Setting Up Or Starting A Community Interest Company (CIC) Social Enterprise - A How To Guide To Company Formation And CIC Registration

A 'How To' guide for starting or setting up a Community Interest Company (CIC) Social Enterprise. A DIY guide to company formation and CIC registration, with step-by-step advice and links to everything you will need.

Should I Set-Up A Social Enterprise?

A social enterprise is a company that uses its profits and assets for the public good. Community Interest Companies (CICs) are probably the most well known, but there are range of other legal structures - here's a useful guide. If you’re not yet sure if a social enterprise is the right choice for you, my infographic will help you.

They have more of a 'business' image than charities, can pay board directors, financial reporting is less of a burden, some can issue shares etc, but don't qualify for charity tax reliefs and, whilst you can fundraise, it's more difficult. Here's are 10 steps to starting a social enterpriseonline learningfind a mentor and resources

Securing funding is almost always the biggest challenge.  The Charity Excellence Framework has its COVID funder database that you can search using the ‘social enterprise’ category and/or download a list of funding finders and funders specific to social enterprises, from the income questionnaire; everything is free.

If It’s A CIC, What Type?

There are 2 kinds of CIC - limited by shares or by guarantee. Most are limited by guarantee (LBG).  A CIC LBG is the only type that can convert to a charity (Foundation Model CIO).

CIC Registration Process

CICs are registered with Companies House and the CIC Regulator.  You can find the regulator’s guidance on setting a CIC up here and the detailed guidance here.  

This article is basically a do-it-yourself guide based on this.  I am not a lawyer, so am not competent to provide professional advice.  If you need this, you need to engage a lawyer.

Form CIC36

This form is what you use to satisfy the CIC Regulator that your company will meet the Community Interest Test.  That is, its purposes are in the community or wider public interest and access to the benefits will not be confined to an unduly restricted group.  You can download the form and continuation form here.

Company Name

Write in the full name of your company.  Search the Companies House register to ensure that one doesn’t already exist and it doesn’t contain any unacceptable ‘sensitive words’.  If you wish to, you can find a list of these here.  These are basically words that if included would mislead someone into thinking your company is something it isn’t; royal, charity etc.

Section A: Community Interest Statement

This is who you provide benefit to, how you do that and what the benefits are.    

Who

The local community, a town, or county, or a section of the community, such as older or disabled people.

How

The activities you undertake that provide the benefits you deliver, such as selling products and services, running events.

What

What those benefits are, such as promoting wellbeing, helping people into employment, or alleviating loneliness.

Section B – Activities & Related Benefit 

Complete the 2 columns, using the continuation sheet, if necessary. 

  • Activities are what you do – selling products or services, such as running classes or events.
  • Benefits is the impact your activities have on the community, such as promoting employment, wellbeing, health or learning. Start each with ‘The community will benefit by…….’ can make this easier to do.

Include in this section how your company will be different from a commercial company, providing similar services or products for individual or personal gain.  Here are some ideas about the types of things this might include:

  • You charge below market rates, or subsidise some products/services. 
  • Free venue space, or priced below market rates. 
  • Running activities that are not commercially viable, which the community needs, by subsidising these from another part of the business. 
  • Small class sizes to meet the needs of those in need, which reduces profit margins that would otherwise be achievable. 
  • Using your shop's presence on the High Street and social media reach to promote purely charitable work.

At the bottom, you will be asked how any surplus (profit) will be used.  Here are some ideas:

  • Used to subsidise your work in the following year to enable those in need to access your services.
  • Reinvested back into the business to enable you to achieve more.

Articles Of Association

Download and complete the appropriate articles of association.  This is a substantial legal document that can appear quite daunting, but all you really need to do is fill in the blanks, so it’s not as difficult as it might first appear. 

This will include the asset lock.  That is, on dissolution, the companies assets must be given to another CIC or a charity.  You enter the details of the one you choose.  

Online Registration

The simplest way to create your CIC is by using the online registration portal.  However, you can also apply by post.

You’ll need to create a Government Gateway user ID and password for your company, as part of this process.  Make sure you store the ID number, password and recovery word.  You don’t need these again for your registration, but will in the future. Be aware that the system will time-out, so if you have a break for a cup of tea, save your work before you do.

What you’ll need:

  • Your Form CIC36 and articles to upload, in pdf format.
  • One or more SIC codes. You can find these here, but you can type in words relevant to your company and the system will show you options you might choose.
  • Details of your company, such as its registered address.
  • Details for each director, such a full name, addresses, date of birth, occupation, nationality and personal information to be used for electronic signature (such as your mum’s maiden name). For a CIC LBG, you will need at least 2 directors.
  • A credit card or Pay Pall account pay the fee (currently £27).

At the end, you’ll be asked to check all the details you’ve entered.  I always copy and paste these and save them into a Word document, in case the application is rejected and you have to apply again; it happens sometimes. 

Once you’ve registered, it usually take a couple of days to be processed. 

Registration Options

If you don’t like the idea of doing it yourself, there are numerous online companies that will do it for you. Be careful about accepting the headline price, as they will add VAT and then encourage you to select all sorts of additional services. You may wish to have these, but be aware that this can significantly increase the cost, so only choose those you need.  

I also provide a CIC registration service at a cost of £160, to help fund the costs of my free Charity Excellence Framework.  That’s more than the online companies charge.  I don’t have their fancy computer systems, but I do provide a much more personal service and resources, such as my funder list.  Details here.

Make Your CIC A Huge Success

Charity Excellence works for all UK non-profits, including social enterprises, because the frameworks it creates are built around the needs of each user.

The resources on this website are just a few from the huge CEF resource base, including the 8 assessment questionnaires, 7 crisis toolkits, the Funding Finder Database’s 100+ core funders, 250+ other free funder databases and funder lists, the 50 CEF funder lists and links to 100s of organisation that will help you for free, plus 100s of free guides, toolkits and other resources

Everything is free.  Register Now to join the 12k other members of the Charity Excellence Community. 

 

The questions are phrased brilliantly - challenging how we prioritise our management time." Ecosystems Knowledge Network

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