Should Charity be Corporate Director of it's CIC

A charity is setting up a trading subsidiary which will be a CIC, who should be directors.

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If a charity sets up a trading subsidiary which will be a CIC, who should the directors be? Should the charity be a corporate director and if so would the CIC need other directors aswell.

If the Charity is not a corporate director how will it's ownership of the CIC be registered?

Any suggestions welcome.

 

Replies (12)

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By David Ex
13th Feb 2024 14:25

That’s surely a governance matter for the charity trustees and their (charity law) advisers. I don’t think it’s something an accountant should be involved with.

Thanks (1)
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By Bobbo
13th Feb 2024 14:35

Westbookkeeping wrote:

If the Charity is not a corporate director how will it's ownership of the CIC be registered?

By being the shareholder of the CIC.

Being a [corporate] director has nothing to do with the ownership of the company.

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Replying to Bobbo:
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By DKB-Sheffield
13th Feb 2024 14:43

Bobbo wrote:

By being the shareholder of the CIC.

Or 'member'... particularly relevant if CLG.

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Replying to Bobbo:
DougScott
By Dougscott
13th Feb 2024 14:50

CICs don't have shares in my experience, they have members, so the charity could be the sole member.

The CIC can then be run by executive directors/employees.

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Replying to Dougscott:
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By DKB-Sheffield
13th Feb 2024 14:56

Dougscott wrote:

CICs don't have shares in my experience, they have members.

Don't always, but can be - and often are limited by shares... hence the dividend cap.

It depends... I've known both structures... either set up intentionally, or by mistake (or the result of poor advice).

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Replying to Dougscott:
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By Bobbo
13th Feb 2024 16:05

In my experience, which is exactly one CIC, they all have shares!

But yes, if going down the limited by guarantee route then charity being sole member would demonstrate control.

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By jonharris999
13th Feb 2024 16:24

No reason why you have to tell us, but if you asked me this question in practice, I'd ask at least two other questions before trying to answer it:

i) What is the advantage to a Charity of having a trading sub that is a CIC instead of an ordinary share company? I see only disadvantages.

ii) Does anyone involved have any experience of these sorts of structures that has informed their planning and choices and if so, why isn't it obvious to them what the Directorship of the sub should be?

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Replying to jonharris999:
DougScott
By Dougscott
13th Feb 2024 17:13

Yes, all the charities I've had experience of have had normal limited companies as trading subsidiaries and the charity has owned all the shares in the company. There is then no need to demonstrate a "community interest" or consult with stakeholders or complete an annual CIC34.

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Replying to Dougscott:
RLI
By lionofludesch
13th Feb 2024 19:51

Dougscott wrote:

Yes, all the charities I've had experience of have had normal limited companies as trading subsidiaries and the charity has owned all the shares in the company. There is then no need to demonstrate a "community interest" or consult with stakeholders or complete an annual CIC34.

I agree that charity's trading company being a CIC would probably be an unnecessary complication. Why would you need the extra level of admin?

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Replying to Dougscott:
RLI
By lionofludesch
13th Feb 2024 19:51

Dougscott wrote:

Yes, all the charities I've had experience of have had normal limited companies as trading subsidiaries and the charity has owned all the shares in the company. There is then no need to demonstrate a "community interest" or consult with stakeholders or complete an annual CIC34.

I agree that charity's trading company being a CIC would probably be an unnecessary complication. Why would you need the extra level of admin?

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By Westbookkeeping
14th Feb 2024 09:09

Thankyou everyone for your replies. The CIC will not have shares and the asset lock will be in favour of the charity.

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Replying to Westbookkeeping:
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By WhichTyler
14th Feb 2024 13:56

Thanks, but going back to your original question, the choice of directors will depend on the purpose of the sub, and may be affected by the rationale for choosing a CIC over a normal share company which you have not yet shared...

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