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Reply To: Community Right to Bid – Should we set up a charity or a CIC?

Home The Just Act Forum Ask a question… Community Right to Bid – Should we set up a charity or a CIC? Reply To: Community Right to Bid – Should we set up a charity or a CIC?

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Hi there – you need to act carefully at this stage. There’s several issues to think through.

If you want to be eligible to lodge an intention to bid under the Localism Act, you should avoid a charity – it will take anything up to 6 weeks to be registered as such, well after the interim moratorium has expired.

So, that leaves an IPS, a company limited by guarantee, or a CIC.

Second, you mention that you’d be raising funds to buy the land – here’s where a second problem comes in. If you wish to raise funds, you can either do this by donations from local people, or from selling ‘ownership’ (AKA equity). The average donation is £50, so you’ll need to think about how many people in your community are there you care enough to give you £50 and see how much that translates to as a total sum. Is it the same or more than the sum the landowner will want?

Chances are, it’ll either be less than that, giving you a shortfall, or need you to get nearly everyone to donate; that’s possible, but is an enormous undertaking.

The other route is to issue community shares, where instead of donating money, they invest it and get ownership. The shares are one-member one vote, and can’t be sold onto anyone else, and the legal entity can be asset-locked (or become a charity itself at a later date). The advantage here is that the average per person is more like £400 which means you’ll need 8 times fewer people to contribute.

(there more on why there’s such a differences between them in terms of amounts people contribute here )

So, in order to set up a community benefit society, you’ll need to contact an organisation like the Plunkett Foundation or Co-ops UK. Even with a following wind, you want to allow 4 weeks, and given the interim moratorium only lasts 6 weeks, the quickest safest route is to register a bog-standard Company Limited by Guarantee in the short term.

A CLG can later convert into a community benefit society, or become a charity, or become a CIC. It takes a day to register, and meets the tests of a Community Interest Group required by the Localism Act to trigger the moratorium.

If you need to raise significant sums to buy the land, have a big look at Community Shares. If not, choose either a charity or a CIC. You can make a CIC into a charity at a later date, but not the other way around; a charity has a greater level of asset protection than a CIC, so whilst you can go from a lower level (CIC) of asset protection to a higher level (Charity), you can’t go the other way.

Happy to have a chat – there’s a comment form on our website, so get in touch if you want to talk through any of this.

  • This reply was modified 2 years, 5 months ago by Profile photo of daveboyle daveboyle.