Community Interest Companies (CICs)-All Things That You Must Know

Do you know not all companies are formed for the sole purpose of just profit making? Some companies are formed for a special cause or to benefit a community. These are known as Community interest companies (CICs). No, they are not charitable trusts! They are limited or public companies about which most people do not have much knowledge. Let us take the example of a cafe whose entire profit is used to help the vulnerable people of that locality. In this blog, know what a community interest company is and its advantages.

What is a community interest company?

Actually, it is a company structure designed for social enterprises. A CIC boasts of a host of key features that set it apart from other companies. Some of these key features are as follows:

Non-Removable Asset lock

CICs must have a legal commitment to use their assets which can be land, income or profits for the overall good of the community. This means that if the company is dissolved because of some reason, nobody can use its assets for his private gain and the assets have to be transferred to another asset-locked body. Remember, it is not possible to remove the asset lock.

Regulation by ORCIC

They are regulated by the Office of the Regulator of Community Interest Companies (ORCIC). It is the ORCIC that evaluates the eligibility of a company to decide whether to give it a status of CIC or not. If someone faces any difficulty in setting up a CIC, ORCIC helps them and also provides necessary guidance.

Community Interest Statement

They must issue a community interest statement to outline the specific activities that they will carry out to benefit the community.

Limited by Shares or Guarantee

CICs can be limited by shares or by guarantee, similar to other types of companies in the UK.

Advantages of setting up a CIC

There are various advantages of setting up a CIC, and some of these are as follows:

• Unlike the complexities that are involved in setting up a traditional limited company, registration of a CIC is quick and inexpensive. Moreover, there are various support networks available to seek help in setting up a CIC (if necessary).
• When a limited company making significant profit, sets up a separate entity as a CIC and sells some products whose profits are used to donate to grassroots organizations working for a social cause like animal welfare, poverty alleviation or fighting malnutrition, there is an increase in its reputation and it becomes attractive for both customers and its stakeholders.
• It also offers more flexibility than a charitable trust in terms of its activities and demands less administration. The best part is it allows its directors to draw a salary and distribution of some of its profit to shareholders.

So, if you are also an entrepreneur and keen to set up a community interest company, register online without any delay. You need to follow just a few simple steps. Make sure to complete the form CIC36. In case, you think, the process is a bit time-consuming or needs some planning, reach out to UK accountants to get help at each step.