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.
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 enterprise, online learning, find 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.
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).
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.
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.
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.
The local community, a town, or county, or a section of the community, such as older or disabled people.
The activities you undertake that provide the benefits you deliver, such as selling products and services, running events.
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.
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:
At the bottom, you will be asked how any surplus (profit) will be used. Here are some ideas:
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.
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:
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.
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.
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.