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Forming a CIC - will it affect EIS claims?

How will forming a CIC affect EIS claims made to date?

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I act for a small local pub which was bought by locals who raised funds under an EIS scheme. In common with so many rural pubs, the business runs at best at break even and more often at a loss and relies heavily on financial support from existing shareholders. 

I have been asked an interesting question which, as so often happens these days, is outside the scope of my expertise (!). It is thought that there may be a case for forming a CIC to purchase the shares of the existing limited company, as this is more likely to be able to raise grants and apply for financial assitance from bodies such as the parish council. Existing shareholders have, to all intents and purposes, written off their initial investment and have no expectation of dividends or capital returns.It is likely that at least some, if not all, of the directors/guarantors of the CIC will be existing directors/shareholder of the limited company.

If the CIC were to purchase the exiting shares at a nominal value, would the existing shareholders be able to make any use of the capital loss on their shares, and would there be any implications for relief previously granted under the EIS - which has just entered its third year?

Any advice would be much appreciated.

 

 

 

 

 

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01st Mar 2019 19:46

Hard to imagine a parish council having (a) such strict rules and (b) enough money to award that it would make the restructure worthwhile. Why won't they support the CIC but will support a ltd co?

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to WhichTyler
01st Mar 2019 19:53

Many grant giving organisations will only support voluntary bodies. They will assume a limited company has shareholders who are in it for personal profit.

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to scalloway
01st Mar 2019 21:46

Sorry I misread teh OP

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02nd Mar 2019 20:42

Although it might be possible to get capital grants I am not sure this is a route to getting revenue support for what are essentially licensed premises. It might be better to structure things as a private licensed members club with a fee which supports the revenue position.

The challenge is I presume running it on a revenue basis and it might also be worth seeing to what extent people are willing to volunteer to keep it open (which may be easier than getting revenue support).

Much that people may give the reason for not providing support that it is not a CIC or a charity, you need really to find out if they will provide support even if it is a CIC.

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