Choosing the right legal structure is a critical decision for any organisation embarking on a collaborative venture. Whether you’re forming a research partnership, coordinating regional services, or pooling procurement resources, the UK Economic Interest Grouping (UKEIG) offers a flexible model for cooperation without the need to set up a company or partnership.
But is a UKEIG the right choice for your specific project? This post explores the scenarios where a UKEIG makes the most sense, the benefits it provides, and the considerations to keep in mind before proceeding.
What is a UKEIG?
A UKEIG is a legal entity that allows two or more organisations or individuals to work together on a joint economic activity. Unlike a company, the UKEIG is not designed to make a profit for itself. Its role is to facilitate and support the economic activities of its members.
UKEIGs were introduced in the UK following Brexit as a replacement for European Economic Interest Groupings (EEIGs). While no longer governed by EU law, UKEIGs retain many of the same core principles, including shared liability, fiscal transparency, and member-driven governance.
When is a UKEIG Suitable?
A UKEIG is most appropriate when:
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You want to collaborate on an economic activity without forming a full company
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Each participant wants to retain their own legal identity
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The project is time-limited or flexible in nature
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There is a clear need for shared costs, shared benefits, and shared liability
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The group does not intend to generate profits as a standalone entity
Typical use cases include:
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Joint research projects between universities or public bodies
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Shared infrastructure or service delivery between local authorities
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Cross-sector partnerships working on regional development
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Collaborative marketing or export promotion initiatives
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Professional networks offering pooled services (e.g. training, consultancy)
The UKEIG structure allows you to combine forces for a specific goal while maintaining legal separation between members.
Advantages of Using a UKEIG
The UKEIG model offers several practical advantages:
1. Simplicity of Formation
Unlike companies, UKEIGs require no share capital, and the formation process is relatively straightforward. You must register with Companies House and submit a formation contract, but the administrative burden is generally lower than with limited companies or LLPs.
2. Operational Flexibility
The structure allows you to tailor the governance, voting rights, and financial contributions according to your specific arrangement. The grouping can scale up or down depending on the needs of the project.
3. Fiscally Transparent
A UKEIG does not pay corporation tax on profits because it does not retain profits. Instead, income and losses are passed through to the members, who report them according to their own tax status.
4. Legal Personality
A UKEIG can enter into contracts, own assets, hire staff, and sue or be sued in its own name. This gives the grouping autonomy to act while offering legal clarity to funders and partners.
5. Continuity of Collaboration
If a project spans multiple years or involves ongoing responsibilities, the UKEIG offers a legal continuity that informal partnerships may lack. It also provides a framework for adding or removing members as the work evolves.
Key Considerations Before Forming a UKEIG
Despite its advantages, a UKEIG is not suitable for every collaborative effort. Consider the following before proceeding:
1. Joint and Several Liability
All members of a UKEIG are jointly and severally liable for its debts. This means each member could be held responsible for the full amount if the grouping cannot pay its obligations. This differs significantly from limited companies, where liability is typically capped.
Careful drafting of internal agreements, clear budgeting, and appropriate insurance are essential to manage this risk.
2. Not for Profit-Making
The UKEIG must not aim to make profits for itself. While it can receive income and recover costs, its purpose must always be to support the members’ own activities—not to operate as a commercial business.
If your project involves direct trading, sales to the public, or long-term profit generation, a limited company may be more appropriate.
3. Filing and Disclosure Obligations
UKEIGs must file key documents with Companies House, including changes to members or managers, annual returns, and certain notices in The Gazette. While less burdensome than for companies, these obligations still require ongoing attention and administrative resources.
4. Member Commitment
All members must be willing to take on both the legal and financial responsibility of the grouping. If one party is uncertain or reluctant to share liability, another legal structure—such as a contractual consortium or lead-partner model—may be safer.
Questions to Ask Before Choosing a UKEIG
To assess whether a UKEIG is the right vehicle for your project, ask yourself:
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Is this a true collaboration where all parties contribute equally or equitably?
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Will the grouping need to enter contracts or hold assets in its own name?
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Is profit-sharing not a requirement of the arrangement?
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Are all members aware of and comfortable with joint liability?
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Do we have a clear project scope, governance plan, and financial model?
If the answer to most of these questions is yes, a UKEIG may offer the ideal mix of structure, flexibility, and accountability.