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How to finance your platform co‑op start-up
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Co‑op legal structures

The type of finance a business or organisation aims to raise will have some influence on the choice of their legal form – and vice-versa. 

Not all entities can use all types of finance, and some legal forms might be more favourable than others to certain funders. 

Here is a short description of each legal form. For more detail please consult our Simply Legal guide or contact our advice team.

Common legal forms

1. Limited companies

Limited companies are corporate bodies registered under the Companies Act 2006 and come in three forms:

  • Public Limited Company (PLC)
  • Private Company Limited by Shares
  • Private Company Limited by Guarantee. 

Companies register with Companies House and are relatively low cost and quick to set up. 

Some platform co‑ops (Open Food Network UK) have chosen to set up as a Company Limited by Guarantee. We are not aware of any platform co‑ops currently set up as Private Companies Limited by Shares or Public Limited Companies.

2. Limited Liability Partnerships

Limited Liability Partnerships (LLPs) are subject to the Limited Liability Partnership Act 2000, must register with Companies House and by law must be engaged in profit-making activities. 

We are unaware of any platform co‑ops set up as LLPs.

3. Societies

Societies are corporate bodies registered under the Co‑operative and Community Benefit Societies Act 2014 in England, Wales and Scotland or the Industrial and Provident Societies Act (Northern Ireland) 1969 in Northern Ireland. 

Societies register with the Financial Conduct Authority (FCA) with model rules that can be modified at a cost.

A Society can be either registered as a Co‑operative Society or a Community Benefit Society. A Co‑operative Society can convert into a Community Benefit Society, but not vice-versa. 

  • A Co‑operative Society is run for the mutual benefit of its members based upon their common economic, social and cultural needs or aspirations and in line with the seven co‑op principles.
  • A Community Benefit Society is run primarily for the benefit of the community at large, rather than just for the members of the society. This means that it must have an overarching community purpose that reaches beyond its membership. 

A Society is the preferred legal form for platform co‑ops in the UK as it tends to reflect the mission and membership structure for these types of organisations, as well as provides the advantage of raising share capital.

Depending on the purpose of the platform co‑op, some have chosen to set up as Co‑operative Societies (Equal Care Co‑op, Signalise) and others as Community Benefit Societies (Bristol Cable, Positive News). 

Other legal forms

In addition co‑ops, depending on their legal form, can choose to identify as Community Interest Companies or Charities. This is usually the case when they wish to subject their social mission to strong external regulation and can demonstrate that their activities satisfy the necessary conditions. 

Community Interest Companies (CICs)

Limited Companies can also be set up as Community Interest Companies (CICs), which are regulated by the 2005 Companies (Audit, Investigations and Community Enterprise) Act. To qualify as CICs companies need to pass a community interest test and need to have an asset lock. CICs need to register both with Companies House and the CIC Regulator. 

Some platform co‑ops have chosen to set up as a CIC with the legal form of a Company Limited by Guarantee (Open Food Network).

Charities

Co‑ops set up as Companies Limited by Guarantee or Community Benefit Societies can also choose to apply for charitable status.  

To be recognised as charitable, a co‑op must be able to demonstrate that it operates for the benefit of the public and that its activities fall wholly within one or more of the charitable purposes set out in the legislation of the country in which they are registered. 

In England and Wales, Companies must register with the Charity Commission, in Scotland with the Office of the Scottish Charity Regulator (OSCR), in Northern Ireland with the Charity Commission for Northern Ireland (CCNI). Community Benefit Societies instead should first register with the FCA as a society and then apply to HMRC to be recognised as charitable for tax purposes.  

Once registered, a charity may only cease to be such by converting to a Community Interest Company with the permission of their countries’ charity regulator or by winding-up or merging with another charity. 

We are not aware of any platform co‑ops set up as charities in the UK.