AS NEW solutions to enable economic regeneration emerge, the perennial debate about what legal structures should be used will begin again.

Joint initiatives between the private sector and the public sector have been tried and tested in the North East and other parts of the UK and have proven to be the most effective at stimulating economic recovery.

In the absence of a statute dictating how a body should be structured, one of the most common legal vehicles used has been a company limited by guarantee.

This has been a favoured structure because it gives a degree of flexibility whilst offering protection to any public sector assets that it is the custodian of.

Essentially, a company limited by guarantee does exactly what it says on the tin and limits the liability of any of its members (effectively the “owners” of the company) to whatever guarantee they give. This is usually limited to £1.

What this does is give members certainty that they are not risking their personal or institutional wealth for what is often a voluntary activity.

In return, a company limited by guarantee cannot distribute any surpluses, so any “profits” made must be reinvested.

Coming out of a recession, there is the inevitable cry for less is more when it comes to structures and institutions. Therefore suggesting that we create more companies limited by guarantee for bodies, such as LEPs or economic partnerships, may be greeted with a certain amount of scepticism.

However, to get full engagement from the private sector there will be a need for the limited guarantee. On the other side of the coin, to get full engagement from the public sector there will be a need to protect assets reputational damage.

A lot of time can be saved by concluding early on that a form of corporate vehicle to protect all those involved will be required. Now that we have drawn a line under the debate over legal structures, the public and private sector can be allowed to get on with working together to improve the economy.

:: Neil Warwick is an expert in company and commercial law at the region’s leading law firm, Dickinson Dees.