Community Interest Companies (CICs)

What is a CIC?

Community Interest Companies (CICs) are limited companies, with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage.

This is achieved by a "community interest test" and "asset lock", which ensure that the CIC is established for community purposes and the assets and profits are dedicated to these purposes. Registration of a company as a CIC has to be approved by the Regulator who also has a continuing monitoring and enforcement role.

Why a CIC rather than a charity?

Their main advantages over a charity are:

  1. The founder can retain control and still draw a limited salary. Contrast this with a charity where the management is through a board of trustees, the members of which are normally unable to draw any remuneration.
  2. The 'asset lock' in a CIC ensures that assets must be used for the specified community purpose. This makes the CIC more appealing to traditional charity funders than a conventional company, but unlike a charity, the CIC can be run on a more commercial basis.
  3. The regulation of CICs is less than a conventional charity so a CIC doesn't have to comply with Charity Commission reporting and regulatory requirements.
  4. Where the CIC has share capital, limited dividends can be paid to shareholders as a return on their investment.

 Are there any disadvantages compared to a charity?

  1. The commercial basis of a CIC means they do not benefit from the tax exemptions available to charities. (A CIC can not also be a charity).
  2. The 'asset lock' limits the extraction of profits and assets from a CIC, unlike a conventional company. However, this ensures that its social purpose is not diverted by management.

If you would like to speak to someone please do not hesitate to contact our Manager, Steve Smith, on scs@p-p.uk
Alternatively you can call the Eastbourne office on 01323 431200.