News
8 February 2007
Community Interest Companies - A new breed of philanthropy
A Community Interest Company (CIC) is a new type of company that has been specifically designed for social enterprises that want to use their assets and profits for the public good. As such, there are a number of differences between setting up a CIC and an ordinary company, limited by either shares or guarantee. However, other aspects of the company, such as membership and control, remain comfortingly similar to general company law.
A CIC is a type of social enterprise. They combine the business skills of the private sector with a strong public sector social agenda. Such organisations are commonly owned by the contracted staff and the staff members appoint what is called a ‘management board’ who are appointed on an annual basis by the members and deal with the operational management of the company.
Why would you wish to establish a CIC over an ordinary type of company limited by shares of guarantee? Currently, companies that do not have charitable status find it difficult to ensure that their assets are dedicated to public benefit. There is no simple, clear way of locking assets to a public benefit purpose other than applying for charitable status, which can be very hard to obtain and is subject to rather onerous restrictions and regulation. As such, the CIC helps to meet the need for a transparent, flexible model, clearly defined and easily recognised.
CICs can be limited by shares, or by guarantee, and will have a statutory “Asset Lock” to prevent the assets and profits being distributed, except as permitted by legislation. This ensures the assets and profits are retained within the CIC for community purposes, or transferred to another asset-locked organisation, such as another CIC or charity.
A particular advantage of a CIC showing that the company is community minded, distinct from other not-for-profit businesses, is that its status can help in securing grants from authorities or the Lottery commission or from other individual philanthropic investors.
The Government is also supporting social enterprises through the tax system. The Community Investment Tax Relief (CITR) gives tax benefits to investors who back businesses in less advantaged areas through Community Development Finance Institutions (CDFIs).
CITR provides tax relief of 5% per annum to investors who invest in an accredited CDFI, which then in turn lends to or invests in a qualifying profit-distributing enterprise or community project. Accredited CDFIs may invest in qualifying CICs.
For detailed advice on establishing a CIC, please contact Simon Woodings of Beswicks Corporate Department on 01782 205 000
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