Governance 101 for Community Assets

Key features of a Community Interest Company (CIC):

• Must satisfy the Community Interest Test, i.e. a reasonable person would consider that the CIC’s activities are or will be carried on for the benefit of the community.

• Asset locked

• Can trade freely

• Can have a large or small membership

• Can be company limited by guarantee or by shares

• There are six forms of CICs (and not all of them are wholly non-profit), depending on:

  • membership size and structure

  • full asset lock or not

  • distribution of profits and surplus.

• A CIC cannot be a charity

• A CIC limited by guarantee cannot convert to a CIC limited by shares or vice versa

• A CIC limited by guarantee is sometimes able to convert to a CIO or charitable CLG, but not to a CIC limited by shares

• A CIC limited by shares can sometimes convert to a CIO but not to a charitable CLG or to a CIC limited by guarantee.

Not automatically eligible for the 80% business rates relief applicable to a charity. Instead, relief is at the discretion of local authority based on local policy

Good for: trading; agility; speed and simplicity of set-up; membership, which can be attractive to funders; compensating board members.

Trade-offs: unable to access to grants specifically for charitable organisations; no guaranteed business rates relief.

Key features of a Community Benefit Society (CBS):

• A type of Registered Society

• For community benefit (not for private gain)

• Democratic: one-member-one-vote

• Can run community share offers (must register with FCA)

• Is mostly not-for-profit; can pay interest on shares (within limits)

• Can be a charity (Charitable CBS) if it meets the tests; recognition is via HMRC rather than Charity Commission (as of December 2025) but is still subject to the jurisdiction of the Charity Commission. See the ‘CIO’ description below for more about being a charity

• Asset lock (preventing assets from being used for private gain) is optional

• A charitable CBS has similar (but slightly less) access to grant funding access than registered charity

• If a charity, then eligible for 80% business rates relief; otherwise, relief is at the discretion of local authority based on local policy

Good for: flexibility on trading (unless charity); community ownership; Community Land Trusts (CLTs); share offers, democratic membership; simplicity of set-up (but slower and more regulated if charitable CBS).

Trade-offs: Less understood; no automatic business rates relief for CBS (unless charity); limited grant funding access if non-charitable; lack of flexibility to convert to a different structure.

Key features of a company limited by guarantee (CLG):

• Usually (but not necessarily) not-for-profit and asset locked

• Can be a registered charity (as long as it is not a CIC) if it meets the tests (in fact, legally must register as charity with Charity Commission if it meets the tests and has more than £5,000 annual income). See ‘CIO’ below for more about being a charity

• Flexible (if not charitable) on activities and trading

Good for: social enterprises; governance stacks; limited liability; business rates relief (if charity); access to grant funding (wider if charity); flexibility (register as a charity, or convert to a CBS or co-op – though this brings complexity).

Trade-offs: slower recognition; more regulation (if charitable); high street bank lenders can sometimes be wary, because there’s no shareholding or equity (just a guarantee, e.g. £1 per member).

A company limited by shares (CLS) is an alternative, but this is uncommon for community asset development and is almost never charitable or not-profit. A few social funders/investors will still invest in a CLS if they have an asset lock (preventing dividends from being distributed to private shareholders).

Key features of a co-operative society:

• Formed for member benefit (those who purchase shares) – not explicitly for wider community benefit or wider beneficiaries 

• Can run community share offers

• Cannot be a charity (due to member benefit, not public benefit), apart from in very specific circumstances that don’t tend to be relevant for community assets

• Democratic

• Less common for community asset development - mostly due to limited access to funding and the need to follow cooperative principles (which is appropriate for some community asset developers’ goals, but not others)

Good for: worker/member co-ops; flexible (can convert to a company).
Trade-off: limited access to traditional sources of funding.

Key features of a Charitable Incorporated Organisation (CIO):

• This is a typical incorporated charity: a structure specifically designed for – and only available to – charities. Unlike unincorporated charities (e.g. trusts/associations), a CIO can hold property and sign contracts in its own name. 

• Not a company, so no requirement to list or register with Companies House (Charity Commission is the sole regulator, unlike charitable companies – see CLG above – which report to both). 

• Full asset lock

• Every activity must serve charitable purpose (e.g. activities in the building)

• Trading must further the purpose of the charity; but it’s possible to set up a trading subsidiary of the charity (which can donate profits to the charity, which avoids Corporation Tax, or reinvest in the subsidiary)

• Greatest access to all traditional sources of funding (grants, donations), although mainstream lenders can sometimes be wary of charities (learning journey required)

Pros: simple governance; corporation tax exempt; clear charity model for fundraising; well understood; can boost credibility with some stakeholders.

Trade-offs: slower to set up and register (can take months, whereas many other entities can be incorporated in days or weeks); restricted ability to trade; no flexibility to convert to non-charitable model.

Many community asset developers (CADs) end up with more than one organisation. Not because they love admin, but because different tools are good for different jobs.

Governance ‘stacks’ matter most when you’re planning a portfolio of buildings (as many CADs are). If your ambition is a cluster, a high street, or a neighbourhood-wide transformation, a single legal entity will rarely be able to hold all the risks, assets and funding streams.

When carefully approached, stacks can allow CADs to:

• Hold different types of risk in different places

• Use different structures to access different funding routes

• Separate charitable activity from non-charitable trading

• Bring in community shareholders

• Protect anchor assets

• Scale without overloading one entity

For example, Coin Street Community Builders is a family of organisations: a social enterprise (company limited by guarantee), housing co-operatives and a registered charity.

Hastings Commons has developed a governance ‘stack’ of four legally distinct organisations working together with an aligned purpose:

• Hastings Commons Neighbourhood Ventures (HCNV) – a social enterprise property developer (company limited by shares with mission-aligned investors). It:

  • buys and finances difficult buildings

  • takes big development risks

  • renovates, leases and manages spaces
    
    

• Hastings Commons Community Land Trust – a charitable Community Benefit Society (CBS), the long-term asset holder and membership body. It:

  • builds a large membership base 

  • holds assets in perpetuity once they are “de-risked”

  • anchors democratic accountability

• Hastings Commons Leisure & Learning – a registered charity delivering programming, community activities and learning.
  
  

• Hastings Commons Living Rents – a subsidiary of HCNV, specialist housing body overseeing residential tenancies and housing standards, becoming a Registered Provider (a mini housing association).

Each has its own legal duties and board. But in practice, they operate as one ecosystem, with single joint quarterly board meeting, a shared strategy and largely shared policies, staff working as a single team, regardless of which entity employs them, and an MOU between the organisations for roles, principles and ways of working.

You can grow towards a stack over time, as needs arise – or you may find it’s not necessary even if you hold multiple assets (e.g. due to the trade-offs of complexity, risk and expense it can bring). 

💡 A word of caution from Julian Lomas (Almond Tree Consulting) in a recent workshop with the pilot Local Property Partnerships: 

“A group or ‘federated’ structure with a mix of charitable and non-charitable entities can be essential if some charitable status is needed, but some activities aren’t charitable. You might even need multiple trading entities to isolate risks from each other. 

Note, though, that the more complex this becomes, the higher the costs of admin, regulation and potentially legal or consultancy advice; it might overall be less efficient and appear less transparent to some funders.

So it’s really important to get tailored advice on whether this is the necessary set-up for your context, purpose and community at this moment in time – and to ensure you structure the relationships between entities properly.”

💡 A note from Julian Lomas (Almond Tree Consulting) in a recent workshop with the pilot Local Property Partnerships:

“It’s because most of them are themselves charities, and this is the easiest way to ensure their funding goes to charitable purposes — but there are various funder organisations, like Architectural Heritage Fund, with more sophisticated and flexible approaches. They will still have careful guardrails in place to ensure funds are protected from being used for private gain.

Whatever your governance structure, many funders need to see a “track record”; if you’re a new entity, you could overcome this by securing high quality trustees or partnering with a more established organisation who meets their criteria for track record.”

💡 A tip from Julian Lomas (Almond Tree Consulting) in a recent workshop with the pilot Local Property Partnerships:

“There are very tightly defined – and often complex – criteria that determine whether your organisation can be a charity or not.

If you’re exploring the charity route, it’s so important to do your research and check whether your purposes and activities absolutely and exclusively align with charitable purposes and public benefit requirements in the Charities Acts.

For example, if you’re preserving a heritage building, for that preservation to be charitable and fit the purpose ‘The advancement of the arts, culture, heritage science’, the building has got to have sufficient merit architecturally or historically to be educational, there has to be sufficient public access to the building, and it must usually be used for charitable purposes (not primarily to carry out a business).

Promoting the arts is only charitable if performances are for educational purposes, not just entertainment, and private benefits to artists are properly managed.

Things like how much you pay to buy or lease a building compared to market rate, or how much you invest in its value through renovations, may impact the ‘public benefit’ test: if there is significant private benefit to the owner or former owner, that needs to be demonstrably ‘incidental’ to the public benefit and managed properly.

This is where tailored advice is usually essential.”