Community interest companies were introduced under the Companies (Audit, Investigations and Community Enterprise) Act 2004. They were the first new type of company introduced in over 100 years. They’ve become a good choice for social entrepreneurs, offering the option to register either as a company limited by shares or by guarantee.
Around 72% of all CICs are limited by guarantee but the number of CICs limited by shares is steadily increasing. There are now more CICs than cooperative or mutual companies registered with the Financial Conduct Authority. They've also become globally recognised with similar models now set up in British Columbia and Nova Scotia. Representatives throughout Europe, China, Japan and South Korea meet regularly with the CIC Regulator to better understand its success.
Many accountants, solicitors and formation agents in the UK don’t understand this company type, despite nearly 13,000 CICs on the public register and 250 new applications every month. Clients are regularly advised to incorporate a Limited company instead of CIC, when it might be more appropriate. If an application for CIC status is initially rejected, they’re also often resubmitted as Limited company applications.
There’s a market for accountants who understand CICs and the motivation for people who want to run a business with a social purpose. CICs are companies where profit is important but isn’t the bottom line, dividends are capped, and openness and transparency are priorities. Additional restrictions and regulation are welcomed and owners want to make a difference to their community, while making a living.
CICs have similar requirements to Limited companies. They have to comply with company law, meet the same statutory filing requirements and can be struck off the register by Companies House. The Regulator of Community Interest Companies ensures CICs benefit the community and observe their additional responsibilities. For example, adhering to the asset lock and filing a community report each year. The community report details any activities the CIC has taken during the year and the community has benefited.
The CIC regulator’s website provides a step by step guide on how to form a new company or convert an existing company to a CIC. There’s further guidance on the legislation that applies to CICs and specific guidance on asset lock and directors' remuneration. The CIC office has a knowledgeable and friendly team who’ll be able to help with any enquiry. Contact details are on the CIC website.