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Community interest company

August 23, 2023

A community interest company (CIC, sometimes colloquially pronounced "kick" but also pronounced by its three letter abbreviation) is a type of company introduced by the United Kingdom government in 2005 under the Companies (Audit, Investigations and Community Enterprise) Act 2004, designed for social enterprises where there is a wish to use their profits and assets for the public good.[1] CICs are intended to be easy to establish, 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. They are overseen by the Regulator of Community Interest Companies.

CICs have proved popular and some 10,000 were registered in the first ten years of the status being available.[2]

Objectives

A community interest company is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or the community, rather than being driven by the need to maximize profit for shareholders and owners. CICs tackle a wide range of social and environmental issues and operate in all parts of the economy. By using business methods to achieve public good, it is believed that CICs have a distinct and valuable role to play in helping create a strong, sustainable and socially inclusive economy.[3]

The community interest company emerged from many sources, often citing the absence in the UK of a company form for not-for-profit social enterprises similar to the public benefit corporation in the United States. One notable early proposal was advanced in 2001 by the Public Management Foundation in "The case for the public interest company",[4] based on research supported by the Gulbenkian Foundation, Gordon Roddick, and the Office for Public Management.

CICs are diverse. They include social and community enterprises, social firms, mutual organizations such as co-operatives, and large-scale organizations operating locally, regionally, nationally, or internationally.

Legal forms

CICs must be limited companies of one form or another. A CIC cannot be a charity, an IPS or an unincorporated organization.

Limited liability 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 the support 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 the application meets the criteria to become a CIC. If satisfied, the regulator advises the Registrar in Companies House who, provided that 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.

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:

  • CICs are identified explicitly with social enterprise. Some organizations may feel that this is 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 organization 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.[5]

CICs must annually provide form CIC34 as part of their annual submission to Companies House. This includes confirmation of Director remuneration and some explanation of their social impact or evidence of the social benefit that they have provided over the last financial year.

Formation and registration

Formation and registration are similar to those of any limited company. New organizations 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. Since 11 March 2019, CICs can be registered online for a reduced fee of £27.[6]

Existing companies can convert to a CIC by passing resolutions which make changes to their name and their memorandum and articles of association and by delivering to the Registrar of Companies copies of these documents, together with a fee of £35, 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.[7]

CICs cannot:

  • be politically motivated (regulation 3 of the Community Interest Company Regulations 2005)
  • be set up to serve an unduly restrictive group (rules 4 & 5)
  • be a company which is a political party, a political campaigning organisation or a subsidiary of a political party
  • be a charity
  • carry out unlawful activities.

Regulator

The 2004 act created the officer known as the Regulator of Community Interest Companies, who is appointed for a term of up to five years by the relevant Secretary of State[8] – from 2016 to 2023 the Secretary of State for Business, Energy and Industrial Strategy, since 2023 the Secretary of State for Business and Trade.

Louise Smyth was appointed as Regulator in September 2020;[9] she is also (since 2017) Chief Executive and Registrar for England and Wales at Companies House.[10]

See also

References

  1. ^ . CIC Association. Archived from the original on 11 October 2015. Retrieved 30 September 2015.
  2. ^ "The rise and rise of the community interest company". Third Sector. 1 June 2015. Retrieved 30 September 2015.
  3. ^ Bounds, Andrew (9 July 2013). "Social enterprises seen as the driver for growth". Financial Times. Archived from the original on 11 December 2022. Retrieved 30 September 2015.
  4. ^ Paul Corrigan, Jane Steele, and Greg Parston (2001). "The case for the public interest company". Public Management Foundation.
  5. ^ Jump, Paul. "How to: Decide between charitable and CIC status". Third Sector. Retrieved 30 September 2015.
  6. ^ "CIC Incorporations: The New Online Process". gov.UK. 13 March 2019. Retrieved 17 March 2019.
  7. ^ "CIC business activities: forms and step-by-step guidelines". GOV.UK.
  8. ^ "Companies (Audit, Investigations and Community Enterprise) Act 2004". legislation.gov.uk. Part 2, s27 and Schedule 3. from the original on 29 December 2010. Retrieved 31 January 2021.
  9. ^ "Louise Smyth appointed as interim Regulator of Community Interest Companies". GOV.UK. Department for Business, Energy & Industrial Strategy. 6 September 2020. from the original on 6 September 2020. Retrieved 31 January 2021.
  10. ^ "Companies House announces new Chief Executive". GOV.UK. Companies House. 1 August 2017. from the original on 1 August 2017. Retrieved 31 January 2021.

External links

  • Office of the Regulator of Community Interest Companies

August 23, 2023
community, interest, company, this, article, includes, list, general, references, lacks, sufficient, corresponding, inline, citations, please, help, improve, this, article, introducing, more, precise, citations, september, 2013, learn, when, remove, this, temp. This article includes a list of general references but it lacks sufficient corresponding inline citations Please help to improve this article by introducing more precise citations September 2013 Learn how and when to remove this template message A community interest company CIC sometimes colloquially pronounced kick but also pronounced by its three letter abbreviation is a type of company introduced by the United Kingdom government in 2005 under the Companies Audit Investigations and Community Enterprise Act 2004 designed for social enterprises where there is a wish to use their profits and assets for the public good 1 CICs are intended to be easy to establish 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 They are overseen by the Regulator of Community Interest Companies CICs have proved popular and some 10 000 were registered in the first ten years of the status being available 2 Contents 1 Objectives 2 Legal forms 3 Formation and registration 4 Regulator 5 See also 6 References 7 External linksObjectives EditA community interest company is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or the community rather than being driven by the need to maximize profit for shareholders and owners CICs tackle a wide range of social and environmental issues and operate in all parts of the economy By using business methods to achieve public good it is believed that CICs have a distinct and valuable role to play in helping create a strong sustainable and socially inclusive economy 3 The community interest company emerged from many sources often citing the absence in the UK of a company form for not for profit social enterprises similar to the public benefit corporation in the United States One notable early proposal was advanced in 2001 by the Public Management Foundation in The case for the public interest company 4 based on research supported by the Gulbenkian Foundation Gordon Roddick and the Office for Public Management CICs are diverse They include social and community enterprises social firms mutual organizations such as co operatives and large scale organizations operating locally regionally nationally or internationally Legal forms EditCICs must be limited companies of one form or another A CIC cannot be a charity an IPS or an unincorporated organization Limited liability 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 the support 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 the application meets the criteria to become a CIC If satisfied the regulator advises the Registrar in Companies House who provided that 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 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 CICs are identified explicitly with social enterprise Some organizations may feel that this is 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 organization 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 5 CICs must annually provide form CIC34 as part of their annual submission to Companies House This includes confirmation of Director remuneration and some explanation of their social impact or evidence of the social benefit that they have provided over the last financial year Formation and registration EditFormation and registration are similar to those of any limited company New organizations 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 Since 11 March 2019 CICs can be registered online for a reduced fee of 27 6 Existing companies can convert to a CIC by passing resolutions which make changes to their name and their memorandum and articles of association and by delivering to the Registrar of Companies copies of these documents together with a fee of 35 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 7 CICs cannot be politically motivated regulation 3 of the Community Interest Company Regulations 2005 be set up to serve an unduly restrictive group rules 4 amp 5 be a company which is a political party a political campaigning organisation or a subsidiary of a political party be a charity carry out unlawful activities Regulator EditThe 2004 act created the officer known as the Regulator of Community Interest Companies who is appointed for a term of up to five years by the relevant Secretary of State 8 from 2016 to 2023 the Secretary of State for Business Energy and Industrial Strategy since 2023 the Secretary of State for Business and Trade Louise Smyth was appointed as Regulator in September 2020 9 she is also since 2017 Chief Executive and Registrar for England and Wales at Companies House 10 See also EditB Corporation certification a global initiative Community Contribution Companies in Canada L3C a similar type of legal structure in the United States Benefit corporation in the United States Social entrepreneurshipReferences Edit What is a CIC CIC Association Archived from the original on 11 October 2015 Retrieved 30 September 2015 The rise and rise of the community interest company Third Sector 1 June 2015 Retrieved 30 September 2015 Bounds Andrew 9 July 2013 Social enterprises seen as the driver for growth Financial Times Archived from the original on 11 December 2022 Retrieved 30 September 2015 Paul Corrigan Jane Steele and Greg Parston 2001 The case for the public interest company Public Management Foundation Jump Paul How to Decide between charitable and CIC status Third Sector Retrieved 30 September 2015 CIC Incorporations The New Online Process gov UK 13 March 2019 Retrieved 17 March 2019 CIC business activities forms and step by step guidelines GOV UK Companies Audit Investigations and Community Enterprise Act 2004 legislation gov uk Part 2 s27 and Schedule 3 Archived from the original on 29 December 2010 Retrieved 31 January 2021 Louise Smyth appointed as interim Regulator of Community Interest Companies GOV UK Department for Business Energy amp Industrial Strategy 6 September 2020 Archived from the original on 6 September 2020 Retrieved 31 January 2021 Companies House announces new Chief Executive GOV UK Companies House 1 August 2017 Archived from the original on 1 August 2017 Retrieved 31 January 2021 External links EditOffice of the Regulator of Community Interest Companies Retrieved from https en wikipedia org w index php title Community interest company amp oldid 1165301339, wikipedia, wiki, book, books, library,

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