IMPORTANT: Before deciding to adopt the Community Interest Company structure it is vital that you obtain professional advice.
A Community Interest Company (CIC) is a legal structure that is designed for businesses that benefit the community rather than solely to make money. A CIC can be a company limited by shares or a company limited by guarantee and have the same benefits as other companies of this type.
Every CIC must
- Be approved by the CIC Regulator and pass the Community Interest Test
- File an annual CIC report with its accounts
- Keep the community aware of its activities
- Only use its assets and profits for the community specified, or pass them on to another body with a similar interest (asset lock)
- Be registered with Companies House in the same way as any other company with the same incorporation documents plus a Community Interest Statement
A CIC cannot be a charity but a charity can own a CIC to run its trading activities. This would allow the CIC to pass its assets to the charity
Advantages of being a CIC
- Freedom to trade
- Able to pay directors
- Ability to pay dividends to shareholders (subject to a cap)
- Retain benefits within the community
- Seek investments, with tax benefits for investors
- Do not have to comply with charity law
Disadvantages of being a CIC
- No tax benefits
- Some Charitable Trusts will not fund
- Additional registration costs
- New legal structure and not widely known so might not attract investors
IMPORTANT: Before deciding to adopt the Community Interest Company structure, it is vital that you obtain professional advice.