The Open Social Enterprise Organisational Structures Bank
This bank will in future hold examples of many different kinds of social enterprise constitution. It is based on the open source philosophy. If you are developing a social enterprise constitution for a particular purpose - perhaps using one of the examples here as a starting point - please share your work with others by sending it to the bank moderator Geof Cox, who will check and post your example here, with full acknowledgement and, if you are willing to be contacted, a link to your e-mail or website. All of the documents available here will be licenced under a Creative Commons Licence. This means anyone is free to use and improve them without cost - but you cannot then charge others for either the original or your derivative design. New users can, though, pay you for additional advice etc. By bringing together design improvements, and adaptions for specialist social enterprise purposes, we can together build a tremendously powerful open resource for all.
If you want to actually register a company yourself you might find these guidance notes useful:
CAVEAT: NEW INCORPORATION PROCEDURES AND FORMS ARE BEING INTRODUCED ON 1st OCTOBER 2009
This is the first draft of a new model CIC structure commissioned by Social Firms UK.
Most Social Firms currently take the form of Guarantee Companies (see the Template Social Firm Guarantee Company below). There have been three main reasons for this:
- first and foremost, the close links between Social Firms and the voluntary and public sectors have made Guarantee Companies much more familiar to Social Firm developers
- second, Share Companies have historically been less able to raise grant funding, and
- third, Guarantee Companies are simpler structures.
The introduction of CICs in 2005 has altered this landscape, principally because the Share CIC form seems just as able to raise grant funding - in addition to share investment. The share form is also generally more attractive to lenders, other things being equal. No doubt many Social Firms will continue to prefer the simplicity of the Guarantee Company form, and for these the existing Template Social Firm Guarantee Company is still recommended (the Guarantee CIC form adds little to this basic not-for-profit Guarantee Company structure - and CIC status can always be added later if required anyway). It is true that the Share CIC form is more complex than the Guarantee Company - there will be a little more admin, especially when members join and leave (share companies are not really suitable for 'membership organisations') - but this is we feel more than made up for by the potential advantages of raising money, and involving and rewarding staff, made possible by having available all forms of finance - grants, debt and equity.
The fundamental feature of the Share CIC's structure is its ability to issue up to 500 voting nondividend shares (Stewardship Shares) of £1 each, and up to 1,000,000 nonvoting cappeddividend shares (Investment Shares) of £1 each.
- Stewardship Shares are designed for the active members of the Social Firm - principally the founders and the employees - and carry the right to participate in control of the Social Firm (though not necessarily in day-to-day management)
- Investment Shares participate financially (ie. receive dividends if the Social Firm makes profits) but do not normally particpate in control.
If it is thought important for any members, such as employees, to participate in both control and financial rewards, then they can be issued with both Stewardship and Investment Shares.
The structure also features a Stakeholder Advisory Group, made up of employees of the Company, also the parents or other relatives providing care at home for employees of the Company, or any other advocate or representative organisation or agency appointed by employees of the Company.
The Board of the Social Firm is made up of:
- one person appointed by the Board of Directors to the executive office of Managing Director, upon such terms and remuneration as the Directors determine, who shall not be subject to retirement by rotation;
- one person nominated by the Stakeholder Advisory Group (as defined in article 1), who shall not be subject to retirement by rotation;
- Not less than one and not more than two persons appointed by the Board of Directors in view of their qualifications or experience in legal, accountancy or general business matters.
- up to five persons who are Stewardship Shareholders.
This Template will be available in wordprocessable form when the finalised version is published by Social Firms UK.
The appearance of the new model stakeholder social enterprise share company below inspired Dr Rory Ridley-Duff to revise and submit this alternative stakeholder model. It is an evolution of the rules first used by First Contact Software in 2001, which, in turn, were based on model rules developed by Gavin Boby and Guy Major of Democratic Business Ltd.
Rory comments that
The main difference is the way minority interests are protected. In the new model stakeholder social enterprise share company case, each shareholder class has 1/3 of the votes at board and general meetings. In my case, the default is a simple majority of all shareholder classes (like a one-member one vote co-operative) but with the ability of one shareholder class to pass a resolution requiring that a proposal gain the support of each shareholder class separately.
Download the wordprocessable constitution here.
Geof Cox Associates have recently been asked by a number of clients to develop a structure to involve a number of stakeholder groups in meaningful ways – participating both financially and democratically in management – but at the same time balance ownership and control to ensure long-term stability and adherance to values.
There are of course a whole range of 'stakeholder' social enterprise models – development trusts, for example, or 'partnership companies' (company+ESOP) that facilitate staff participation. However, none of these quite hit the mark if what is required is more complex stakeholder participation:
- participation both in financial terms (both profit distribution and capital growth if possible) and in democratic control, and by a number of stakeholder groups, for example customers, staff, sponsoring bodies and others
- the potential to realise sweat equity or other initial contributions
- long-term safeguarding of the aims and values of the founders
The model Stakeholder Share Company drafted here attempts to address these criteria. It is a share company based on balancing 3 types or classes of shares:
- stewardship shares, which do not participate in profits but which can exercise up to one third of the votes in the company and whose holders can compose one third of the board of directors – these are designed to be held by the founders and supporting not-for-profit organisations, just one share each, and safeguard the basic structure, aims and values of the social enterprise
- partnership shares, which can also exercise up to one third of the votes in the company, and whose holders can compose one third of the board of directors, but which do participate in profits and growth – these are designed for stakeholder such as staff and customers, linked with contracts, and have to be transferred if the contract ends (eg. they are only held while a customer is a customer)
- investment shares, which also obviously participate in profits and capital growth, can exercise up to one third of the votes in the company, and whose holders can compose one third of the board of directors - these ordinary shares can be used for a number of purposes: to realise sweat equity put in by the founders, to enable further staff participation (possibly through one of the tax efficient schemes) and also obviously to raise equity investment in future.
There are 3 key potential disadvantages with such a structure however:
- First, it is not entirely not-for-profit, and this coupled with its complexity render it a less powerful grant raising vehicle. Something similar could be done with a share CIC but this would curtail the possibility of capital growth and therefore realising sweat equity. A key judgement here therefore is how important the ability to raise grants really is
- Second, there is the potential complexity of dealing with partnership shares if they come and go frequently. This may not be an issue because current demand for this type of structure is from enterprises that have long term stable staff and customers. However, if problems can be foreseen in this area the partnership shares might all be held by a separate structure – a Limited Liability Partnership probably - in which the percentage share of the profits is automatically adjusted both when say customers join and leave and possibly according to their level of business.
- Third, there is the complexity of adjusting votes at general meetings so that each stakeholder group (class of share) has an equal say. This is dealt with in Article 21, and I'm aware that it not only looks prohibitively complex but might also be legally challenged. There may be simpler and sounder solutions using multiple votes in some classes, or making all investment shares non-voting but combining them with Partnership shareholding, etc. Any feedback on this would be welcome. A worked example might aid understanding. Suppose at a meeting the votes on a resolution were as follows:
Obviously, in a conventional vote the resolution would be carried, but here the following adjustments take place to equalise the voting rights in each class (possibly at the expense of individuals).
A third of all the votes cast is 44 (132/3). This is divided by the total voted in each class and multiplied by the votes for and against, as follows:
So with this adjustment the resolution would be lost.
If the key disadvantages – relative weakness as a grant raising vehicle and relative complexity – can be negotiated – and remember that because of the complexity of the brief there has to be some compromise somewhere - then this Stakeholder Share Company model is I think capable of fulfilling most aims of the social enterprises I have in mind. In practice the underlying governance of this structure would look like this...
Since stewardship shares and investor shares would generally be issued to the founding group, this group would in fact be in control of the Company for some time (unless/until stewardship shares are allocated to new participants or supporting organisations, and new investors are allowed in).
Download the wordprocessable version of the Model Stakeholder Social Enterprise Share Company here.
This is the working constitution for the miEnterprise project - a toolbox for learning disability service modernisation.
miEnterprise facilitates small scale enterprise activity (micro- or mini-enterprises) to ease the transition of 'earning disabled people' from institutional care and welfare benefit dependency into work
miEnterprise is a joint venture between providers of enterprise support and users of enterprise support:
- The providers of enterprise support agree to help with enterprise development - everything from initial training and business development, through to filling in the right forms, doing the books, and organising joint marketing
- The users of enterprise support experience miEnterprise as an 'enterprise club' which helps them make money and get together with others interested in the same thing
miEnterprise is itself an open source project: if you are an organisational structures developer please take a look at the constitution and suggest improvements to Geof Cox. The constitution is perfectly usable as it is, however: download the wordprocessable version for your own use here.
This is an important example because it contains notes on the whys and wherefores of company design, and detailed instructions on how to actually establish a company. Most of this accompanying information is applicable to any social enterprise, though some specific objects, equal opportunities, and other details of the structure do relate specifically to a social enterprise that will employ people with disabilities. Along with the wordprocessable constitution here, however, this template should enable you to set up a simple social firm company without any expert help - though without training/advice we can't guarantee it will be the best solution for your aims and circumstances.
This material is licenced under a Creative Commons Licence.