company (CIC)

Key points:• Can be established as a company limited by guarantee or a company

limited by shares at Companies House• Needs to have a purpose which benefits the community (widely

interpreted) and certain restrictions on asset distribution• The CIC Regulator needs to approve the establishment• Regulated by Companies House and the CIC Regulator

Community Interest Company (CIC)

May be the right choice for you if:• You want to carry out more commercial activities than a charity can,

but still for community benefit• You want to benefit from the social enterprise ‘brand’• You want to raise equity finance and pay dividends (but only up to

certain limits)• You want employees to be directors

May not be the right choice for you if:• Organisations you are likely to seek funding from will only fund

charitable organisations• You need to benefit from charitable tax reliefs• You want more flexibility in terms of activities

Non-charitable Company Limited by Guarantee (CLG)

Key points:• Established at Companies House as a company limited by guarantee

(no shares, just members)• No specific requirements as to what purposes or activities the

company has• Only regulator is Companies House

Non-charitable Company Limited by Guarantee (CLG)

May be the right choice for you if:• You do not want to be subject to restrictions on your activities • You want to have employees who are directors, or be the sole director• You want to minimise regulation and the burden of filing with different

regulators• You want to set up your organisation very quickly

May not be the right choice for you if:• You need to have charitable status to obtain funding• You want to raise equity finance and pay dividends• You want to have the brand of a charity or CIC

Contact details

Erica CrumpSenior Associate

Charity & Social Enterprise DepartmentBates Wells & Braithwaite London LLP

2-6 Cannon StreetLondon EC4M 6YH

e.crump@bwbllp.comTel: 020 7551 7796

Joanna StokesSolicitor

Charity & Social Enterprise DepartmentBates Wells & Braithwaite London LLP

2-6 Cannon StreetLondon EC4M 6YH

j.stokes@bwbllp.comTel: 020 7551 7793