Have you come across the term CIC or heard of it? We have heard of the normal types of companies such as charities, limited companies and public companies. In this article I aim to expalin “What is a Community Interest Company” and the ins and know hows.
What is a Community Interest Company? Definitions
A community interest company is a type of company introduced by the United Kingdom government in 2005 under the Companies Act 2004, designed for social enterprises that want to use their profits and assets for the public good.
Wikipedia
A CIC is a special type of limited company which exists to benefit the community rather than private shareholders.
https://www.gov.uk/set-up-a-social-enterprise
Introduced in 2005 in the UK, a community interest company is a type of company designed for social enterprises that want to use their profits and assets for the public good.
https://www.sumup.com/en-gb/invoices/dictionary/community-interest-company/
Advantages of a Community Interest Company
Access to certain forms of finance and Funding
CICs will attract some certain types of funding and grants which are only available to these type of organisations. Some people will only donate or give to these types or organisations too.
Limited liability Protection
Being a limited company, this provides an the element of security for those who own and run the organisation
Quick To set up
A community interest company is far way quicker to setup compared to the process of setting up a charity
Less Governance Requirements
Community Interest Companies are regulated by the CIC Regulator and so have fewer restrictions on trading activities than a charity
Disadvantages of a Community Interest Company
Restrictions of Assets
a CIC can only transfer assets for less than market value to another CIC or asset-locked body (such as a charity or a similarly asset-locked community benefit society)
Lack of Public awareness of the CIC model
The concept of a CIC is quite new and not well known and so many individuals are not be familiar with the community interest company model or form.
Restrictions on dividends
Only CICs limited by shares are allowed to pay dividends, and even then they are still subject to a dividend cap. As well as the standard limits on dividends under company law, only 35% of a CIC’s distributable profits in a single year can be paid out in dividends to the company’s shareholders (with a limited facility to carry forward unused dividend capacity to future years).
How to Set up a Community Interest Company
To set up a CIC, you’ll need:
- a ‘community interest statement’, explaining what your business plans to do
- an ‘asset lock’- a legal promise stating that the company’s assets will only be used for its social objectives, and setting limits to the money it can pay to shareholders
- a constitution – you can use the CIC regulator’s model constitutions
- to get your company approved by the community interest company regulator – your application will automatically be sent to them
The CIC regulator has guidance on setting up a CIC.
What is The difference between a Community Interest Company and a Charity?
Both CICs and Charities are similar in sturcture an d it would be necessary that we highlight the key differences between them.
A CIC is expetec to make a profit from its services whila charity is not intended to ma ke any profit form its services or work
A CIC will get most of its income from trade, selling something then reorienting the money into the social enterprise. A charity, on the other hand, will be almost entirely reliant on donations and grants.
another difference is that an organisation can only be a charity if it is established for exclusively charitable purposes for public benefit.
Examples of Community Interest Companies
- Allendale Creative Artists
- 12 November 2013 Case study
- Bewdley Development Trust
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- Blues and Beers
- 12 November 2013 Case study
- Bookdonors
- 12 November 2013 Case study
- Bristol Together
- 12 November 2013 Case study
- Cittaslow UK
- 12 November 2013 Case study
- Culture and Sport Glasgow Trading
- 12 November 2013 Case study
- Directions Finningley
- 12 November 2013 Case study
- Frame of Mind now known as Frame of Mind (Vocational Training)
- 27 November 2015 Case study
- Isle of Skye Ferry
- 12 November 2013 Case study
- Little Fish Theatre
- 12 November 2013 Case study
- Metfield Stores
- 12 November 2013 Case study
- Pathfinder Healthcare Developments
- 12 November 2013 Case study
- Ryburgh Community Enterprise
- 12 November 2013 Case study
- Scotcash
- 12 November 2013 Case study
- The Fold Bransford
- 7 October 2016 Case study
- Skills for Life Learning Centre
- 12 November 2013 Case study
- Spokes
- 12 November 2013 Case study
- The Expert Patients Programme
- 12 November 2013 Case study
- The Wellbeing Project now known as Wellbeing Enterprises
- 27 November 2015 Case study
- Warm Wales (Cymru Gynnes)
- 12 November 2013 Case study
- Women Like Us now known as Timewise Foundation
- 27 November 2015 Case study
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