What are Community Interest Companies (CICs)?

In 2005 the government created a new kind of company structure. It was called a CIC or Community Interest Company.

The new structure allows social enterprises to register as limited companies giving them a separate legal identity from their founders. CICs can be limited by guarantee, by shares or operate as a Plc.

Like all other limited companies, CICs must comply with company law as well as other specific legal requirements.

The CIC Regulator’s Office was opened in July 2005 to regulate, provide advice to, and raise awareness of Community Interest Companies. Since then more than 1,600 companies have been registered as CICs.

CICs are no more difficult to set up than a normal limited company and offer the security of a regular company structure, but they also have some key features which make sure they’re working to benefit communities.

All CICS must abide by the following rules:

Community Interest test

All CICs must prove to the Regulator they satisfy the conditions of benefiting a community by trading. This includes an annual report detailing how they have done this. A community is not restricted to a certain area or group of people, however. Examples of a valid CIC community include: people with a particular disease, unemployed young people, coffee growers in South America. In some cases, the purpose of the CIC can benefit the world’s community. For example, environmental ventures that benefit more than just one area or country.

Asset lock

Any assets including profits are prevented from being distributed accept as permitted by legislation. This allows funders that deal with the CIC to be confident the profits will be primarily used to benefit the community rather than the investors or owners.

Abide by conditions of Regulator

CICs are regulated in the same way normal limited companies are. CIC regulation is far less active than the laws that govern charities. The Regulator does however, have the power to investigate any complaints brought against the CIC if it’s not working towards helping the community.

Of course, you can run a social enterprise without it being registered as a CIC. However, a CIC allows more legal protection and gives added credibility to the venture – something that you may need should you wish to deal with certain organisations or seek investment.