What is a Community Interest Company?

What is a Community Interest Corporation or “CIC”?

CICs are limited liability company designed for social enterprises. So, it has the familiar company form that has a separate legal identity from its members. Also it is simpler to incorporate than a charity.

A CIC can be a private company limited by guarantee, as is Oasis Business CIC, or by shares, or public limited company. A CIC limited by shares can pay dividends to its shareholders, though in certain circumstances the dividend may be capped. Crucially the CIC is flexible and can be tailored to an organisation’s particular needs.

The CIC is seen as significant in facilitating the development and expansion of community orientated activities and a welcomed additional legal form for social enterprises, complementing those already available.

As a limited company a CIC must comply with company law generally, as well as complying with the CIC legal requirements.

The phrase “not for profit” is frequently used when discussing social enterprises. This can be misleading and should only be used in the context of the company not having as its primary purpose the generation of profits for its owners.

If a CIC fails to make profits from its activities (or in some way generate sufficient income to cover its running costs) it will eventually fail altogether. Therefore rather than thinking in terms of CICs being non-profit making they should be thought of as making profits for their community purposes.

If a CIC trades, their business activities will need to generate surpluses to support its activities, maintain its assets, make its contribution to the community (and in some cases make a limited return to its investors).

Alternatively, some CICs may well depend on grants or donations to enable it to carry out its social purpose.

The company structure of shareholders and directors and easily understood corporate governance systems will be familiar to people and companies dealt with, such as, banks, suppliers and advisers. Also, the ability to pay salaries to directors may assist in attracting the right people to the CIC initiative.

The statutory asset lock provisions for Oasis Business CIC prevents the assets and profits being distributed except as permitted by legislation. It provides the confidence to those wishing to fund and deal with CICs that the assets and profits will primarily be devoted to the benefit of the community, rather than rewarding the owners or investors.

An annual CIC report, in general terms, describes the company’s activities; who was consulted; and what assets were transferred other than for full consideration; and directors’ remuneration. This provides transparency of operation. It also ensures that those affected by and benefiting from the CIC’s activities will be properly recognised as stakeholders.

Useful websites:

Registrar of Companies England, Wales and Scotland www.companieshouse.gov.uk
Department for Business Innovation and Skills www.berr.gov.uk
Office of the Regulator of Community Interest Companies www.cicregulator.gov.uk