Structures and governance

As your community energy activity develops it is likely that you will need to set in place a business structure and governance arrangements. For example you may want to set up a social enterprise structure that enables you to own and manage a renewable energy installation.

It makes sense to consider (and seek advice in) what business structure and governance arrangements might suit the aims and activity of your group at an early stage. This can help you to agree the aims and principles of your group and create governing documents that make these clear to anyone who wants to join or work with you in the future. On this page you will find a range of links and resources to help you choose the right structure for your organisation or address issues that may arise in the course of your work. It is also important to seek the advice of other groups who have set up in a similar way.

There are several key ideas that you will need to understand, and some important questions to ask in deciding what legal structure is right for your group. There are five main options -

Community Benefit Society - the overarching business aim of a community benefit society, whatever its day to day activity, is to deliver benefit to the community it serves. There are some overlaps with charitable status; it is controlled by its members, but it is a separate legal entity and any profits must be reinvested in the project and for the benefits of the wider community. Any money spent outside of this must serve the original purpose.

Co-operatives UK produced a short guide on community benefit societies.

Co-operative societies - the key difference between a co-operative society and community benefit society is that the former is operated for the members rather than the wider community. Common goals amongst members are typically economic or social. Under some circumstances you may distribute profit, for example, you can purchase power at a lower rate from a community-owned renewable energy installation.

NB. In the summer of 2014 the FCA started taking a different approach to its registration responsibilities and rejected applications for new energy co-operatives. For further information see the Community Energy England website.

Community Interest Company - this option is similar to a traditional limited company and has the same overarching community focused goals as the options above. The primary core features of any company holding Community Interest Company (CIC) status is that the assets owned by the company are locked to ensure they are applied for the good of the community. There are also limitations on dividend and interest payments to shareholders. Profits are allowable, but the focus must always remain on providing social good.

Company limited by shares - this is one of two options that a CIC can choose when setting up. Under this model the company has shareholders and the liability of the shareholders to creditors of the company is limited to the capital initially invested.

Company limited by guarantee - a company limited by guarantee does not usually have shareholders, but instead has members who act as guarantors. The guarantors usually contribute a nominal amount in the event of a company winding up. When set up as a CIC, profits cannot be extracted by members.


Further Information

The Ace for Communities website from NEF has a section on forming community energy groups.

The Source website from CSE has a section on Legal issues that provides links to a range of different resources on structures and governance.

The Energy Mentoring project provides support to community groups in the form of trained mentors. The site contains resources on community energy projects including advice guides, policy, publications and reports.

Co-operatives UK provides expert support and guidance on the process of setting up co-operatives and developing existing businesses into co-operatives.


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