A Distinct 'Social Enterprise' Law in the UK: The Case of the 'CIC'

To what extent should a jurisdiction’s legal system offer or afford community-based organisations pursing a socially sustainable business model a tailor-made social enterprise law that functions autonomously from its corporate and commercial law? Is there a space for a distinct legal structure or vehicle to be arranged and provided specifically for social enterprises within what is already a crowded field of organisational forms and structures prescribed by law? These are just two of the questions to which I have attempted a response in a recent article.

The responses to these questions are offered through the prism of the regulation of the community interest company vehicle (‘CIC’) in UK law, which my article claims can be depicted as a legal institution blending together a separate social enterprise law and a legal form that are both distinguishable from the orthodox corporate law framework and traditional company vehicles. This unique corporate form has grown to become an established part of the UK statutory architecture that recognises and controls organisational law. The point is made that although legal practitioners and commentators were initially sceptical about the merits and benefits of CICs, the customisation of the CIC towards the pursuit of projects and activities involving ‘social enterprises’ has been enormously successful.

Arguably, this success has been achieved because of, rather than despite, the superimposition of the CIC on top of the standard limited liability company model that is enshrined in the UK Companies Act 2006. As such, counterpoised somewhere between the classic corporate form and the traditional not-for-profit ‘charity’, the CIC is a ‘hybrid’ institution which enables social entrepreneurs to have the best of both worlds: the benefits of separate legal personality, access to private capital via the issuance of shares, limited liability of investors and members, and perpetual succession, on the one hand, alongside rules of law promoting socially responsible behaviour, community-based objectives, and societal benefit, on the other hand.

Although a CIC is a ‘hybrid’ institution possessing many of the features of the standard corporate framework, the purpose of this piece is to stress how the statutory provisions regulating these entities amount to something which can be conceptualised as producing a separate social enterprise law; separate in the sense of being autonomous from UK commercial or company law. The case is made that a separate UK social enterprise law does indeed exist as a result of the mandatory ‘asset-lock/maximum aggregate dividend and interest payment cap’ characteristic prevalent in the law governing the CIC. Finally, the article goes on to probe whether such an independent and self-contained layer of regulation is a desirable development from a practical and theoretical perspective, and if so, why.

David Cabrelli is a Senior Lecturer in Commercial Law at the University of Edinburgh