Post by Carmel on Sept 5, 2014 22:41:28 GMT
Hi all,
This post is about our governance and or constitution. We were about to convert to a CIC Co-op before the news of vacating the building broke. We then realised that our governance could have a bearing on receiving funding. Now we are undecided. The Building Working Group are getting advice from various sources. Below are some basic definitions to start as some of the terminology is hard to understand. Then the emails which were circulated over the past few days where opinions and more explanations are given.
We need a strong governance to make funders feel safe but the Star & Shadows values must be reflected within which ever model we use.
Discussions are still going on and more information and advice will follow.
Basic definitions….
CIC (say kick). The Star & Shadow is currently set up as a Community Interest Company (CIC). A CIC is a company set up to provide benefits to the community. It is regulated by the CIC Regualtor so there are rules to be adhered to and checks in place to ensure we are doing thinks properly. The main feature of a CIC is that it has an “asset lock”. This means that the assets, income, capital and profits cannot be used for private gain. They can only be used for the intended community benefit. Therefore CICs are prohibited from distributing their assets or profits to their members or selling them off.
Asset Lock. Described above. It means assets are protected for community benefit. Charities and some co-op models also have assets locks.
Co-op An organisation which is owned and managed by the people who use i.e it’s members.
CIC Co-op. Star & Shadow were about to convert to a CIC Co-op this month but this has stalled as our governance has implications on how we raise funds for the new building. Anyway a CIC Coop is a legal entity which has an asset lock but a more collective model of governance in the sense that we can write our own set of local rules that incorporate collective decision making and consensus. This is how we operate anyway regardless of what governance or constitution we have. Kevin at SES helped us put the constitution together. Under a CIC governance we are not legally obliged to do collective decision making and consensus decision making. So a CIC governance does not suit the Star & Shadow ethos. This was the reason for converting to a CIC Co-op. The members were to be volunteers, Canny Little Library, Conversation Group, any other users of the cinema.
Charity. When we received the news that we needed to raise large sums of money some people told us that funders don’t like funding CIC’s. Funders prefer Charities as they are tightly regulated and controlled and can be trusted to do what they are supposed to do with the money they receive. A charity is another community company. It is not for profit. It is run by trustees. An option for S&S is to set up a Charitable Trust with the sole object of raising and collecting money to buy 210 warwick Street and refurbishing it. We could still keep our CIC Coop for normal operations. A charity has an asset lock. But there is alot of admin work for us in administering a charity.
Industrial and Provident Society (IPS) there are two kinds of Industrial and Provident Society (1) an old style workers coop, and a new style Community Benefit Society (CBS):
(1) A co-operative is run for the mutual benefit of members who use its services. This is based upon the common economic, social and cultural needs or interests of the members. Typically, the common need or interest will define their relationship with the co-operative as a service user, customer, employee or supplier. A co-operative has open membership; there should be no artificial restrictions on membership, and membership should be open to anyone who meets the criteria. Recent guidance from the FCA says that a co-operative can have investor-members who are not otherwise users of the society’s services. A co-operative can pay interest on member share capital and a share of the surplus, or dividend, based on the level of transactions (customer-purchases, supplier-sales or employee-wages) with the society.
(2) A community benefit society is run primarily for the benefit of the community at large, rather than just for members of the society. This means that it must have an overarching community purpose that reaches beyond its membership. An applicant enterprise must also have a special reason for being a community benefit society rather than a company, such as wanting to have democratic decision-making built into its structure. Although a community benefit society has the power to pay interest on members’ share capital, it cannot distribute surpluses to members in the form of dividends. A community benefit society can opt to have a statutory asset lock, which has the same strength as the asset lock for a charity and for a community interest company. This type of asset lock is not currently available for co-operatives.
Community Share Issue. One method of raising funds.
The term “community shares” refers to withdrawable share capital, which is a form of share capital unique to IPSs. This type of share capital can only be issued by IPS co-ops s i.e. Cooperative Societies and Community Benefit Societies and not to Cooperative Community Interest Companies (Coop CICS) or Charities. So an organisation can issue shares to the community. This is what the Jazz club in Pink lane , Newcastle did a few months ago. Star & Shadow currently are prevented from doing so as CICS, Charities and CIC Co-ops are not allowed. So far not a problem as there are plenty other methods of raising funds. Loans, grants etc. We don’t know how much money we need yet.
The Cube Cinema Just for everyone’s information this is a cinema in Bristol which is like the star and shadow in culture and is volunteer run. It bought it’s building this year. They are set up as a Workers Cooperative under the Industrial and Provident Society (IPS) Act. Not the co-op cic like us. In purchasing their building they set up a separate organisation entitled, Microplex Holdings Ltd, a non-profit Industrial and Provident Society and Community Land Trust (CLT) whose charter is to secure and maintain the freehold of the Cube Cinema as a community arts space in perpetuity.
The Tyneside Cinema is set up as a charity. See enclosed where both have got funds from.
www.cubecinema.com/cgi-bin/freehold/freehold.pl?action=counter
I will put the Tyneside list of funders up later. Cant’t extract it now.
Email Thread starts here…
From Trevor 28.8.2014
Hi all
This is a note from Giovanni at NCVS following from a meeting Robin and I had with him today. The background is that these two structures appear to be the best alternative options to take on as the new governance model of the Star and Shadow. They require further research with SES and other advisors as they have other implications. However either would allow fundraising by a Community Share Issue.
Regards
Trevor
PS my own bias is towards the Community Benefit Society but I am open to be swayed otherwise.
Industrial & Provident Society There are two kinds of Industrial and Provident Society (1) an old style workers coop, and a new style Community Benefit Society (CBS):
A co-operative is run for the mutual benefit of members who use its services. This is based upon the common economic, social and cultural needs or interests of the members. Typically, the common need or interest will define their relationship with the co-operative as a service user, customer, employee or supplier. A co-operative has open membership; there should be no artificial restrictions on membership, and membership should be open to anyone who meets the criteria. Recent guidance from the FCA says that a co-operative can have investor-members who are not otherwise users of the society’s services. A co-operative can pay interest on member share capital and a share of the surplus, or dividend, based on the level of transactions (customer-purchases, supplier-sales or employee-wages) with the society.
A community benefit society is run primarily for the benefit of the community at large, rather than just for members of the society. This means that it must have an overarching community purpose that reaches beyond its membership. An applicant enterprise must also have a special reason for being a community benefit society rather than a company, such as wanting to have democratic decision-making built into its structure. Although a community benefit society has the power to pay interest on members’ share capital, it cannot distribute surpluses to members in the form of dividends. A community benefit society can opt to have a statutory asset lock, which has the same strength as the asset lock for a charity and for a community interest company. This type of asset lock is not currently available for co-operatives.
======================================================
From Robin 01.09.2014
Dear all,
I'm interested in Trevor's stated "bias" for a Community Benefit Society rather than an old style workers cooperative (or Industrial Provident Society), because I feel the benefits of the latter far out-way the Community Benefit Society.
These are:
1. There is a considerable body of examples of how the IPS works, these include models such as The Cube Cinema, which is cited every-time someone utters the term fund-raising!
2. We could vest the property in the IPS and end up with one governing body, rather than two or three being talked up at the moment.
3. There is an overlap with the taxation system that is applied to Charities and IPS, for example The Cube, which is not a charity that enables the cube to gain the same 25% add-on from donations that charities currently have (negotiated under legislation governing IPS's directly with the UK tax authority), as a well as the council tax (business) 100% exemption.
4. If you look at the definitions of the IPS and the CBS, provided by Cooperatives UK, the definition of the cooperative sounds like the Star and Shadow is now, whereas the CBS sounds like a far wider definition of community. Becoming a CBS will lead to prolonged discussions about what we are and I very much doubt if we will achieve consensus this side of the next millennium.
5. On the question of the Asset Lock, CBS can have one now, but one is proposed in newer legislation as an add on to the model constitutional documents we could adopt as a IPS in the near future, until then or "for-ever" we can put in place a rule that guards against a takeover (which given our ridgidity on consensus governance I think this is an impossibility anyway), or we could put the property in the name of a community land trust (another instrument that has its origins in the 19th Century). The Cube do this, it is simply an administrative mechanism that is dealt with as an administrative mechanism, and at some time when the ISP asset lock in invoked it could be simply wound up.
6. As I have suggested there are lots of model legal instruments recognized by HMR&C out there that we could simply borrow and tweak. They have been prepared by such bodies as "Cooperatives UK", "Land for People Limited", "Radical Routes" etc. One of these documents "The Summerset Rules", is actually written in English rather than a form of "legalise!
7. One of the concerns of the Governance Group was to produce a governing instrument that was simple, could be understood and would facilitate the transfer of roles. These models exist within the IPS community, they even include people we trade with SUMA Foods Cooperative.
8. CBS registration is the opposite, documents are written for a professional group of directors/trustees, the governing instrument will be a straitjacket, and there is no long established body of practice to draw from.
9. My reading of CBS governing instruments is that what they define as "democracy" is more about electing a board, with a wider AGM. Whereas the history and practice of the larger numbers of IPS includes more collective models. My feelings are that this device is written for the comparative Voluntary Sector Organisation, where a wider empowerment of members has been subsumed my a growing tendency towards managerialism.
10. There is something unique about how we do decision making at the Star and Shadow, it is often cited by the voluntary sector in Newcastle-upon-Tyne as different, important, and inspirational ... they want a bit of what we've got!
11. I think some of us are being influenced by what the Cooperative Group has done for cooperation, fucked it over and tarnished 200 years of work, I say don't be bought off with a line of coke that someone else did, stick with a wider movement that is associated with real social change, democracy, social activism and is far far more radical in terms of organizing work and in particular creative work.
12. If we want to organise a community share offer, we can do one as an IPS, though, "The Cube" is doing something else at the moment and its more in-house and far more radical, than appointing an external consultant. there is a view amongst some of us that we will not need this measure.
13. The charity option, with the property vested in one, means that its a big charity, more expensive accounting, a potentially pesky regulator, problems when we do politics (including campaign work), double the insurance bill.
14. To become an IPS, we simply wind up the CIC and register as a IPS. The fee's are higher than for a CIC and CBS, but probably cheaper in terms of the legal work that has to be done, because the model instruments exist and there are many support agencies including Cooperative UK with a legal team.
Peace and Cooperation,
Robin
================================================
From Trevor 02.09.2014
Hi all
Prompted by Robin's e-mail I took a look at the document on winding up a CIC on the CIC regulators website. See link below. In my reading the only acceptable form of Industrial and Provident Society that a CIC can transfer assets to without provision of full consideration (ie a cash or equivalent payment of the full actual value of the assets to the CIC) is a Community Benefit Society. In order to clarify this further I have now also spoken to Linda Barlow Legal Officer at Co-ops UK.
Her view is that the 'natural' route of conversion of a CIC is to become a Community Benefit Society. The two organisations have a common purpose of existing for community benefit, rather than for the benefit of the co-op members, and they both possess an asset lock (though CBS's do not have to). This process would be one of conversion and so would not require formal winding up of the CIC but rather it requires the agreement of the CIC Regulator just to allow us to move to a different Regulator. Her view was that this will be a much more simple route of conversion than to have to ask the Regulator to sanction us becoming an IPS. In particular she felt that as the intended nature of an IPS is to make a profit for it's members and to distribute it to them, rather than to be for the benefit of the community, the CIC Regulator would be likely to impose far more stringent controls and ask for much more paperwork to demonstrate we were not departing from our original community benefit objectives [and thus breaching our asset lock] for a conversion to an IPS. In fact she pointed out that an IPS style co-op that fails to provide employment and dividend benefits for it's members is technically failing to achieve it's legal objectives (though often this can be overlooked).
Her further advice was that we can obtain from them directly, or through SES, a model form of governance that allows us to insert a clause for consensus decision making as a CBS. She says that to do this we should insert the exact wording regarding this governance and any details of notice periods for meetings etc. from our present CIC articles into the Articles of the CBS in order to avoid a potential criticism by either Regulator that we were changing our governance method if the words were significantly different.
Finally she saw no problem with a CBS having an accessory Community Land Trust as either a charitable trust or a non-charitable company. It is also possible the CBS itself could be a CLT but she felt this would make it much more complicated and suggested we seek more advice from the Community Land Trusts Association.
Lastly she said the next step was to seek advice from the CIC Regulator to establish that they are willing to consider our conversion to a CBS or to an IPS. I will contact them regards this before Sunday. I will also explore the likely time scale of any decision process for either route.
Given this advice I feel that a becoming a Community Benefit Society is more consistent with the reasons for the existence of the Star and Shadow than an old style workers coop/IPS. The CBS also seems better if considering the long term protection of the Star's present volunteer values from a distant future take over by profit minded individuals. Lastly that this conversion to a CBS is likely to be a much simpler legal and regulatory process than setting up an IPS.
A final thing is that it may be wise to factor in £500-1000 legal fees, as part of out Feasibility money bid, for the conversion process whichever route is taken (but especially if an IPS is adopted) for this legal process.
I'll bring any further news to Sunday's meeting.
Trevor
www.gov.uk/government/uploads/system/uploads/attachment_data/file/336570/13-713-community-interest-companies-guidance-chapter-10-transfer-of-assets-and-ceasing-to-be-a-cic.pdf
===============================================
From Robin 03.09.2014
OK, if this is the case, (Cooperatives UK lawyers are pretty well conservative at everything they do) and I really would prefer it if we would at least consult bodies for advice in two’s where there is a disagreement!
1. The Star and Shadow is going to change. No longer will we be run for the mutual benefit of members (volunteers) and the other member organisations who use its services the canny library the conversation group, the other diverse groups including film bee, and other adhoc groups who we create for a purpose, or individual members who make the transition from being cinema members to volunteers, all linked through mutual common economic, social and cultural needs or interests. But, anyone who walks through the door be they members of the EDF or die-hard conservative’s! I think there will be difficulties caused in this move in terms of our relationship with Blank, and everyone else (you are going to be defined solely as tenants).
2. We are doomed to adopt a constitution that requires a lawyer to interpret it, and written with the imagination of a management consultant and does not necessarily have a clause that permits us to have a local set of rules.
3. Out the window goes any notion of equality, we are going to have directors called directors and trustees called trustees, and a regulator who intervenes. We are going to become a bog-standard voluntary sector organisation. Peace and cooperation,
==================================================
From Trevor 04.09.2014
Becoming an IPS the response from the Regulator of CICs
Dear Trevor,
Thank you for your enquiry.
A Community Interest Company (CIC) can only convert to a permitted
Industrial Provident Society subject to meeting the eligibility criteria
posed by the Financial Conduct Authority. A permitted Industrial
Provident Society is a Community Benefit Society which has a restriction
on the use of its assets and not the old style IPS such as a bona fide
co-operative. Before proceeding further we would suggest that you
contact the Financial Conduct Authority for further information about
the eligibility criteria of becoming Community Benefit Society with a
restriction on the use of its assets.
Provided that you meet this criteria, you will then be required to
deliver the appropriate papers with a £10 fee at Companies House and
attach a link to our website which provides further information:
www.gov.uk/government/publications/community-interest-companies-business-activities/cic-business-activites-step-by-step-guidelines#convert-a-cic-to-an-ips
With regard to your second question the CIC Regulator's Office will
deal with the application within 5-10 working days of receipt of the
appropriate papers from Companies House.
Regards,
Helen Huish
Helen Huish
Case Manager
Office of the Regulator of Communities Interest Companies
==========================================================================================
From Robin 04.09.2014
Dear all,
Trevor’s email yesterday:
The essence is this there are two kinds of Industrial and Provident Society (1) an old style workers coop, and a new style Community Benefit Society (CBS): (2) The regulator and the rather conservative legal advice we are obtaining from Cooperatives UK asan exiting CIC we can only convert to the CBS.
- I obtained this same information yesterday, from Cooperatives UK and the CIC Regulator, but it’s not straight forward as that, and the £10 fee is only what you pay companies house. There are lots of other factors involved in this and we really must not rush into this and end up with a straight jacket of a constitution.
- On top of the fee and form you have to submit a set of rules. These are checked by the FSA clause by clause (this is not the CIC regulator) and like the process of setting up a charity the only way you can make progress is to use a model set of rules provided from a sponsor organisation. The fee for sponsorship from Cooperatives UK is £500 and the model rules despite offering a so called “Collective Variant” and an offer to minimally tweak it represent a strait jacket. For the CBS there is no option to append a local agreement.
- If as some of you think is it is prudent embedding a community land trust and charity in this, we effectively abandon the cooperative free model we have operated under for eight years. We will change and our “board” will amount to a professional body constantly looking at the legal issues of making any kind of decision, with a set of regulator(s) who are anything other than “under the radar”.
- What we want is an old style worker cooperative (which cooperative UK, the CIC regulator, and Trevor are saying we cannot have). BUT they are missing the issue and the strategy adopted by companies everywhere.
- If we could become a IPS we would be far better off because there are a number of “sponsoring bodies” outside of Cooperatives UK, who could give a model constitution that better represented what we really are, very much more collective options, and even one sponsor offers a DIY community Share Package”, which could empower one or two of our number rather than paying £5K to some consultant.
- But, coop’s UK, the CIC regulator are wrong and are missing out on other routes to a cooperative.
- We could (a) close down the CIC and transfer the assets to another body, who could make their use over to us. (b) a better model is to keep the CIC but effectively turn it into an assessorary company. Which means basically:
- - We create an independent new IPS called the Star and Shadow Cinema Cooperative, which is an IPS. The Star and Shadow CIC contracts out all administration, asset management, and programme to the new coop, which has a similar set of objectives to the Star and Shadow. Then we administer the CIC on the basis that it has one meeting per year, with virtually the same minutes and agenda, (change the dates each year) and a set of directors who go through the motions of sending the return and the accounts to companies house (in time it becomes a smooth administrative procedure undertaken in less than five minutes, because the accounts will include administration costs donated to the CIC from the IPS consisting of £15 annual fee and £10 for stamps and photocopies, and a gradually reducing balance of the assets (which depreciate by a percentage each year), until we reach the point where we just shut it down and there are no assets to transfer.
- The result is one constitution written in English, that isn’t a strait jacket, one body with fund-raising capacity of a charity, one regulator.
This a perfectly legal strategy adopted by companies everywhere. If we can avoid doing anything rash, for a couple of weeks, I will ask a learned expert at Newcastle University to speak to us at a meeting. Meantime we look for a model we can live with or one that is more “tweakable” than the cooperative Uk model.
We bid for £4K of legal work in the feasibility bid, I really don’t think we will need it.
Do you really want a chairperson, treasurer and secretary, directors and a formal board stuffed full of the dis-empowered, but functionally having a nice CVable title, and lots of time spent trying to identify a new community, which sadly will not be based around creativity in a free space, but rules, place and keeping the regulator(s) happy. What would be the pleasure in that.
Peace and Cooperation,
Robin
This post is about our governance and or constitution. We were about to convert to a CIC Co-op before the news of vacating the building broke. We then realised that our governance could have a bearing on receiving funding. Now we are undecided. The Building Working Group are getting advice from various sources. Below are some basic definitions to start as some of the terminology is hard to understand. Then the emails which were circulated over the past few days where opinions and more explanations are given.
We need a strong governance to make funders feel safe but the Star & Shadows values must be reflected within which ever model we use.
Discussions are still going on and more information and advice will follow.
Basic definitions….
CIC (say kick). The Star & Shadow is currently set up as a Community Interest Company (CIC). A CIC is a company set up to provide benefits to the community. It is regulated by the CIC Regualtor so there are rules to be adhered to and checks in place to ensure we are doing thinks properly. The main feature of a CIC is that it has an “asset lock”. This means that the assets, income, capital and profits cannot be used for private gain. They can only be used for the intended community benefit. Therefore CICs are prohibited from distributing their assets or profits to their members or selling them off.
Asset Lock. Described above. It means assets are protected for community benefit. Charities and some co-op models also have assets locks.
Co-op An organisation which is owned and managed by the people who use i.e it’s members.
CIC Co-op. Star & Shadow were about to convert to a CIC Co-op this month but this has stalled as our governance has implications on how we raise funds for the new building. Anyway a CIC Coop is a legal entity which has an asset lock but a more collective model of governance in the sense that we can write our own set of local rules that incorporate collective decision making and consensus. This is how we operate anyway regardless of what governance or constitution we have. Kevin at SES helped us put the constitution together. Under a CIC governance we are not legally obliged to do collective decision making and consensus decision making. So a CIC governance does not suit the Star & Shadow ethos. This was the reason for converting to a CIC Co-op. The members were to be volunteers, Canny Little Library, Conversation Group, any other users of the cinema.
Charity. When we received the news that we needed to raise large sums of money some people told us that funders don’t like funding CIC’s. Funders prefer Charities as they are tightly regulated and controlled and can be trusted to do what they are supposed to do with the money they receive. A charity is another community company. It is not for profit. It is run by trustees. An option for S&S is to set up a Charitable Trust with the sole object of raising and collecting money to buy 210 warwick Street and refurbishing it. We could still keep our CIC Coop for normal operations. A charity has an asset lock. But there is alot of admin work for us in administering a charity.
Industrial and Provident Society (IPS) there are two kinds of Industrial and Provident Society (1) an old style workers coop, and a new style Community Benefit Society (CBS):
(1) A co-operative is run for the mutual benefit of members who use its services. This is based upon the common economic, social and cultural needs or interests of the members. Typically, the common need or interest will define their relationship with the co-operative as a service user, customer, employee or supplier. A co-operative has open membership; there should be no artificial restrictions on membership, and membership should be open to anyone who meets the criteria. Recent guidance from the FCA says that a co-operative can have investor-members who are not otherwise users of the society’s services. A co-operative can pay interest on member share capital and a share of the surplus, or dividend, based on the level of transactions (customer-purchases, supplier-sales or employee-wages) with the society.
(2) A community benefit society is run primarily for the benefit of the community at large, rather than just for members of the society. This means that it must have an overarching community purpose that reaches beyond its membership. An applicant enterprise must also have a special reason for being a community benefit society rather than a company, such as wanting to have democratic decision-making built into its structure. Although a community benefit society has the power to pay interest on members’ share capital, it cannot distribute surpluses to members in the form of dividends. A community benefit society can opt to have a statutory asset lock, which has the same strength as the asset lock for a charity and for a community interest company. This type of asset lock is not currently available for co-operatives.
Community Share Issue. One method of raising funds.
The term “community shares” refers to withdrawable share capital, which is a form of share capital unique to IPSs. This type of share capital can only be issued by IPS co-ops s i.e. Cooperative Societies and Community Benefit Societies and not to Cooperative Community Interest Companies (Coop CICS) or Charities. So an organisation can issue shares to the community. This is what the Jazz club in Pink lane , Newcastle did a few months ago. Star & Shadow currently are prevented from doing so as CICS, Charities and CIC Co-ops are not allowed. So far not a problem as there are plenty other methods of raising funds. Loans, grants etc. We don’t know how much money we need yet.
The Cube Cinema Just for everyone’s information this is a cinema in Bristol which is like the star and shadow in culture and is volunteer run. It bought it’s building this year. They are set up as a Workers Cooperative under the Industrial and Provident Society (IPS) Act. Not the co-op cic like us. In purchasing their building they set up a separate organisation entitled, Microplex Holdings Ltd, a non-profit Industrial and Provident Society and Community Land Trust (CLT) whose charter is to secure and maintain the freehold of the Cube Cinema as a community arts space in perpetuity.
The Tyneside Cinema is set up as a charity. See enclosed where both have got funds from.
www.cubecinema.com/cgi-bin/freehold/freehold.pl?action=counter
I will put the Tyneside list of funders up later. Cant’t extract it now.
Email Thread starts here…
From Trevor 28.8.2014
Hi all
This is a note from Giovanni at NCVS following from a meeting Robin and I had with him today. The background is that these two structures appear to be the best alternative options to take on as the new governance model of the Star and Shadow. They require further research with SES and other advisors as they have other implications. However either would allow fundraising by a Community Share Issue.
Regards
Trevor
PS my own bias is towards the Community Benefit Society but I am open to be swayed otherwise.
Industrial & Provident Society There are two kinds of Industrial and Provident Society (1) an old style workers coop, and a new style Community Benefit Society (CBS):
A co-operative is run for the mutual benefit of members who use its services. This is based upon the common economic, social and cultural needs or interests of the members. Typically, the common need or interest will define their relationship with the co-operative as a service user, customer, employee or supplier. A co-operative has open membership; there should be no artificial restrictions on membership, and membership should be open to anyone who meets the criteria. Recent guidance from the FCA says that a co-operative can have investor-members who are not otherwise users of the society’s services. A co-operative can pay interest on member share capital and a share of the surplus, or dividend, based on the level of transactions (customer-purchases, supplier-sales or employee-wages) with the society.
A community benefit society is run primarily for the benefit of the community at large, rather than just for members of the society. This means that it must have an overarching community purpose that reaches beyond its membership. An applicant enterprise must also have a special reason for being a community benefit society rather than a company, such as wanting to have democratic decision-making built into its structure. Although a community benefit society has the power to pay interest on members’ share capital, it cannot distribute surpluses to members in the form of dividends. A community benefit society can opt to have a statutory asset lock, which has the same strength as the asset lock for a charity and for a community interest company. This type of asset lock is not currently available for co-operatives.
======================================================
From Robin 01.09.2014
Dear all,
I'm interested in Trevor's stated "bias" for a Community Benefit Society rather than an old style workers cooperative (or Industrial Provident Society), because I feel the benefits of the latter far out-way the Community Benefit Society.
These are:
1. There is a considerable body of examples of how the IPS works, these include models such as The Cube Cinema, which is cited every-time someone utters the term fund-raising!
2. We could vest the property in the IPS and end up with one governing body, rather than two or three being talked up at the moment.
3. There is an overlap with the taxation system that is applied to Charities and IPS, for example The Cube, which is not a charity that enables the cube to gain the same 25% add-on from donations that charities currently have (negotiated under legislation governing IPS's directly with the UK tax authority), as a well as the council tax (business) 100% exemption.
4. If you look at the definitions of the IPS and the CBS, provided by Cooperatives UK, the definition of the cooperative sounds like the Star and Shadow is now, whereas the CBS sounds like a far wider definition of community. Becoming a CBS will lead to prolonged discussions about what we are and I very much doubt if we will achieve consensus this side of the next millennium.
5. On the question of the Asset Lock, CBS can have one now, but one is proposed in newer legislation as an add on to the model constitutional documents we could adopt as a IPS in the near future, until then or "for-ever" we can put in place a rule that guards against a takeover (which given our ridgidity on consensus governance I think this is an impossibility anyway), or we could put the property in the name of a community land trust (another instrument that has its origins in the 19th Century). The Cube do this, it is simply an administrative mechanism that is dealt with as an administrative mechanism, and at some time when the ISP asset lock in invoked it could be simply wound up.
6. As I have suggested there are lots of model legal instruments recognized by HMR&C out there that we could simply borrow and tweak. They have been prepared by such bodies as "Cooperatives UK", "Land for People Limited", "Radical Routes" etc. One of these documents "The Summerset Rules", is actually written in English rather than a form of "legalise!
7. One of the concerns of the Governance Group was to produce a governing instrument that was simple, could be understood and would facilitate the transfer of roles. These models exist within the IPS community, they even include people we trade with SUMA Foods Cooperative.
8. CBS registration is the opposite, documents are written for a professional group of directors/trustees, the governing instrument will be a straitjacket, and there is no long established body of practice to draw from.
9. My reading of CBS governing instruments is that what they define as "democracy" is more about electing a board, with a wider AGM. Whereas the history and practice of the larger numbers of IPS includes more collective models. My feelings are that this device is written for the comparative Voluntary Sector Organisation, where a wider empowerment of members has been subsumed my a growing tendency towards managerialism.
10. There is something unique about how we do decision making at the Star and Shadow, it is often cited by the voluntary sector in Newcastle-upon-Tyne as different, important, and inspirational ... they want a bit of what we've got!
11. I think some of us are being influenced by what the Cooperative Group has done for cooperation, fucked it over and tarnished 200 years of work, I say don't be bought off with a line of coke that someone else did, stick with a wider movement that is associated with real social change, democracy, social activism and is far far more radical in terms of organizing work and in particular creative work.
12. If we want to organise a community share offer, we can do one as an IPS, though, "The Cube" is doing something else at the moment and its more in-house and far more radical, than appointing an external consultant. there is a view amongst some of us that we will not need this measure.
13. The charity option, with the property vested in one, means that its a big charity, more expensive accounting, a potentially pesky regulator, problems when we do politics (including campaign work), double the insurance bill.
14. To become an IPS, we simply wind up the CIC and register as a IPS. The fee's are higher than for a CIC and CBS, but probably cheaper in terms of the legal work that has to be done, because the model instruments exist and there are many support agencies including Cooperative UK with a legal team.
Peace and Cooperation,
Robin
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From Trevor 02.09.2014
Hi all
Prompted by Robin's e-mail I took a look at the document on winding up a CIC on the CIC regulators website. See link below. In my reading the only acceptable form of Industrial and Provident Society that a CIC can transfer assets to without provision of full consideration (ie a cash or equivalent payment of the full actual value of the assets to the CIC) is a Community Benefit Society. In order to clarify this further I have now also spoken to Linda Barlow Legal Officer at Co-ops UK.
Her view is that the 'natural' route of conversion of a CIC is to become a Community Benefit Society. The two organisations have a common purpose of existing for community benefit, rather than for the benefit of the co-op members, and they both possess an asset lock (though CBS's do not have to). This process would be one of conversion and so would not require formal winding up of the CIC but rather it requires the agreement of the CIC Regulator just to allow us to move to a different Regulator. Her view was that this will be a much more simple route of conversion than to have to ask the Regulator to sanction us becoming an IPS. In particular she felt that as the intended nature of an IPS is to make a profit for it's members and to distribute it to them, rather than to be for the benefit of the community, the CIC Regulator would be likely to impose far more stringent controls and ask for much more paperwork to demonstrate we were not departing from our original community benefit objectives [and thus breaching our asset lock] for a conversion to an IPS. In fact she pointed out that an IPS style co-op that fails to provide employment and dividend benefits for it's members is technically failing to achieve it's legal objectives (though often this can be overlooked).
Her further advice was that we can obtain from them directly, or through SES, a model form of governance that allows us to insert a clause for consensus decision making as a CBS. She says that to do this we should insert the exact wording regarding this governance and any details of notice periods for meetings etc. from our present CIC articles into the Articles of the CBS in order to avoid a potential criticism by either Regulator that we were changing our governance method if the words were significantly different.
Finally she saw no problem with a CBS having an accessory Community Land Trust as either a charitable trust or a non-charitable company. It is also possible the CBS itself could be a CLT but she felt this would make it much more complicated and suggested we seek more advice from the Community Land Trusts Association.
Lastly she said the next step was to seek advice from the CIC Regulator to establish that they are willing to consider our conversion to a CBS or to an IPS. I will contact them regards this before Sunday. I will also explore the likely time scale of any decision process for either route.
Given this advice I feel that a becoming a Community Benefit Society is more consistent with the reasons for the existence of the Star and Shadow than an old style workers coop/IPS. The CBS also seems better if considering the long term protection of the Star's present volunteer values from a distant future take over by profit minded individuals. Lastly that this conversion to a CBS is likely to be a much simpler legal and regulatory process than setting up an IPS.
A final thing is that it may be wise to factor in £500-1000 legal fees, as part of out Feasibility money bid, for the conversion process whichever route is taken (but especially if an IPS is adopted) for this legal process.
I'll bring any further news to Sunday's meeting.
Trevor
www.gov.uk/government/uploads/system/uploads/attachment_data/file/336570/13-713-community-interest-companies-guidance-chapter-10-transfer-of-assets-and-ceasing-to-be-a-cic.pdf
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From Robin 03.09.2014
OK, if this is the case, (Cooperatives UK lawyers are pretty well conservative at everything they do) and I really would prefer it if we would at least consult bodies for advice in two’s where there is a disagreement!
1. The Star and Shadow is going to change. No longer will we be run for the mutual benefit of members (volunteers) and the other member organisations who use its services the canny library the conversation group, the other diverse groups including film bee, and other adhoc groups who we create for a purpose, or individual members who make the transition from being cinema members to volunteers, all linked through mutual common economic, social and cultural needs or interests. But, anyone who walks through the door be they members of the EDF or die-hard conservative’s! I think there will be difficulties caused in this move in terms of our relationship with Blank, and everyone else (you are going to be defined solely as tenants).
2. We are doomed to adopt a constitution that requires a lawyer to interpret it, and written with the imagination of a management consultant and does not necessarily have a clause that permits us to have a local set of rules.
3. Out the window goes any notion of equality, we are going to have directors called directors and trustees called trustees, and a regulator who intervenes. We are going to become a bog-standard voluntary sector organisation. Peace and cooperation,
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From Trevor 04.09.2014
Becoming an IPS the response from the Regulator of CICs
Dear Trevor,
Thank you for your enquiry.
A Community Interest Company (CIC) can only convert to a permitted
Industrial Provident Society subject to meeting the eligibility criteria
posed by the Financial Conduct Authority. A permitted Industrial
Provident Society is a Community Benefit Society which has a restriction
on the use of its assets and not the old style IPS such as a bona fide
co-operative. Before proceeding further we would suggest that you
contact the Financial Conduct Authority for further information about
the eligibility criteria of becoming Community Benefit Society with a
restriction on the use of its assets.
Provided that you meet this criteria, you will then be required to
deliver the appropriate papers with a £10 fee at Companies House and
attach a link to our website which provides further information:
www.gov.uk/government/publications/community-interest-companies-business-activities/cic-business-activites-step-by-step-guidelines#convert-a-cic-to-an-ips
With regard to your second question the CIC Regulator's Office will
deal with the application within 5-10 working days of receipt of the
appropriate papers from Companies House.
Regards,
Helen Huish
Helen Huish
Case Manager
Office of the Regulator of Communities Interest Companies
==========================================================================================
From Robin 04.09.2014
Dear all,
Trevor’s email yesterday:
The essence is this there are two kinds of Industrial and Provident Society (1) an old style workers coop, and a new style Community Benefit Society (CBS): (2) The regulator and the rather conservative legal advice we are obtaining from Cooperatives UK asan exiting CIC we can only convert to the CBS.
- I obtained this same information yesterday, from Cooperatives UK and the CIC Regulator, but it’s not straight forward as that, and the £10 fee is only what you pay companies house. There are lots of other factors involved in this and we really must not rush into this and end up with a straight jacket of a constitution.
- On top of the fee and form you have to submit a set of rules. These are checked by the FSA clause by clause (this is not the CIC regulator) and like the process of setting up a charity the only way you can make progress is to use a model set of rules provided from a sponsor organisation. The fee for sponsorship from Cooperatives UK is £500 and the model rules despite offering a so called “Collective Variant” and an offer to minimally tweak it represent a strait jacket. For the CBS there is no option to append a local agreement.
- If as some of you think is it is prudent embedding a community land trust and charity in this, we effectively abandon the cooperative free model we have operated under for eight years. We will change and our “board” will amount to a professional body constantly looking at the legal issues of making any kind of decision, with a set of regulator(s) who are anything other than “under the radar”.
- What we want is an old style worker cooperative (which cooperative UK, the CIC regulator, and Trevor are saying we cannot have). BUT they are missing the issue and the strategy adopted by companies everywhere.
- If we could become a IPS we would be far better off because there are a number of “sponsoring bodies” outside of Cooperatives UK, who could give a model constitution that better represented what we really are, very much more collective options, and even one sponsor offers a DIY community Share Package”, which could empower one or two of our number rather than paying £5K to some consultant.
- But, coop’s UK, the CIC regulator are wrong and are missing out on other routes to a cooperative.
- We could (a) close down the CIC and transfer the assets to another body, who could make their use over to us. (b) a better model is to keep the CIC but effectively turn it into an assessorary company. Which means basically:
- - We create an independent new IPS called the Star and Shadow Cinema Cooperative, which is an IPS. The Star and Shadow CIC contracts out all administration, asset management, and programme to the new coop, which has a similar set of objectives to the Star and Shadow. Then we administer the CIC on the basis that it has one meeting per year, with virtually the same minutes and agenda, (change the dates each year) and a set of directors who go through the motions of sending the return and the accounts to companies house (in time it becomes a smooth administrative procedure undertaken in less than five minutes, because the accounts will include administration costs donated to the CIC from the IPS consisting of £15 annual fee and £10 for stamps and photocopies, and a gradually reducing balance of the assets (which depreciate by a percentage each year), until we reach the point where we just shut it down and there are no assets to transfer.
- The result is one constitution written in English, that isn’t a strait jacket, one body with fund-raising capacity of a charity, one regulator.
This a perfectly legal strategy adopted by companies everywhere. If we can avoid doing anything rash, for a couple of weeks, I will ask a learned expert at Newcastle University to speak to us at a meeting. Meantime we look for a model we can live with or one that is more “tweakable” than the cooperative Uk model.
We bid for £4K of legal work in the feasibility bid, I really don’t think we will need it.
Do you really want a chairperson, treasurer and secretary, directors and a formal board stuffed full of the dis-empowered, but functionally having a nice CVable title, and lots of time spent trying to identify a new community, which sadly will not be based around creativity in a free space, but rules, place and keeping the regulator(s) happy. What would be the pleasure in that.
Peace and Cooperation,
Robin