A community interest company (CIC, pronounced "see-eye-see", or colloquially, "kick") is a form of social enterprise in the United Kingdom intended "for people wishing to establish businesses which trade with a social purpose..., or to carry on other activities for the benefit of the community".[1]
CICs were introduced by the UK government in 2005 under Part 2 of the Companies (Audit, Investigations and Community Enterprise) Act 2004. They enjoy the flexibility and certainty of the company form, but with statutory provisions to ensure they are working for the benefit of the community. The Regulator of Community Interest Companies provides oversight, which is intended to be "light touch".[2]
CICs have proved popular, with some 10,000 registered in the first ten years of the status being available.[3] CICs tackle a wide range of social and environmental issues and operate in all parts of the economy. By using business methods to achieve public good, it is believed that CICs have a distinct and valuable role to play in helping create a strong, sustainable and socially inclusive economy.[4]
History
Limited companies that do not have charitable status find it difficult to ensure that their assets are dedicated to public benefit. Before the CIC regime was introduced there was no simple, clear way of locking the support of such a company to a public benefit purpose, other than applying for charitable status.
The community interest company emerged from many sources, often citing the absence in the UK of a company form for not-for-profit social enterprises similar to those in other countries. A first significant proposal for a new company form in the UK was advanced in 2001 in "The case for the Public Interest Company",[5] by Paul Corrigan, Jane Steele and Greg Parston of the Public Management Foundation. This proposal was based on research funded by the Gulbenkian Foundation, Gordon Roddick, and the Office for Public Management, and was influenced by the example of the American public benefit corporation. Stephen Lloyd of Bates Wells Braithwaite is also credited with having conceived of the idea of the "Community Interest Company" and led much of the work on establishment of that legal company form in the UK.[6]
Characteristics
CICs are diverse. They include social and community enterprises, social firms, mutual organizations such as co-operatives, and large-scale organizations operating locally, regionally, nationally, or internationally.
In order for a company to be registered as a CIC, the Regulator must be satisfied that "a reasonable person might consider that its activities are being carried on for the benefit of the community", or at least a section of the community.[7] This community interest test is met primarily by including a suitable objects clause in the articles of association.
In order to meet this test, CICs cannot: The articles of a CIC must also provide that its assets cannot be used except for the benefit of the community. This is known as the asset lock.
Formation and registration
CICs are limited companies, either limited by shares or limited by guarantee. Thus Registered Societies and unincorporated associations cannot be CICs.
When a CIC is requested, the CIC regulator considers whether the application meets the criteria to become a CIC. If satisfied, the regulator advises the Registrar in Companies House who, provided that all the documents are in order, will issue a certificate of incorporation as a CIC.
CICs must file a "community interest company report" (form CIC34) as part of their annual submission to Companies House. This includes confirmation of directors' remuneration and some explanation of their social impact or evidence of the social benefit that they have provided over the last financial year.[17]
A CIC is expected, though not absolutely required, to specify an "asset-locked body" in its articles of association, to which any surplus assets will be transferred when the company is wound up. If such a body is not specified, the Regulator's approval must be obtained before any distribution can be made.
Formation and registration are similar to those of any limited company. New organizations can register by filing the Form IN01 and memorandum and articles of association together with a Form CIC36 signed by all their directors, explaining their community credentials, to the Registrar of Companies for England and Wales, or the Registrar for Scotland, with a fee of £35.
Regulator
The 2004 act created the officer known as the Regulator of Community Interest Companies, who is appointed for a term of up to five years by the relevant Secretary of State[20] – from 2016 to 2023 the Secretary of State for Business, Energy and Industrial Strategy, since 2023 the Secretary of State for Business and Trade.
Louise Smyth was appointed as Regulator in September 2020;[21] she is also (since 2017) Chief Executive and Registrar for England and Wales at Companies House.[22]
See also
- B Corporation (certification) – a global initiative
- Community contribution company in Canada
- L3C – a similar type of legal structure in the United States
- Benefit corporation in the United States
- Social entrepreneurship
External links
References
- Regulator of Community Interest Companies. Office of the Regulator of Community Interest Companies: Information and guidance notes. Chapter 1: Introduction Department for Business, Energy & Industrial Strategy, 2016^
- Regulator of Community Interest Companies. Office of the Regulator of Community Interest Companies: Leaflets. Information Pack Department of Business, Energy & Industrial Strategy, 2016^