One important task of setting up a new community enterprise is selecting the right legal structure that will work for your business. Its easy to get lost in a maze of terminology and options. In this blog Diana provides a little of the history of the Community Benefit Society and explains why it is the legal structure of choice for many new community enterprises.
The Community Benefit Society (CBS) legal structure has risen in profile over the last decade because of its ability to enable community ownership of the business and assets through investment in community shares.
But it’s not a new kid on the block – the roots of the Community Benefit Society are found deep in the Co-operative movement that grew from the Rochdale Equitable Pioneers’ Society set up in 1844. The CBS legal model still embodies the international Cooperative values and principles shared by cooperatives worldwide:
“Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others.”
In 2014 lots of earlier legislation covering co-operatives and industrial and provident societies were bought together in the Co-operative and Community Benefits Societies Act – which is now the primary legislation governing the establishment and operation of CBS. This is an important point to remember! Societies are not governed by company or charity legislation (except in the case of company directors).
Even before this legislation Wessex had developed its own set of model rules to enable organisations to be legally incorporated as a Society. Model rules, developed and promoted by ‘sponsoring bodies’ such as Wessex, make it cheaper and easier to get started – and provide the confidence that the Rules are tried and tested.
The Wessex Rules, first developed in 2007, have been adopted by a range of Community Benefit Societies include community-owned housing, food and retail enterprises, managed workspace, and woodland enterprises. They have been used for new societies, established societies wishing to update their rules and even by companies converting to a CBS. The rules have been updated a number of times based on feedback from users. Most recently the Wessex Community Assets Model 2018 Rules include updates to democratic processes, including to enable greater clarity in case of disputes.
These ‘Wessex Rules’, like other model rules, are based on the relevant legislation to enable the community business to trade for the benefit of the community. They are recognised by the Financial Conduct Authority, the regulatory body for societies, and also the Community Shares Unit that oversees Community Share Offers.
Other features of the Wessex Rules include:
- Based on co-operative principles and enable democratic governance of the Society – with each member having one vote – regardless of the level of shareholding they hold.
- Enable investment from a range of sources including through ‘community shares’. CBS are also recognized by many funders and can also receive donations & secure loans and social investment.
- All shares in the society have a nominal value of one pound each. The founders can decide how many £1 shares are required to become a member of the Society, and the investment level can be changed as part of a community share offer. But to enable economic participation the Wessex Rules also allows share ownership to be shared by up to three people as one member.
- A ‘statutory asset lock’ which protects the use of assets of the Society for community benefit.
- Uniquely the Wessex Rules ensures the Society operates and can be recognised as a Community Land Trust – which has been especially important to those communities looking to develop community owned housing.
So what’s the process to setting up your new CBS? It always starts with a good founding group of individuals, who are connected with their community and share an understanding of the business that your community wants to develop – and hopefully invest in. Your group should use a set of model Rules – compare them if necessary – and resist making lots of changes. There is a lot to be said for keeping it simple! As a sponsoring body we will help explain the Rules, answer questions, complete the paperwork and deal with the FCA. Then it’s over to you to be ready to get going once the registration certificate for your new Society lands in your inbox!