Choosing a structure
Community groups take many forms – from small clubs run entirely by volunteers to larger companies run as social enterprise for community benefit. Some have paid staff, the vast majority do not. Each will have a structure, making it easier to run the group.
Community group structures include:-
Company Limited by Guarantee
Scottish Incorporated Charitable Organisation (SCIO)
Community Interest Company (CIC)
Industrial and Provident Societies
Why choose a structure? Whilst there is no legal obligation for your group to adopt a formalized structure, having a structure does offer you clear advantages.
a structure gives your group a more formal base from which to work
it will mean that you have a set of rules and guidelines (your constitution) and you will need a constitution to open a bank account
a structure can give your group more credibility and encourage support for your aims – particularly those structures which mean that your group will be reporting to a regulatory body and have to be legally compliant
most funders require your group to have a structure (be formally constituted) before they will consider an application for grant assistance from you
How to choose the best structure for your group
Before looking in more depth at the different options available, ask yourselves the following questions.
Your answers to these will help guide you to choosing the most suitable structure for your group:-
what is your group set up to do? What are you aiming to achieve?
who can become a member and how do you intend to recruit members?
who will be responsible for managing and controlling the group? How will they be appointed? What will they be authorised to do?
how will the group’s members meet and make decisions?
does your group or organisation intend to be borrowing money and / or giving grants or loans to others?
does your group own property or is it likely to own property in the future?
is it likely that your group will be handling large sums of money?
do you envisage the group employing paid staff?
is your group thinking about charitable status?
When your group is in the early stages of setting up, it is likely to be the steering group who will need to consider these questions. Understandably, they may not have all the answers straight away but they will have an idea about the nature and likely scale of what the group is being set up to achieve.
For example, if the group is being set up to run a local sports club for young people who will meet in the local community centre once a week, then it is unlikely that they will be employing staff, owning premises or handling large amounts of money. However, a community group which is looking to take over the running of the local shop will need to consider the implications of owning or leasing a building (the shop) and taking on staff. They are also more likely to be handling larger sums of money.
Broadly speaking, the choices of community group structures fall under two categories:-
To remain unincorporated
Most groups start out unincorporated, existing simply as a group of individuals who have agreed to come together for a shared aim that offers community benefit of some kind. You may decide that you want to remain this way. However, it is important to realise that unincorporated groups have no legal identity except as a collection of individuals.
This means that an unincorporated group cannot:-
hold property in its own name
enter into contracts in its own name
undertake legal proceedings in its own name
Individuals acting for an unincorporated group (that is the executive or management committee members) may be held personally responsible when things go wrong (for example if the group end up in debt or with outstanding legal obligations).
To become incorporated
Becoming incorporated gives your group or organisation a legal identity of its own (separate from the individuals involved).
This means that it can:-
hold property and enter into contracts
defend or take legal proceedings
Being incorporated offers individual members and committee/board members protection against unlimited personal liability. If your group wants to employ someone or wants to enter into a contract concerned with buying or leasing property, then becoming incorporated would be a sensible route to take.