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Community Interest Company (CIC) – do you want your startup to benefit the community you live in?

Community Interest Company (CIC) – do you want your startup to benefit the community you live in?

by Disrupts MagazineMay 31, 2016

A CIC is suitable for those considering creating a startup as a social enterprise. The essential feature of a CIC is that its activities are carried on for the benefit of the community. 

So if you want your start up to benefit some part of your local community but do not want to go to the expense or the administrative hassle of achieving charitable status, then this may be the company for you. CICs also provide more flexibility than charities.

CICs are primarily intended to use their assets, income and profits for the benefit of the community they are formed to serve. They must therefore embrace some special features, as set out below.

Special Features

  • A community interest statement must be made on formation that its activities will be carried on for the benefit of the community and set out how this will be achieved. This is known as the “community interest test”. A “community” for CIC purposes can embrace the population as a whole. It can also be limited to a section of the community if they share a common characteristic which distinguishes them from other members of the community and a reasonable person might consider that they constitute a section of the community. 
  • Recent examples have included a company offering filmmaking training programmes for people from different communities in Glasgow and a wellbeing consultancy working in the workplace.
  • CICs are subject to an “asset lock” which ensures that assets are retained within the company. The main elements of the asset lock are (a) generally, CICs may not transfer assets at less than full market value; (b) dividend payments are subject to a cap that limits the amount of dividend payable to 35% of distributable profits; (c) on dissolution of a CIC any surplus assets must be transferred to another CIC or a charity. 

Flexibility features

  • The directors can be paid and have the same rights and duties as any other directors. 
  • The members of a CIC have the same governance and decision-making role as in any other company, but must have regard to the wider community which the company serves. 
  • CICs produce accounts and annual returns just like any other company, which are available on the public record. 
  • A CIC must make an annual community interest company report detailing what it has done and how this has benefited the community; what directors’ salaries and dividends have been paid and to what extent it has involved its community in its activities.
  • A CIC is otherwise like any other company. It has a separate legal identity, the ability to enter into contracts and own assets in its own name and flexibility in borrowing and fund raising. It also has to pay tax like any other company!
If you want to learn more about CICs, please email Christopher Owen at Chris.Owen@Penningtons.co.uk or call him on +44 (0) 207 753 7512.

If you want to learn more about CICs, please email Christopher Owen at Chris.Owen@Penningtons.co.uk or call him on +44 (0) 207 753 7512.

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Disrupts Magazine
Disrupts Magazine
Disrupts is a start-up-focused with an edge. Based in London, the team get behind the scenes of the start-up scene.