Community Interest Company Formation

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Community Interest Companies

Home / Community Interest Companies

Updated on : 16-Dec-2024 10:56 AM GMT | 4 min read

What is a Community Interest Company (CIC)?

Community interest company legislation introduced in 2005 defines the rules & regulations and establishes the legal framework for community interest companies. The main objective of a community interest company is to trade for the benefit of the community rather than earning profit for shareholders of the enterprise. It is a special type of non-charitable limited company formed primarily for the benefit of a community.

This is not the only business form for those who wish to start a social enterprise. You can also set up trusts, charities, standard companies, unincorporated associations or a charitable incorporated organization. It can be set up as private limited company by shares (Minimum one director, one shareholder needed) or private limited company by guarantee (Minimum Two directors or trustees needed) or public limited company.

Key Features of Community Interest Company

Community Interest Company must comply with company laws & CIC laws.
It should not deviate themselves from the social mission.
It should be approved & regulated by CIC regulator.
It is not strictly considered as “Not for profit organization” and can return profit to the investors. They must ensure that their main focus is community benefit rather than earning profit.
Community interest companies are based on asset lock. It means that the assets & profits earned by the company should not be distributed as per the regulations of dividend capping. Profits earned must be retained by the company in order to benefit the community & its activities. Assets can only be transferred to another CIC or charitable organization.
If a community interest company chooses their company to be limited by shares, they are restricted as per dividend cap - how much maximum amount should be paid to the shareholders (35% of distributable profits)

How do i set up a Community Interest Company?

In order to set up a community interest company, you need to do the following –

Pay a prescribed fees
Incorporate a constitution and define the following –
1. Type of limited company
2. Motive of your enterprise
3. Who will be the director?
4. How many directors or shareholders will be there?
Make a community interest statement and define the following –
1. How your activities will benefit the community?
2. How this objective will be achieved?
Pass a community interest test to satisfy CIC regulator that the activities you are doing are for the benefit of the community (you need to pass this test throughout the life run of CIC)
Prepare a declaration that your community interest company will not be owned or controlled by a political party or a political organization.

Note–Individuals who wish to convert charitable organizations& existing companies to community interest companies need to follow different procedure & costs.

Requirements of a Community Interest Company

Like ordinary companies, community interest companies needs to file copy of their accounts annually along with their annual returns and a prescribed filing fee. In addition to your accounts, you also need to file annual CIC report containing the following details –

What you will do to benefit the community?
Information on transfer of assets
Any dividend declared or proposed on shares and interest related to performance paid and their compliance with the capping rules.

Advantages of Registering Community Interest Company

The advantages of registering community Interest Company are as follows –

The first and the foremost advantage of community Interest Company is clear commitment to social goals. It must ensure that CIC funds should only be used to fulfill company’s social objectives rather than fulfilling individual shareholder goals.
Community interest companies enjoy benefit of limited liability protection. It not only provides protection to the owner but also to the assets of the social enterprise which is not generally given to an unincorporated entity.
It has access to various forms of finance such as donors, grants or community development finance which may lead a social enterprise to run as CIC.
The legal company structure of CIC is flexible and can meet the needs of the individual of different organizations. You can set up CIC as private limited company by shares and private limited company by guarantee or public limited company.
Community Interest Company can be formed easily and quickly in comparison to a charitable organization. A single consolidated application is send to company’s house which is reviewed by company’s house and CIC regulator before the approval is given for the same.
It has low compliance requirements in comparison to charitable organizations. Community interest companies are regulated by CIC regulator and the annual community interest report is submitted as the main requirement.
A community interest company has its own legal status and continues its operation until it is dissolved or converted into a charitable organization.

How Finacbooks help in Community Interest Company Registration?

Finacbooks is a leading UK portal providing accounting, finance & taxation services to small businesses. We are having more than 10 years of experience in helping individuals providing community interest company registration at a least possible price. We will guide you through the entire process of community interest company registration. To avail the best deals on community interest company registration, kindly call us at 03300886645 or you can also e-mail us at business@finacbooks.com