What is a Community Interest Company?

A Community Interest Company (CIC) is a limited liability company providing services or activities for community benefit. CICs operate on a business model, aiming to make a surplus or profit to support their activities. However, unlike a Private Sector business, the profit made by a CIC is not distributed to individuals running/owning the company. Any profits made are used exclusively to further the aims of benefiting the community - either a specific geographic community or a community of interest (a specific group of people).

CICs are often run as a social enterprise, although their activities and services can be broader than the ‘social purposes’ of a social enterprise. Whilst the ideas for a community benefit trading activity may come from an entrepreneurial individual, the company structure will need to be democratic with the members appointing/electing suitable Directors to run the company on their behalf.

To be a CIC, your organisation will need to:-

• meet the Community Interest Test
• ensure that your governing document (also referred to as your Articles of Association or constitution) includes certain specified requirements relating to being a CIC
• be incorporated by Companies House in the same way as a normal company, with the same incorporation documents supplemented by a Community Interest Statement.
• observe statutory reporting requirements
• keep the community in touch with its activities
• only use your assets and profits for the community specified (or pass them to another body with similar features)
• include reference to being a CIC in your organisation's name

Suitability of the CIC structure

Amongst all the choices of types of organisaitons available, the Community Interest Company (CIC) structure is most suitable for oeganisations who:-

• want to trade for the benefit of a specific community (as long as any current constitution permits them to do so)
• can prove that their activities and services will benefit the community
• want to limit the personal liability of members
• want to run/lease/manage/own community assets such as shops, garages, day care centres
• do not have charitable purposes and are not seeking charitable status (in Scotland a CIC is not eligible to be a registered charity itself)
• are existing charities who want to set up a trading arm (the trading arm, which would not have charitable status itself, could be a CIC)

Advantages and Disadvantages of being a CIC

Advantages

• as a corporate body, a CIC can hold property and borrow money in its own name
• flexible options for trading for community benefit without private gain
• personal liability of members is limited
• two tier structure for decision making allowing democratic input from members including the chance to vote on election/re-election of the board of directors
• asset lock ensures that profits/assets are retained by the community
• directors may receive limited payment (if the CIC’s constitution or Articles permits)

Disadvantages

• may incur some setting up costs (such as legal fees and registration fees to Companies House)
• dual reporting to both Companies House and the CIC Regulator including statutory filing of Annual Accounts along with annual CIC Report
• cannot apply for charitable status in Scotland