💾 Archived View for gemini.ucant.org › gemlog › 2021-08-30_uk_legal_forms.gmi captured on 2024-02-05 at 09:44:07. Gemini links have been rewritten to link to archived content
⬅️ Previous capture (2022-06-03)
-=-=-=-=-=-=-
This post has been made into a living document (here).
It's hard to find a good write-up of the different legal forms an organisation can take in the UK. Partly this is because there's little demand: if you're trying to set up a non-profit organisation, you just don't care about the differt types of share capital arrangements companies might adopt, and vice-versa.
There's another problem: agenda-pushing. Some people have got their favourite legal form, e.g., the cooperative, or the CIO, or the limited liability partnership, and want to see the rest of the ecosystem through that lens. There is a slight tendency on the part of government to push CIOs and CIC status, for example. So get weird propaganda on gov.uk sites saying "Oh, we couldn't have done all this with a limited company", when in fact the speaker was indeed using a limited company, because they're trying to push CIC status.
A more benign form of the above is where people are trying to answer a different question, the question what business structures exist for your new venture. This leads to a bit of conflation and duplication, as "sole proprietorship" and "trading as" might make an appearance, giving us our third problem. What's going on is they're giving guidance on business structures, not legal forms.
Example: UK government guide to business structures
The third problem is making the list orthogonal from other concerns. By necessity, an organisation is of one and only type. The types are mutually exclusive and collectively exhaustive: you can't be a company AND unincorporated at the same time, both as a matter of logic and as a matter of law. But: there are certain statuses that a legal entity can have, and some of these statuses are available to multiple types of legal entity. Several different types can be charities. Several different descriptions of company may acquire the status of "Community Interest Company" and so on. So I'd like to be able to split that off too. Another thing which might get conflated is the different ownership and governance models that might exist within one of these types.
The statuses I think are orthogonal include:
The actual types of legal form, which are all mutually exclusive, include:
The list above is fairly comprehensive, but not *yet* exhaustive. Some of the types above can also be charities or CICs.
For companies, there are the following descriptions of company:
It has been illegal to set up the deprecated type of company in the UK since about 1980, though apparently it's still licit in the Isle of Man.
The three current limited company types may additionally acquire the status of a Community Interest Company, and a company limited by guarantee may be registered as a charity. A plc that is a CIC is fairly similar to a "community benefit society", on which more below. A company limited by guarantee that is also a registered charity is fairly similar to a CIO.
For registered societies, there are now only two sub-types that have not been deprecated. All new registered societies must be of one or the other type, but the older types tend actually to be better known:
It is possible for community benefit societies also to be charities.
The company, in its four or five forms, is a special case of the body corporate. Historically, there seem to have been four different types of corporation:
The chartered corporation is the best starting point: before the prerogative power was brought under control in the seventeenth century, the King (or indeed Queen) would issue charters to groups of individuals, requiring the courts and others to treat the group as though it were a single body. "corporation" basically means turning something into a "body", from Latin "corpus", which means the same thing. You didn't want to have a situation where someone sued the Bishop of Winchester, but he died before the lawsuit was resolved, and the new Bishop was allowed to walk away from the lawsuit, and this principle was generalised to groups of people who existed at the same time, rather than who succeeded each other over time like occupants of a bishopric.
Prescriptive corporations were a legal fiction: it was absurd to treat groups of people who behaved as though they were a single organisation in a way which pretended that they were NOT a single organisation. You didn't want a lawsuit collapsing because, say, Oxford University's charter was so old that no-one could still find it. Maybe it never had one - it had just always operated as a single entity, and it would be ridiculous for it suddenly to be treated as a collection of hundreds of individuals all parties to some lawsuit that had just got jarringly more complex. So prescriptive corporations are organisations so old and so cohesive that it's fair to assume that they probably were once given a charter, but it was too long ago to matter. A sensible legal fiction.
Statutory corporations are corporate bodies set up by Parliament, after the Crown was brought to heel in 1689. Each one had its own act of Parliament, just as each chartered corporation had its own Charter. The main difference was that the document issued from Parliament rather than the Crown (this has some implications in the present day for whether a corporation can make rules which are binding on people who aren't members: important for harbourmasters, universities and so on). You can still dig up individual acts of Parliament for the Hudson Bay Company, or the Bank of England, and so on. When Halifax Building Society merged with the Bank of Scotland a few decades ago, this required an act of Parliament too.
Registered corporations are what we now call companies. One act of Parliament, since roughly the 1850s, has allowed a government official to create new companies. The current law on this is the Companies Act 2006.
The miscellaneous other bodies created by act of Parliament, e.g., county councils, tend to be statutory corporations.