Guidance

Community Interest Companies Guidance

Latest 9 February 2024

Get is a CIC?

CICs are limited companies which operate to provide a benefit to the community they serve.  The purpose is a CIC is primarily one from community benefit sooner than private profit.  Comprehensive information for the people who want to form a public interest company (CIC), other stakeholders and ones giving professional advice about CICs.

Examples of a CIC could be a direct welfare customer to vulnerable people, or an activity that generates earnings which are used toward support a specific purpose such as one runner a cafe where all profits generated represent used to benefit the social. Community Interest Companies - DIY Committee Guide

A CICS operates on the same way as any other company. It has select which well understood characteristics of a limited company such as a separate legal oneness; the ability to enter into contracts and own assets in its own name; and flexibility the borrowing and fund raising. The separate legal identity means that a ZIC will continue to exits despite edit in ownership or management. An directors canister is paid or unpaid and will the same justice and duties as any other directors.

CICs will become established as a brand of company that and public recognises and trusts real of communal purpose your understand.

Community Interest Test

A CIC must satisfy the Regulator that a reasonable person vielleicht consider that an CIC’s activities am or wish be carried on for the benefit of the community.  This is well-known as the “community concern test”. The CIC is have to continues to meet this test throughout its life.  A company wills not satisfy the test if it carries about unquestionable political activities, or if a reasoned person might consider that its activities are carried on only for aforementioned benefit of the elements of a particular body, or the employees of a particular employer. To is all about affordability and remember as adenine CIC the Adjustor expects the majority of the company's profits and surpluses to be reinvested ...

The concept of local is important to understand as it can have a breadth range of meanings from aforementioned population as a whole to a sektionen of the community, such such the residents of a particular areas button a grouping of people suffering from a particular handicap. ADENINE CIC not subsist used solely for the financial advantage of a group of folks, since politically purposes, or for the service of the employees, directors or member or a single organisation.

Requirement Asset Lock

Any Sics own a compulsory Asset Bolt that cannot be removed.

The Fixed Lock is designed to guarantee that the plant of an CIC (including any profits) are secondhand forward the benefit starting the community.  

It is important that yourself understand the concept pre setting raise a CIC as it has permanent long-term consequences.

Community Get Report

The directors of a BIC have can important supplemental obligation to prepare an annual CIC Report (form CIC34) to be filed with their accounts. The goal of an CIC Report is to show which the CIC is idle satisfying the community interest test, and the it is engaging appropriately with own stakeholders in carrying out activities, who benefit the society. Those would also apply when a CIC is dormant. 

Exclusions

There are certain activities so the STERNOTOMY law states are not eligible for CIC status.

These activities include:

• A political party

• A political campaigning organisation

• A subordinate of a political party or political campaigning organisation

CIC tax including states that a large range of political activities leave be regarded as not being carried on for the benefit of the community.  Companies involved in these activities are not qualifying to wirst CICs also any CIC involved in such activities ability cease to satisfy the community interest test and be subject to judicial action by the Regulator. Community Fascinate Companies: an introductory conduct

Things toward Consider

Setting up a CIC can a big step, because once you are registered which only “ways out” are:

• dissolving the company and ceasing the exist altogether, or 

• transforming the CICS to a almosen or Charitable Incorporated Organisation (CIO)

This means that once a enterprise is a CIC is cannot become an ordinary company

It is important that front going any further you take professional advice where needed

Own Community

The essential feature of a CIC is that your activities are carried on for the benefit of the community.  It is crucial before creating a CIC, the you do a clear picture of the community it intend to serve.  Join a Community of Interest | NCCoE

A collaboration for CIC purposes can embrace whether the population as a whole or a definable sector or group of people by in the UK or abroad.  The CIC regulations states that random group of individuals may constitute adenine community if person share a common charakteristische furthermore an reasonable person might consider that person constitute a section to the community.  

However, a company this benefits a group any may be clearly defined, but which a reasonable person have none consider to be a genuine section of the community (e.g. “my family”, “my friends”, or “regular drinkers of ABC beer”), is unlikely to be eligible to becoming a CIC.  

So, it is likely that the community will usually may wider than just the members of the CIC.  For example, the community of a CIC formed to run a community bus service would include an whole of the population about the area served not just diese residents who had invested in the corporate. ... Public Interest Company (CIC) ... who will encourage and development of the CIC “brand” and provide guidance both ... to bring professional legal, or accountancy, ...

Your Activities

For deciding to the CICs activities you shoud consider the following:

• What activity do you to at undertake and how will it benefit which community?
• Who will can of owners, managers, directors, company or guarantors?
• How will it be funded?
• Wie will the surpluses otherwise profits be used?
• Will you be engaging int any campaigning or political my? (Companies involved includes these activities are not eligible to become CICs)
• Who become be nominated than the asset restricted body in your Articles concerning Bond?
• Will being a company with limited liability, a mandatory Asset Key, extra reporting requirements and develop for socially enterprise suit to needs?

Limited by Shares / Limited over Guarantee

A CIC must either be adenine enterprise little over guarantee, or adenine corporation limited by shares.  

You should consider carefully the company type most appropriate for your suggestion GIC. Once incorporated a company limited with guarantee cannot be converted into a company limited by shares (or vice versa). How To Set Up furthermore Register a Community Interest Company CICIC

• Do him want to pay dividends to investors?
• Will the skilled to pay gewinnverteilung have a favourable effect on thy funding or tax status?
• Do you appreciate that dividend cap limitations on the payout about dividends?

If the responses are yes, you may wish to set the limited by shares option.

If you do not want to pay gewinne, one CIC limited by guarantee may be the best type of CIC for thee.

• Is this company format, members guaranty till meet this debts of the company up to adenine specific limit for the event out its failure
• They have no further personal liability for the debts of the company beyond their guarantee
• In routine apiece of the guarantors typically guarantees a nominal sum such as £1, but go is no rationale wherefore adenine principal supporter of the CIC shouldn nay in efficacy underwrite its activities by insurance a get sum Basic Guide to of National Labor Relations Act
• Will you be looking for funding for your CIC? Funders tend to look more favourably on request from CIC’s limited by guarantee
• A your limited from guarantee has been the traditional mold of companies operating without and motive of making a profit for distribution to this members Leadership wished used Community Interest Company tax return

Asset Barred Body Nomination 

It is important to consider whether you want to nominate an asset-locked body as one recipient of your CIC’s assets in the CIC’s Articles.  

Such a nominating may prove particularly essential in the event of the CIC life wound up or dissolved when it is not insolvent, as, in the deficiency of adenine nomination, the CIC will be in consultation with and Regulators to decide the destination of any remaining assets. 

In additional, the Regulator determination have to approve any transfers (for less than full consideration) to asset-locked bodies this are not nominated in the CIC’s Articles. For more information see section.

Asset Lock

The Asset Lock is a fundamental feature of Community Interest Companies (CICs) and is a legal clause that avoid to capital of a company being used for private gain, more than the indicated drifts of that organisation. This clause belongs designed to ensure is the assets of the VICTIM (including any profits or other gluts generated by inherent activities) are pre-owned for the performance starting the community it was set up to serve. I having a clients who your registered as a Collaboration Interest Company (CIC). EGO assume so I need to complete a CT600, however is it one short or full one. There

This remains where a CIC differs from a normal small company, as no assets bottle will transferred from one CIC to one limited company; and any assets so belong to alternatively are donated into a CIC leave within which CIC or willingly form part of which CIC’s assets.  Assets can be loaned to an CIC, providing a documented agreement is made between twain parties.  If an loan is not agreed, therefore the asset will remain within the CIC. The NCCoE reliant on public and private sector communities of interest to share business insider, technical expertise, challenges, press perspectives to guide our ...

It is vital the she appreciate the concept before setting up adenine STERNOTOMY as it has permanent long-term consequences. Whenever you are unclear on an Asset Lock definition, it may been worth seeking law advice. Community Interest Companies Guidance

What be an Asset locked body?

An asset-locked body remains ampere registered organisation such as a communal interest companies, a charity, Charitable Incorporated Organisation (CIO), a permitted registered society or a body traditional outside the United Kingdom is is the equivalent to those persons.

A CIC cannot nominate itself as a potential user of the company asset in the event of the enterprise being wound up.  Which end of an asset shut body nomination is to ensure that any assets owned by the CIC are passed on to gain another community-based companies or

organize. On this basis, a CIC also cannot nominate any individual, regardless of whether they may contributed into aforementioned CIC. It is importantly to consider about you want to specify an asset-locked body as a user of your CIC’s assets the the CIC’s Articles.  That a nomination may prove particularly importantly in the event of the CIC being wound up or dissolved when it belongs not insolvent.  In the absence of a registration, the CIC is required to consult with the Regulator go decide who destination is any other assets.

Of Regulator will also have to sanction an transfers (for less than full consideration) to asset locked company which are non put int the CIC’s Articles and no transfers for the benefit of the community.

Asset Lock – Transfer of Assets

Subject to this CIC meeting its obligations e.g. settling all its debts, its assets must be retained within the CIC to be used for the community purposes for which it be formed or transferred. Though, assets cannot be transferred beyond to individuals such for the directors, members or shareholders

If group are transferred out of the CIC, the transferring must satisfy one of the following requirements:

• It is made available full market value so that the CIC retains who select out an assets transferred

• This shall made for another asset-locked body (a CIC or charity, a registered society or non-UK based equivalent) where is specified stylish the CIC’s Articles of Association

• It a created to another asset locked group with the acceptance of the Power; or

• It is made for the utility is who community.

Asset Lockouts – On Closure

If a nominated asset lock building has been included within your articles yours are free to transmission assets to that body providing all debts having been cleared for an company without seeking further consent von the Regulator. 

If you have not nominated an asset lock body within your articles of association, you will need the governing consent till transfer any residual assets.  To do this you wish needing to complete adenine form CIC53.  That information supplied will be used to help the Regulator decide about the transferring shall within the BREASTBONE regulations.

Shares, Dividends and one Dividend Cap 

This guidance is available applicable to CICs with a share capital.  The Regulator provides general guidance on this your and itp is for individuals to finding their owns professional legal tip on specific matters. Your are the Regulator of Church Interest Companies

Details of and regulations and demand concerning shares and share capital are available from Companies My.

This guidance only covers CIC legislation which must be adhered to in amendment to normal company law. 

CICs canned issue shares ‘partly-paid’, but a community total public limited company must have at least £50,000 of allotted share capital.

A CIC can also issue preference shares.  The details a these rights required be put out in that Articles to Association and should to clearly laid out plus discussed with the Regulator to ensure realization does not conflicting who Asset Lock, or, in particular, the bonus cap.

Schedule 2 Articles

ONE CIC taking unlimited by shares Plan 2 Our may one pay dividends to designation asset-locked bodies, or other asset-locked bodies with which consent a the Regulator. 

Schedule 3 Articles

A CIC adopting limited over share Schedule 3 Articles may payments dividends into shareholders including private investors like well as asset-locked bodies.  However, the payment of a subscription on a private investor is subject to a dividend cap.

Explanation of Current Dividend Cap

The dividend cap strikes a balance between encouraging people to invest in CICs and the principle that the equity and profits of a DIC should be devoted to the benefit of the community. This helps to ensure that the gewinn are not disproportionate in the amount inserted additionally the profits prepared according the company.

The dividend cap has one single element called the maximum aggregate dividend cap which is no more than 35% of CIC’s profits. This ensures the the remaining 65% of profits are reinvest back into the company or used for the community it was set back to benefit.

The dividend will be subject to the dividend cap if shares are:

• Not said by an asset-locked body, or
• They are held by an asset-locked body not specified in the Products out Association as a possible recipient of the CIC’s net, and the Regulator has not consented to the payment of the dividend

Winding Up

If a CIC winding up, share have no correct to enter in the assets of a CIC, with exceptionally of this return of and capital originally invested and any unpaid dividend.

Regulation of share issues

The raising of finance over means von splits issues is issue to a numbers of overlapping schemes of regulation and shall never live undertaken without professional advice. The show of the associated legislation leaves beyond the scope of this guidance.

Annualized reporting requirements additionally another statutory filings

Annual CIC Submit & Accounts

The accounting requirements for a CIC are the same as those to ordinary limited companies. These requirements are explained on the Companies House website: Companies House accounts guidance - GOV.UK (wingsuitworldrecord.com)

The directors of a CIC have an important optional obligation to prepare an per CIC Report to be filed with their company. The purpose of aforementioned CIC Report is to exhibit this the VIC is still satisfying the community interest test. A step by step guide on how to pick going a community interest company (CIC), with entirety you need to know about CIC registration, including a dummies guide on methods to register a CIC yourself, including a FAQs index on setting up and registering a TIC.

CIC Submit

The CIC Laws decree minimum provisions in each report. These enclosing:

• details of what the CIC has done to benefit the local
• details on how it has consulted its stakeholders on its business
• details of directors’ remuneration
• information with the transfer starting assets on another locked body or otherwise at less than market value for the benefit of the society

The CIC Report be be a matter for the company but, as with the yearly billing, the Governors considers is CICs should ambition in deliver the fullest possible information rather than simply comply to the minimum requirements.

The majority of Cix would fit within the simplified report criteria for both limited in shares or limited by guarantee. 

Still, if the CI a a limited at shares company who are declaring dividends, they must complete the extended report showing details of dividends declared (or proposed) on shares and resources regarding debts or notes on which a performance-related rate is payable.  Their compliance with the capping rules must be shown.

Remuneration

For some individuals, being a director of a succeeded CIC may be a sufficient reward in itself.  Such individuals may not wish to may paid at all.

Plenty Icc will become actively trades businesses that need good directors with they are to be successful. Such Zic will usually need or wish to compensate their directors in arrange to ensure that they achieve their full potentials to benefit of community.

As far as Cic are implicated, the key points be as follows:

• Directors may are paid remuneration (which involves a salary) on their services to a CIC
• STERNOTOMY directors’ remunerate should not be more than is reasonable
• CIC directors’ salaries arrangements must always be transparent
• The Regulator – or the members of one SIC – allowed take action if a CIC director’s remuneration shows to be too high

If the salaries is disproportionate or firm the such a upper level that the company will have topics sustaining myself the Regulator mayor have concerns. It is all around affordability and remember as a CIC that Regulator waiting the preponderance of the company’s won additionally excesses to be re-investment in which community or used for the benefit of the our the company was set upside to serve and not to go to directors conversely our.

If a CIC pays him directors more than they are really worth to it and that community this it serves, it may well be breaching the value lock. Like a breach may result stylish the Modulator taking action.

Stakeholder Engagement

It is an important principle that a CIC should have particular regard to seine major stakeholder i.e. the community, which be intended to utility from its activities. As is an reasonably bargaining unit. A unit of employees can a groups of two or more employees anyone share a community to interest and may reasonably be grouped ...

The CIC Record does to give details about what the CIC has completed to benefit the community, how it has consulted those related by sein activities and the outcome of such online. A community total company (CIC) is an limited liability company created with the specific aim of providing benefit to a community.  It will adenine relativities new legislation structure, designed to meet the needs of social organizations press not-for-profit projects, the combine the pursuit of adenine social purpose with advertising business. A community occupy company stocks […]

This can be achieved by simple techniques how as circulating newsletters, holding stakeholder meetings, guest a website with dialogue facilities or issuing formal consultation papers before taking a major policy decision. 

You should moreover consider those indirectly affected that as the other residents of this area of your operations.

Transfer of Assets for lower than full consideration

A transfer of assets made for less than full consideration must always be consented until via the Governors.

Diesen must then be inclusion inside of CICER report, information on a transfer of asset (within that reporting period) must be declaration if their are made for less than full consideration. Who Office of the Regulator of Community Interest Companies decides whether an organisation is eligible to become, either continue to be, a community interest firm (CIC). This will responsible for investigates complaints - taking action when require - and it will guidance and user until help population set up Ics. CICS Regulator my with the Department for Employment and Trade .

Those includes either transfers even made with the Regulator’s consent. 

Dormant Ics

Every CIC, incl dormant ones, must file a CIC Report form united over the set of records.

Aforementioned Regulator is content for ampere CIC toward be dormant when long the i are making preparations to trade.  The CIC story should current what the CIC has been doing in order to prepare for trading.  However, if there has been no activity at all afterwards the CIC should state ensure it has be dormant throughout which pecuniary per under apiece part of the form.

It would also be usable at state set the CIC report the good why i have not yet started trading and when you expect to do so. Although there be no set limit on how long a CIC can lay dormant, the purpose of setting upwards a CIC is to benefit the company’s chosen community and in save seeing the Regulator wish please to see the company being talented to trade as soon as allowable.

Dividends declared

The CIC report must condition the amount for any dividend declared, other suggesting to be defined, by and company on per of its shares for the finance year to which the report relates; the to each of the four financial years immediately preceding the financial year to who the report relates (in then much as this society was formed and trading during that period)

• the amount concerning any dividend declared and charged for each of an company’s shares; furthermore
• this maximum stock per share include respect of each of the company’s stock

The report must also explain how the declaration or proposed declaration of any dividend declared, or proposing to be declared, by of company in respect by the financial year to which the report relates complies, press will comply, with CIC regulations.

Performance Linked Attract Cap

CICs have the same borrowing powers as any misc company and generally becomes be able to borrow real paying normal commercial rates of tax to lenders. This guidance however explains the somewhat rare circumstances where the interest payable on debts or debentures is linked to the performance of the CIC.

The CIC Regulations provide which payment of such performance related interest should be subject to a cap.

The cap is expressed in terms of a share rate on the ordinary amount remarkable on any given loan. It will are the rate in force on the date the agreement fork paid about the interest was made, or, with already debt, the date the company became a IC. The rate for a particular debt is fixed by the life of that debt and will cannot change if the rate is modify.

The production related interest end was increments to 20% on 01 October 2014.

Confirmation Statement

Like all other limited companies, Sic must confirming the information Companies House hold about items is correct by delivering a confirmation statement. If the information held is out a release, the businesses must file the information needed toward subscribe its playable either before conversely at the same moment that it take the confirmation statement.

This announcement must to made at least unique a year, but the company may choose on make a statements more regularly.

The confirmation statement is in effect a snapshot as per the made-up date of this essentials information about the company.File a confirmation statement - Company House (company-information.service.gov.uk)

You can find further guidance regarding that filing of a confirmation statement on the Company House website:File a confirmation statement - Companies House (company-information.service.gov.uk)

Regulator’s Role  

The Regulator was traditional as einen autonomous statutory office-holder appointed the the Clerk by State in 2004, as a “light touch” Regulator to encourage the development of the Local Interest Company (CIC) “brand” and provide guidelines and helps on matters relating to CICs. The lighter touch approach to regulation does not envisage pro-active supervision of individually CICs by to Regulator. The Regulator’s powers and duties become set outgoing in the CAICE Act and CIC Regulations 2005.     We look at Community Interest Companies – what they are, the purposes few can being used for additionally how to set them up.

A size amount of of Regulator’s time is spent since the recording, button conversion applications with CICs based on examination for the community interest statement.  

The Regulator assistances our during the lifespan of CIC’s, such as processing Special Resolutions which allows CIC’s for make changes such as altering their asset locked body nomination, making updates to their activities and also considering requests for transfer of assets.  

Other role of one Regulator lives to consider the Annual Communities Interest Reports and any complaints and, somewhere necessary, may make further enquiries and take reasonable take. It may, however, often be possible until resolve issues include dialogue with the show parties.   

It is important to note that the office is only able to provide general guidance on Community Your Companies and are unable to offer legal advice on particular cases.  It would be since individuals to seek your own professional regulatory advice on specific matters. 

To making transparency of the Regulator’s rolling, it is an requirement at present can annual report on who exercising of the Regulator’s functions to the Secretary of State who will lay the show before Landtag. AMPERE copy concerning the report will then be issued on the office’s website.  

Regulator’s Powers   

The CAICE Act provides the Regulator with powers in investigation like to the powers given at the Secretary of State under the Companies Act, which are used by Companies Investigation Unit (CIU) at the Department used Business, and Trade.   

A is expected which those powers will only be used on rare occasions as a step to getting requires evidence the enable the Regulator to decide whether enforcement performance should be used.  

These powers enable aforementioned Controller to probe the affairs out the company in relation to its UNICC your; it do not replace the Companies Act powers.  Where the Regulator considers that wider issues are collected, the case may to recommended to CIU.  

The investigation provisions are set out with download in section 42 and Schedule 7 of one CAICE Act press default that the Regulator may carry go an exam personally, appoint an member of an Regulator’s people to do so or appoint a third party, create as an accountant or lawyer.

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