Streetbank revisited: the regulators respond
The story of Streetbank – which was initially refused charitable status, struggled to raise funding as a community interest company, then successfully reapplied to become a charity at the end of last year – raises interesting questions about the pros and cons of these legal forms.
Pioneers Post invited the Community Interest Company regulators and the Charity Commission for England and Wales to respond to the article about Streetbank which we published just before Christmas. We're also inviting readers to join the discussion, tweet us @PioneersPost...
Last month Pioneers Post spoke to the co-founder of Streetbank – an online platform that aims to bring communities together and help people save money – about the constraints of being a Community Interest Company (CIC) and being officially recognised as a registered charity (finally!).
The case raises numerous questions about both the state of CICs in the UK and what it means to be a charity.
It is almost a decade since CICs were introduced in the UK by the Companies (Audit, Investigations and Community Enterprise) Act 2004. In August 2014, there were approximately 10,000 CICs registered in the UK and as of January 2015 they make up 58% of the social ventures registered on the RBS SE100 Index.
CICs can only distribute up to 35% of their profit to shareholders – the rest must be either retained within the CIC or used for community benefit. While many believe this asset lock is crucial, others argue that it is too restrictive.
In a guest blog published on Third Sector just this week CEO of Connect Assist Patrick Nash wrote: “Reassessing the asset lock is crucial, as, in its current guise, it appears to be stifling investment, which has a knock-on effect when it comes to sector growth.”
We asked the CIC Regulator whether it is concerning that Streetbank found being a CIC prevented it from accessing sufficient funding/grant opportunities and thus it felt it necessary to become a registered charity? We also questioned whether this is a common challenge facing CICs and asked the regulatory body to describe the state of CICs as we edge nearer to its tenth anniversary.
Regulator Sara Burgess said:
"CICs can and do get grant funding, though some charitable trusts and grant funders have specific criteria which do not relate to the CIC model. In many cases trust and grant funding is very specific to the funder's interests and these criteria have to be met. This applies to charities as well as CICs.
"The unique advantage of the CIC is that it has other opportunities to achieve income through trading and investment. The CIC model allows it to operate commercially. This is not the model for all socially minded organisations but there are now over 10,000 CICs registered to deliver social impact."
Streetbank’s case also raised questions about the definition of charities in England and Wales. Stephanie Biden, partner at BWB, told Pioneers Post: "To the person on the street, it might seem very obvious that Streetbank should be charitable - isn't helping your neighbour the essence of charity?"
Pioneers Post invited the Charity Commission to comment on the case and the technicalities of what makes an organisation charitable – do all the people using the service need to be in "charitable need" or is it enough that by using the service the organisation is “encouraging people to be more altruistic”?
The Commission was also invited to respond to co-founder of Streetbank Sam Stephens’ comment: "We experienced a sense of frustration and helplessness. The Streetbank vision is for neighbourhoods where neighbours are generous – where people share things and skills, and where community is built.
“However, we felt powerless against what felt like a faceless, slow moving and cautious bureaucracy."
A Charity Commission spokesperson said:
“An organisation that is applying to register as a charity needs to be able to demonstrate that it is established for exclusively charitable purposes for public benefit. If it is not able to do this then, regardless of the merits of what it is doing, its application will not be successful. All applications are considered on their individual merits and on the basis of the information that is provided to us at the time."
The spokesperson also spoke about the specifics of the Streetbank application – but did not refer to Sam Stephens' comment:
"Streetbank initially applied to register as a charity in 2011. The applicants were not able to demonstrate at that time that the organisation was furthering exclusively charitable purposes for public benefit. The application was therefore rejected.
"We received a further application in 2014. On an initial consideration of the proposed objects and the supporting information provided it appeared that, whilst some of what Streetbank was doing may further charitable purposes, not all of its activities would be furthering charitable purposes for public benefit because not all of the recipients of voluntary assistance would necessarily be in charitable need.
"However, after discussion with the applicants, we established that in this case part of Streetbank’s purpose was the promotion of good citizenship, although this was not stated in the objects.
"It did this by actively encouraging members of the public to volunteer for altruistic purposes. It would not be essential for this charitable purpose that all recipients of voluntary services are necessarily in charitable need. The charity was therefore registered once an appropriate amendment to the objects had been made."
These responses merely touch upon the crucial debates around CIC regulation and some of the complexities around the application process an organisation needs to go through to be recognised as a registered charity.
Are you a CIC that has found it difficult to raise funds or perhaps are you frustrated with the restrictions of the CIC legal form? Have you been rejected by the Charity Commission? Do you agree with Streetbank's co-founder, is the Charity Commission a slow-moving, faceless bureaucracy? Join the discussion by tweeting us @PioneersPost
Photo credit: Jessica H