Types of Community Interest Company (CIC)
Community Interest Companies (CICs) in Scotland are a type of limited company designed to benefit the community rather than private shareholders. Unlike in the rest of the UK, CICs in Scotland cannot achieve charitable status simply by converting. Organisations must choose between being a CIC or a Scottish charity (regulated by OSCR), but not both. Below are the three main types of CICs in Scotland and what they are best suited for:
Company Limited by Guarantee (CLG) CIC
Best for: Social enterprises, non-profits, and community organisations that do not need share capital.
Structure: No shareholders; instead, it has members who act as guarantors.
Key Features:
- Profits are reinvested into the community purpose.
- Asset lock ensures assets are used for the benefit of the community.
- Commonly used for social enterprises and community groups that do not intend to distribute profits.
Why Choose It?
- Ideal for organisations relying on grants, donations, and non-investment funding.
- Offers a clear social mission while allowing commercial activity.
Best for: Social enterprises that need investment but still want a strong community focus.
Structure: Has shareholders who own shares and can receive dividends (subject to the dividend cap).
Key Features:
- Allows raising funds through share investment.
- Can distribute limited profits to shareholders but must primarily benefit the community.
- Often used by ethical businesses and social enterprises looking for sustainable income.
Why Choose It?
- Suitable for businesses needing external investment.
- Balances financial sustainability with community objectives.
Public Limited Company (PLC) CIC
Best for: Larger social enterprises seeking significant external investment.
Structure: A publicly traded company with shares available on the stock market, but still subject to CIC regulations.
Key Features:
- Can issue shares to the public, allowing it to raise larger sums of capital.
- Profits must primarily serve the community rather than maximising shareholder returns.
- Must comply with both CIC regulations (e.g., asset lock, dividend cap) and PLC regulations.
Why Choose It?
- Suitable for ambitious social enterprises needing large-scale funding.
- Provides opportunities for ethical investors to support social causes through publicly traded shares.
- Maintains a community-driven mission while accessing capital markets.
Key Considerations for CICs in Scotland
No Charitable Status: Scottish CICs cannot register as charities, meaning they do not benefit from charity tax exemptions. If charitable status is required, organisations must choose a different legal structure (such as a Company Limited by Guarantee, Community Benefit Society or a SCIO) and seek registration with OSCR instead of incorporating as a CIC.
Fundraising Limitations: CICs may struggle to access certain grants and donations that are only available to charities.
Choosing the Right Structure: Organisations should carefully consider whether a CIC, a Scottish charity, or a combination (e.g., a charity with a CIC trading arm) best suits their objectives.
By understanding these different CIC structures, organisations in Scotland can choose the most suitable model to balance community impact, financial sustainability, and legal compliance.