When setting up your community energy scheme, it is important to make sure your operation is correctly structured and represents the way in which your community scheme will run.

Types of community development

There are four types of defined community development – local development and community benefit arrangements are the most common in the UK

Local development
promoting opportunities for local private and national small scale investors. For example, co-operatives. Energy4All advocate this form of development.

Joint ventures
the sharing of a project between private and non-profit companies such as land owners and local development trusts.

Non-profit
Developments by non-profit organisations on behalf of the community such as local development trusts or community interest co-operatives.

Community benefit arrangements
Arrangements with private commercial organisations such as renewable energy community benefit schemes.

It is important to determine at an early stage of the project which structure your development will follow.

Legal structure of your group

Once it is clear the type of community development your group will be, it is essential to decide legal structure your group will take. There are six different structures which are applicable to community groups:
1.    Private Limited Company *
2.    Public Limited Company
3.    Company Limited by Guarantee
4.    Industrial Provident Society *
5.    Charity
6.    Limited Partnership

Although all these legal structures could be used, a Private Limited Company and an Industrial Provident Society are best suited to most types of community development.

A Private Limited Company does not offer public shares, but instead raises capital by selling ordinary and preference shares to existing members. This structure is quick and easy to set up (registration takes approximately 2 weeks) and is a great way to start your community company. If you find at a later stage that you wish to offer public shares it is always possible to convert it into a Public Limited Company.

An Industrial Provident Society is also relatively simple to establish. It offers a good solution to communities who are engaging in their projects not just for social reasons but for financial ones as well. The society must have a minimum of 7 members who are eligible for up to £20,000 worth of shares each.

Both types of structure can qualify for tax relief under the Enterprise Investment Scheme (EIS)