First introduced in 2005, Community Interest Companies are limited companies run for the benefit of the community, not merely for profit. CICs are regulated via a ‘community interest test’ and ‘asset lock’ to ensure that they are run appropriately.
CICs – the basics
- As with standard limited companies, CICs can be limited by shares, or guarantee. By law, CICs have an asset lock to ensure that any company profits are only used for the purposes that were originally intended, and not private gain.
- To ensure that CICs are run for the benefit of the community, the proceeds of any asset sales must be returned for the benefit of the company, or another CIC (or registered charity).
- Each year, the directors must submit an annual community interest report to Companies House alongside its accounts, detailing dividends paid, directors’ remuneration and how the company has been working in the interests of the community over the previous 12 months.
- CICs are regulated by The Office of the Regulator of Community Interest Companies (a partner of the Department for BIS), and are subject to standard Company Law – including the Companies Act 2006.
How to set up a CIC
- In order to set up a CIC, you must complete Form IN01 (the same form used to form a limited liability company), but you must not complete section A3 – and must complete option 3 of section A7. Your company name must end in either ‘community interest company’ or ‘c.i.c’.
- You must also file printed copies of the Memorandum and Articles of Association (CIC model articles are available for use).
- You must fill in Form CIC36 – an application to set up a CIC (which is only available in paper format), together with a £35 cheque payable to Companies House.
- Find out more in Companies House guidance GP1 – Incorporation and Names.
- Your application will be passed to the CIC regulator for approval, so you will also need to write a ‘community interest statement’ outlining the aims of the new company.
- You will need to create an asset lock, which ensures that if you sell any assets belonging to the CIC, the profits remain with the CIC – or are transferred to another CIC entity.