Community interest company
Encyclopedia
A community interest company (CIC) is a new type of company introduced by the United Kingdom
government in 2005 under the Companies (Audit, Investigations and Community Enterprise) Act 2004
, designed for social enterprise
s that want to use their profits and assets for the public good. CICs are intended to be easy to set up, with all the flexibility and certainty of the company form, but with some special features to ensure they are working for the benefit of the community.
Community Interest Companies (CICs) as Social Enterprise
A Community Interest Company (CIC) is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholder
s and owners. CICs tackle a wide range of social and environmental issues and operate in all parts of the economy. By using business solutions to achieve public good, it is believed that social enterprises have a distinct and valuable role to play in helping create a strong, sustainable and socially inclusive economy.
CICs are diverse. They include community enterprises, social firms, mutual organisations such as co-operatives, and large-scale organisations operating locally, regionally, nationally or internationally.
There is no single legal model for social enterprise. They include companies limited by guarantee, industrial and provident societies, and companies limited by shares; some organisations are unincorporated associations and others are registered charities.
that do not have charitable status find it difficult to ensure that their assets are dedicated to public benefit. There is no simple, clear way of locking assets of such a company to a public benefit purpose other than applying for charitable status. The community interest company is intended to meet this need.
When a CIC is requested, the CIC regulator considers whether applications meet the criteria to become a CIC. If satisfied, the regulator advises the registrar in Companies House
who, providing all the documents are in order, will issue a certificate of incorporation as a CIC.
A charity can convert to a CIC with the consent of the Charity Commission
. In so doing it will lose its charitable status including tax advantages. A charity may own a CIC, in which case the CIC would be permitted to pass assets to the charity. CICs are more lightly regulated than charities but do not have the benefit of charitable status, even if their objects are entirely charitable in nature.
Those who may want to set up a CIC are expected to be philanthropic
entrepreneurs who want to do good in a form other than charity. This may be because:
Existing companies can convert to a CIC by passing resolutions which make changes to their name and to their memorandum and articles of association and by delivering to the Registrar of Companies copies of these documents, together with a fee for £25, and a form CIC37 (which is similar to a CIC36, but asks for confirmation that the company is not a charity, or that permission has been obtained from the Charity Commission to convert from a charity to a CIC). The Registrar will conduct the normal checks for registration and pass the papers to the Regulator of Community Interest Companies, to determine whether the company satisfies the
community interest test.
CICs cannot:
The first ever UK Community Interest Company was TalentStar, founded by Adam Chetter.
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
government in 2005 under the Companies (Audit, Investigations and Community Enterprise) Act 2004
Companies (Audit, Investigations and Community Enterprise) Act 2004
The Companies Act 2004 is an Act of the Parliament of the United Kingdom.The following consultation documents and reports are precursors of this Act:...
, designed for social enterprise
Social enterprise
A social enterprise is an organization that applies business strategies to achieving philanthropic goals. Social enterprises can be structured as a for-profit or non-profit....
s that want to use their profits and assets for the public good. CICs are intended to be easy to set up, with all the flexibility and certainty of the company form, but with some special features to ensure they are working for the benefit of the community.
Community Interest Companies (CICs) as Social Enterprise
A Community Interest Company (CIC) is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
s and owners. CICs tackle a wide range of social and environmental issues and operate in all parts of the economy. By using business solutions to achieve public good, it is believed that social enterprises have a distinct and valuable role to play in helping create a strong, sustainable and socially inclusive economy.
CICs are diverse. They include community enterprises, social firms, mutual organisations such as co-operatives, and large-scale organisations operating locally, regionally, nationally or internationally.
There is no single legal model for social enterprise. They include companies limited by guarantee, industrial and provident societies, and companies limited by shares; some organisations are unincorporated associations and others are registered charities.
Legal forms and social objectives
Regular limited liability companiesLimited liability company
A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...
that do not have charitable status find it difficult to ensure that their assets are dedicated to public benefit. There is no simple, clear way of locking assets of such a company to a public benefit purpose other than applying for charitable status. The community interest company is intended to meet this need.
When a CIC is requested, the CIC regulator considers whether applications meet the criteria to become a CIC. If satisfied, the regulator advises the registrar in Companies House
Companies House
Companies House is the United Kingdom Registrar of Companies and is an Executive Agency of the United Kingdom Government Department for Business, Innovation and Skills . All forms of companies are incorporated and registered with Companies House and file specific details as required by the...
who, providing all the documents are in order, will issue a certificate of incorporation as a CIC.
A charity can convert to a CIC with the consent of the Charity Commission
Charity Commission
The Charity Commission for England and Wales is the non-ministerial government department that regulates registered charities in England and Wales....
. In so doing it will lose its charitable status including tax advantages. A charity may own a CIC, in which case the CIC would be permitted to pass assets to the charity. CICs are more lightly regulated than charities but do not have the benefit of charitable status, even if their objects are entirely charitable in nature.
Those who may want to set up a CIC are expected to be philanthropic
Philanthropy
Philanthropy etymologically means "the love of humanity"—love in the sense of caring for, nourishing, developing, or enhancing; humanity in the sense of "what it is to be human," or "human potential." In modern practical terms, it is "private initiatives for public good, focusing on quality of...
entrepreneurs who want to do good in a form other than charity. This may be because:
- CICs are specifically identified with social enterprise. Some organisations may feel that this is a more suitable than charitable status.
- Members of the board of a charity may only be paid where the constitution contains such a power and it can be considered to be in the best interests of the charity. It means that, in general, the founder of a social enterprise who wishes to be paid cannot be on the board and must give up strategic control of the organisation to a volunteer board, which is often unacceptable. This limitation does not apply to CICs.
- They are looking to work for community benefit with the relative freedom of the non-charitable company form to identify and adapt to circumstances, but with a clear assurance of not-for-profit distribution status.
- The definition of community interest that applies to CICs is wider than the public interest test for charity.
Formation and registration
The formation and registration is similar to that of any limited company. New organisations can register by filing the Form IN01 and memorandum and articles of association together with a form CIC36 signed by all their directors, explaining their community credentials to the Registrar of Companies for England and Wales, or the Registrar for Scotland with a fee of £35.Existing companies can convert to a CIC by passing resolutions which make changes to their name and to their memorandum and articles of association and by delivering to the Registrar of Companies copies of these documents, together with a fee for £25, and a form CIC37 (which is similar to a CIC36, but asks for confirmation that the company is not a charity, or that permission has been obtained from the Charity Commission to convert from a charity to a CIC). The Registrar will conduct the normal checks for registration and pass the papers to the Regulator of Community Interest Companies, to determine whether the company satisfies the
community interest test.
CICs cannot:
- be politically motivated (see regulation 3 of the Community Interest Company Regulations 2005 (“CIC Regs”))
- be set up to serve an unduly restrictive group (see regulations 4 & 5 of the CIC Regs)
- be a charity
- carry out unlawful activities
The first ever UK Community Interest Company was TalentStar, founded by Adam Chetter.
See also
- Social entrepreneurshipSocial entrepreneurshipSocial entrepreneurship is the work of social entrepreneurs. A social entrepreneur recognizes a social problem and uses entrepreneurial principles to organize, create and manage a venture to achieve social change . While a business entrepreneur typically measures performance in profit and return, a...
- L3CL3CA low-profit limited liability company is a legal form of business entity in the United States that was created to bridge the gap between non-profit and for-profit investing by providing a structure that facilitates investments in socially beneficial, for-profit ventures while simplifying...
(similar type of legal structure in the United StatesUnited StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
)
External links
- Community Interest Companies Regulator
- CIC Association website
- Social Enterprise and Business Structures in Canada Discussion paper on work being done in Canada to create a unique social enterprise legal business structure, using the UK example.
- William Davies, New StatesmanNew StatesmanNew Statesman is a British centre-left political and cultural magazine published weekly in London. Founded in 1913, and connected with leading members of the Fabian Society, the magazine reached a circulation peak in the late 1960s....
, 13 September 2004, "How to tame capitalism"