Whether you are thinking of creating a new social enterprise or are up and running, what kind of board are you thinking of?
Hi. I’m still trying to narrow down ideas at the moment, but it would be really helpful to know more about what type of structure people have tried using before because I’m totally new to this.
I think one of the key questions is who do you want to own the organisation and then who do you want to put in charge of the major decisions. That is a really good starting point. There are a few different legal structures that people set up and the most common ones are:
- Company Limited by Guarantee
- Community Interest Companies
- Company Limited by Shares
There is more detail under some of these but most social enterprises tend to be 1, 2, 4 or 5.
I have been thinking about a Community Interest Company because that is what I read that most social enterprises are. It is all a bit confusing though!
Yeah, I hear you. I just want to get it right from the very beginning - not have top change two months down the line because I chose the wrong format. Also, at this stage I cant really afford the legal advice or one of those ‘company formation’ places, and so it’s a bit concerning.
It’s all a bit scary for me really. Which I think is why I haven’t taken the leap before now. I just want to get it right.
It is important to try and get things right at the beginning but sometimes people can get too paralysed by fear of getting it wrong. You can always add more members to your board and you can sometimes change your legal structure as well (within certain bounds).
You can turn a 2-director Company Limited by Guarantee into a 5-director Community Interest Company or a 10-director Charity as your needs change and as your social enterprise evolves.
So is there a minimum number of directors? I mean it can’t just be me can it?
Im not sure about that one Sally. Wouldn’t that make it a sole trader type affair?
Apologies if that complicates. Someone else will no doubt know!
In addition to getting the structure (as close to) right (as possible) - I’d definitely recommend that people do a bit of thinking about what they want their board to be like and do. A common challenge I see if that people put people on their board with unrealistic or unclear expectations about what that will mean. So, be open about what you are asking them to do/contribute. and if posssible… understand the difference between non-executive/trustee roles and executive board member roles. This can all feel a bit intimidating at the start, but I think having a bit of knowledge about good governance can be very powerful.
Hi, just to add to Dave’s note, you can merge 1 and 2 // or 2 and 3
The below is well… a gov design… but your point of reference for all things logistics if you want to start a CIC. (Community Interest Company!)
@Sally Your legal structure will only be related to what you want to achieve, how you want to achieve it and with who and never be dependant of what the majority does.
Each offer is unique.
Also the decision of which legal structure is best will come after you’ve done your thinking on the who, what, where, and how you want to run your business… not before.
Thanks for that link Servane!
Thanks @Servane and I will have a look at that
I’m glad someone else was asking about directors. I had a bad experience with an ex colleague and I don’t want to hand over control to other directors if I can avoid it. Is there anything stopping me from being the only director and hiring others as employees without control over the company?
There isn’t anything legally stopping you and you can be a one director company. Be prepared though for people not to regard your governance as very good though and this will almost certainly affect your ability to raise finance through loans and grants.
Hi Dave (or anyone else), could you explain a bit why this might have an impact on the ability to raise grants and loans?
It depends Sally. Are you intending on going for charitable grants? They sometimes request joint signatories. I was sole director of one of my companies - do think it’s good to take the space with an advisor or mentor
My advice would be to contact your local school for social entrepreneurs ( I’m a fellow) and ask them to advise you re pro Bono legal advice.
Hi Michael, I wonder how you proceeded with this challenge?
A bad experience doesn’t necessarily mean it will repeat again and I wonder how it would feel to sit in this context where trust is absent, and reflect on the assumptions that need dismantling… what insights you could get, how you could anticipate potential future partnerships and shared decision-making if you ever came to this point again.
I would agree with @Servane and that is great advice.
I find that when you are starting out, your initial board and team will often be people that you know well, that you trust and that you have some personal history with. Inevitably as companies and organisations expand, more people will join the board who you have less history and personal relationships with. So there is some merit in really reflecting on this experience to see how you could change things in the future to get a much more positive outcome.