One of the trends we have spotted over the last year at All Ways Network has been the increased number of queries from people wanting more information on setting up a Community Interest Company (CIC for short). So here goes with (almost) everything you need to know about CICs and the setup process.
You may or may not have heard of a CIC, but they were first created back in 2005 primarily to allow individuals or groups to come together to create community impact or benefit. This could be delivered to any client group, purpose or town. It could also be as broad as impacting people across the world!
Although there are many features that are unique to a CIC, it is essentially a company in its legal structure. I will scatter this blog with lots of advantage points of a CIC - one of the advantages is the ability to choose two types of structure. You can either setup as a normal company limited by guarantee or if you wish to attract investors and look to give them a return on that investment through dividends then you can also setup as a company limited by shares.
Another area you will need to understand is the Asset Lock. This is especially the case if you are interested in applying to one of the many funders out there who support CICs. Funders who support CICs wish to make sure that the profits that are generated are there for the good of the organisation and to benefit the community, not for the benefit of private shareholders. An asset lock allows for this by ensuring any asset that are built up or any profits that are attained are not to be distributed to the directors. The asset lock will prevent members from removing its clause in the documentation by special resolution. This differs to an ordinary company where it can be removed at any time. There will also be a dissolution clause in the case the CIC no longer continues operating that the assets will be provided to preferably a similar organisation.
Now back to some more advantages of setting up a CIC. It is much quicker to create a CIC when compared to a registered charity and there is the ability to have much wider objectives. Another advantage over a charity is the founder can be involved in the strategic overview as well as the the day to day running of the CIC and be financially rewarded for it. The CIC model is quite popular with social enterprises. This is a setup where at least half your income must come from your trading income with the rest from grants and donations etc.
You may have brushed up on all your knowledge and decided to go for it. As part of the setup, there will be 2 things you need to do. The first is the application process which is similar to setting up a limited company, but with some extras. Your documentation will also contain information relating to what you will be doing, who will benefit, your purpose and the activities you will be doing. In terms of compliance regulation, it will be the same as for normal companies, but once a year you will be required to complete a CIC34 report which is a review of what you have done over the last year.
To summarise then, here is some of what a CIC has. It has a social stamp, protection, ability to do entrepreneurial things. It also has the same framework as a legal company in terms of the liabilities. You have the flexibility of being able to inject private commercial funding and also give a return to those investors if you so desire.
Blog Post by Rashid Hussain, Funder and Charity Lead at All Ways Network. He can be contacted via email on rashid.hussain@awn.org.uk