Community Interest Company

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Corporate status

Incorporated

Terminology: governing document

"Memorandum and articles of association".

Terminology: governing body

"The directors" or "the board of directors", although the memorandum and articles of association may use some other term to describe the directors.

Management/governance structure

See "Company". A Community Interest Company (CIC) must first be registered as a limited company; CIC status will be an additional "badge" overlaid on the basic company structure.  It is possible to "convert" an existing limited company to a CIC.

Membership

See Company limited by guarantee or Company limited by shares

Governing legislation

A CIC is incorporated under the Companies Act 1985 or the Companies (Northern
Ireland) Order 1986 by the Registrar of Companies.  The rules under which CICs operate, are set down in The Community Interest Company Regulations 2005.  CICs are regulated by the CIC Regulator.

Charitable status available?

No. However a CIC can convert to a charitable company.

Profit distribution permitted

No - one of the defining characteristics of a CIC will be that it cannot distribute profits (except for a capped return on share capital, if the company is limited by shares). It also contains an asset lock which prevents members benefiting directly on dissolution as all assets and surpluses are passed to another asset locked body (ie a CIC or charity).

Advantages of being a CIC

• The registration of a CIC is relatively cheap as compared to an Industrial and Provident Society.
• On winding up, the remaining assets of a CIC pass to a nominated body or similar asset-locked body.  This could be your organisation if you are a CIC or a charity.
• The assets of the organisation are locked and cannot be "plundered" by a future membership.

Disadvantages of being a CIC

• The CIC status creates extra administration – the organisation must produce an Annual Community Interest Company Report.
• Not well understood yet as compared with Company form
• No financial advantages eg tax relief 
• The CIC regulator has wide powers to intervene in your organisation and can dismiss from and appoint directors to your board in extreme circumstances.

Examples of Use

The CIC is primarily intended for use by social enterprises, who need the freedom to trade as a company but also need some objective evidence of their community benefit credentials in order to secure grant aid and other support.  The CIC legal form is also commonly used for the trading arm of a charitable organisation, with that charitable organisation being specified as the beneficiary of the asset lock. 

Examples of the use of the CIC legal form for local food initiatives:

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• Food Chains NE CIC
• Ipswich Ripple Food Co-op CIC 
• Weardale CSA (Community Supported Agriculture) CIC
• f3 the local food consultants

Participation issues

See Company limited by guarantee or Company limited by shares.
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