Community Interest Companies (CICs) – What are they?

Community Interest Companies (CICs) – What are they?

20th February 2024

Community Interest Companies (known as CIC) are companies formed with the purpose of benefiting the community. There are some requirements regarding a CIC in order for it to obtain and keep its status as a CIC.

A CIC can be company limited by shares, both private and public, or a company limited by guarantee, it cannot change from one set-up to the other. A CIC of either type must include certain regulations/points in their constitutional documents (or “Articles of Association”).

Part of the requirements to be complied with is that that the CIC appoints an “Asset Locked Body”, although this can later be appointed, an Asset Locked Body is either a charity or another CIC to whom the assets of the CIC will be passed to should it be wound up, and in the case of insolvency, wound up after the creditors be satisfied. If the Asset Locked Body owns shares in the CIC then they may be able to receive dividends. The intention behind this concept is that the CIC’s success or its assets at least (in the event it is closed) will be paid forward into projects for the community/social development.

A political party may not be a CIC.

CICs are regulated under the CAICE – Companies (Audit, Investigations and Community Enterprise) Act 2004 which also establishes a regulator, which is a separate department with Companies House, a company can either be incorporated as a CIC or  incorporated as a ordinary company first and then apply for CIC status with this regulator, this process takes roughly 10-15 working days and involves changing the name of the company to reflect its CIC status.

A CIC, like many other companies, can be organised as having a small number of members that are also directors or have a board of directors and a larger number of members.

CICs are required to deliver to the Registrar of Companies an annual community interest company report with its annual accounts. This report records their activities for that year including any details on assets transferred for less than market value, dividends paid and the remuneration of directors.

CICs are still covered by company law so in addition to answering to the regulator and the CAICE Companies (Audit, Investigations and Community Enterprise), they will be subject to the Companies Act 2006.

The concept of a CIC is to create a type of entity that can be ran for the benefit of a community and not solely for profit but include some of the benefits (such as limiting liability) that a company can provide.

If you are a CIC or are thinking about starting setting one up and need legal advice, please get in touch with our Commercial and Corporate Law Solicitors who can offer clear and cost-effective expert advice.

Article written by Corporate Commercial Solicitor Kyle Smith.