Community interest company
A community interest company (CIC) is a new type of company introduced by the United Kingdom government in 2005. A CIC is a new type of company, designed for social enterprises that want to use their profits and assets for the public good. CICs will 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.
A social enterprise 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 shareholders and owners. Social enterprises 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, the Government believes that social enterprises have a distinct and valuable role to play in helping create a strong, sustainable and socially inclusive economy.
Social enterprises are diverse. They include local community enterprises, social firms, mutual organisations such as co-operatives, and large-scale organisations operating 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 and others are registered charities.
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Legal forms and social objectives
Currently companies 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 to a public benefit purpose other than applying for charitable status. The Community Interest Company will help to meet the need for a transparent, flexible model, clearly defined and easily recognised.
The CICs regulator will consider whether applications meet the criteria to become a CIC. If satisfied, the regulator will advise 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 Commissioners. In so doing it will lose its charitable status including tax advantages. A charity may however own a CIC in which case the CIC would be permitted to pass assets to the charity. In the same time an organisation must choose whether it wishes to incorporate as a CIC or a charity. CICs will be more lightly regulated than charities but will not have the benefit of charitable status, even if their objects are entirely charitable in nature.
A charity may, however, own a CIC in which case the CIC would be permitted to pass assets to the charity. This for example enables a CIC to run a charity shop and pass all the profits to the charity that owns it.
The sort of people who will want to set up a CIC will typically be entrepreneurs who want to do good in a form other than charity. This may be because:
- 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.
- 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.
- The definition of community interest that will apply to CICs will be wider than the public interest test for charity.
- CICs will be specifically identified with social enterprise. Some organisations may feel that consequently this is a more suitable than charitable status.
See also
External links
- DTI page on CICs
- William Davies, New Statesman, 13 September 2004, "How to tame capitalism"
- Community Interest Companies Regulator
- A briefing on CICs from the Birmingham Community Empowerment Network - pdf file.
Categories
Types of companies | Social economy