Setting up a Community Interest Company? - X-Forces Enterprise
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Setting up a Community Interest Company?

A Community Interest Company (CIC) is a limited company that exists to benefit the community rather than shareholders. It is simpler to register and operate a CIC than a charity. But the CIC ‘brand’ still provides recognition of the purpose of the business. It also provides light-touch regulation of the sector, which helps inspire more confidence and trust in your enterprise. Be aware that CICs cannot be political, including political campaigning or as a subsidiary of a political party.

How do I register a Community Interest Company?

CICs are registered with Companies House as companies but it is the CIC Regulator who decides whether an organisation passes the community interest test.

1. Register as a Limited Company

2. Provide a community interest statement that explains what your business plans to do and how it serves the community

3. Put a CIC asset lock in place

4. Make sure you have an appropriate Memorandum of Articles / Constitution in place

5. Think about the distribution of shares

6. Get your company approved by the community interest company regulator

7. Register your CIC online with Companies House

Register as a limited company to become a CIC

If you are setting up your business as a Community Interest Company, you have to register as a limited company first. This can be limited by shares, by guarantee or as a public limited company. Find out more about setting up a limited company on the Gov.UK website.

What is a community interest statement?

The most important additional document you need to provide when registering as a CIC is a community interest statement, more commonly known as a CIC36. The CIC36 form outlines the social objectives, interests, and activities of the CIC as well as makes various declarations to operation under CIC regulations. The CIC36 must be signed by all first directors.

Companies already operating as a limited company but switching to CIC status must fill in a CIC37 form.

What is the CIC asset lock?

The CIC asset lock is designed to ensure that the assets of the CIC (including any profits or other surpluses generated by its activities) are used for the benefit of the community.

This means that assets must be retained within the CIC to be used for the community purposes for which it was formed, or, if they are transferred out of the CIC, they must be:

  • transferred  for full market value and the CIC retains the value of the assets      transferred
  • transferred  to another asset-locked body (a CIC or charity, a registered society or  non-UK based equivalent) which is specified in the CIC’s Articles of  Association
  • transferred  to another asset locked body with the consent of the Regulator
  • done for  the benefit of the community

Are CICs allowed shareholders?

Yes, a CIC limited by shares has the option of issuing shares to its members. These shares are allowed to pay a dividend, providing they aren’t excessive. The aim is to strike a balance between encouraging people to invest in a CIC without undermining the principle purpose of community benefit. The rate of the dividend cap is set by the CIC Regulator.

Passing the CIC test

In order to be approved as a CIC, you’ll need to satisfy the official Community Impact Regulator in a process termed ‘passing the CIC test’. The test will assess your paperwork and confirm your CIC meets its purposes and could be regarded by a reasonable person as being in the community or wider public interest.

It will also be asked to confirm that access to the benefits it provides will not be confined to an unduly restricted group. It is intended to be a light touch test, but you be assessed annually that you have stuck to your aims.If satisfied, the regulator will advise the registrar in Companies House who, providing all the documents are in order, will issue a certificate of incorporation as a CIC.

What reporting obligations does a CIC have?

As with other limited companies, you’ll need to provide a copy of your annual accounts, to go on public record. You will also need to provide an annual CIC report. This is a document to show that the CIC is still satisfying the community interest test. You’ll also have to supply a Confirmation Statement. This confirms the details held on file are still correct.

DISCLAIMER While all reasonable efforts have been made, the publisher makes no warranties that this information is accurate and up-to-date and will not be responsible for any errors or omissions in the information nor any consequences of any errors or omissions. Professional advice should be sought where appropriate.


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