What is a Community Interest Company CIC?

What is a Community Interest Company? UK CICs explained simply - meaning, structure vs a charity, directors, setting one up, asset locks & lots more

What Is A Community Interest Company CIC?

This dummies guide to Community Interest Companies explains the meaning of the term CIC, what a CIC is, the the different types of CIC company structure, how many directors you'll need and whether a CIC is a charity, or not; it isn't. There are CIC definitions and a FAQs list at the end with answers to common CIC company questions.

What is the Meaning of CIC?

CIC stands for Community Interest Company, which is one of the most common types of non profit organisation in the UK.

What is a CIC Company?

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.  They are a special type of limited company which exists to benefit the community rather than private shareholders.

Is a CIC Company a Charity?

CICs are not charities.  The legal definition of charity is narrower than that for a CIC company.  All charities are non profits, but not all non profits are charities.

CICs have more of a 'business' image than charities, can pay board directors more easily, 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.

CIC Company Versus Charity?

Use our step by step guide on CIC versus charity, which gives you the questions to ask yourself and walks you through choosing whether a CIC or charity would be best for you.

How Do I Convert a CIC?

Use our step by step guide on how to convert a private company to a CIC and a CIC LBG to a charity.

What Are the Different Types of CIC Company?

There are 2 kinds of CIC - limited by shares or by guarantee.  Almost everyone chooses a CIC limited by guarantee (LBG).  Only CICs LBG can convert to a charity (Foundation CIO model).  A CIC can have either a large membership or a small membership set of articles.  Almost everyone chooses small membership.

How Many Directors Does a CIC Need?

A CIC must have a minimum of 1 director.  There's no maximum.  However, many CICs wish to fundraise and I think that at least some funders may not be willing to make a grant to a CIC with only one director.  However, that's just my opinion and I may be wrong; I often am.  I would suggest 2 or 3 directors, even if only to spread the workload and make sure the company doesn't cease trading, if something untoward should happen to you.

Who Can Be a CIC Director?

Most people can be directors.  You must be at least 16, but arguably 18 is better, as anyone under this age cannot enter into contracts or sign contracts on behalf of a company.  You cannot be an “undischarged bankrupt” (have active bankruptcy proceedings against you), or be a disqualified director.

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How Long Does it Take To Set Up a CIC?

It will inevitably take you some time to find directors and prepare the paperwork but online submission shouldn't tale more than about an hour and CIC companies are usually registered within about 4 days.

How Do I Register a CIC Company?

You need to register a CIC with Companies House and the CIC Regulator but the process of registering a CIC covers both.  Use our step by step guide on setting up and registering a CIC for this.

What is a Community Interest Statement (CIC Form 36)?

A Community Interest Statement (CIC F36) 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.

What is a CIC Asset Lock?

Your articles also include an asset lock.  That is, on dissolution, the company’s assets must be given to another CIC or a registered charity.  You enter the details of the one you choose.

What are CIC Company Articles Of Association?

Download and complete the appropriate CIC company 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.

What are the Rules for CIC Articles of Association?

There are 2 types of articles for CICs:

  • Large membership - for CICs, which have more members than they have directors.
  • Small membership - for CICs, all of whose directors are members of the company and all of whose members are directors of the company.

In addition to this, if your CIC will be limited by shares, there are additional types of articles:

  • A schedule 2 CIC company limited by shares is only permitted to pay dividends to specified asset locked bodies, or other asset locked bodies with the consent of the Regulator.
  • A schedule 3 CIC company limited by shares is permitted to pay dividends to shareholders who are not asset locked bodies, including private investors, but the payment of a dividend to a private financial investor is subject to a dividend cap.

In my experience, the vast majority of CICs are Limited By Guarantee and are small membership.

What Do I Need to Register A CIC Online?

To register your CIC with Companies House, you'll need your community interest statement (CIC F36) and  company articles of association (both in pdf format), the details about your company and directors, and a credit card or Pay Pal to pay the registration fee.

CIC Company Definitions

Here are simple definitions for the main terms you are most likely to come across.

  • Community Interest Company (CIC) - a special type of limited company, which exists to benefit the community rather than private shareholders
  • Limited by Guarantee - a type of company, usually a non-profit, which has guarantors, rather than shareholders.  Usually invests any profit back into the company.
  • Form CIC 36 - application to form a CIC.  You will need to upload this as a pdf.
  • Community Interest Statement - is the Form CIC 36, which is required to confirm that the CIC will provide benefit to the community
  • Articles of Association - written rules about running the company.  In a charity, often referred to as your constitution.  You will need to upload these as a pdf.
  • Memorandum of Association -  a legal statement signed by all initial shareholders or guarantors.  The online system will create this for you.
  • Asset Lock - a registered charity or other CIC that would be given any remaining assets, in the event your company is dissolved.  Enter details into your articles.

Please note that I am not a lawyer, so am not competent to provide professional advice.  Equally, the definitions above are simple summaries of their more complex meanings, as a guide to understanding only.  If you need proper advice, you need to engage a lawyer.

What is a CIC Company - FAQS

  • What is the meaning of CIC?  CIC stands for Community Interest Company, which is one of the most common types of non profit organisation in the UK.
  • What is a UK CIC Company?  A CIC is a special type of limited company which exists to benefit the community rather than private shareholders.
  • What are the different types of CIC?  Most commonly, a CIC can be a company limited by guarantee, or a company limited by shares.
  • What is a CIC company Limited by Guarantee?  A CIC limited by guarantee is a company which has no share capital and cannot pay dividends. Usually, the directors agree to meet the company's debts up to a nominal amount, if it became insolvent.
  • What is a CIC company Limited by Shares?  CIC companies Limited by Shares are much less common but can pay dividends, albeit subject to a dividend cap.
  • What are CIC large membership articles of association?  Large membership articles are for CICs, which have more members than they have directors.
  • What are CIC small membership articles of association?  Small membership articles of association are for CICs, all of whose directors are members of the company and all of whose members are directors of the company.
  • What is a schedule 2 CIC?  A schedule 2 CIC company limited by shares is only permitted to pay dividends to specified asset locked bodies, or other asset locked bodies with the consent of the Regulator.
  • What is a schedule 3 CIC?  A schedule 3 CIC company limited by shares is permitted to pay dividends to shareholders who are not asset locked bodies, including private investors, but the payment of a dividend to a private financial investor is subject to a dividend cap.

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This Guide to CIC Companies Doesn't Constitute Professional Opinion

I am not an accountant, nor a lawyer and no advice can be applicable to all organisations, in all circumstances, so this resource is no more than a guide to understanding.  I've summarised the regulatory guidance and augmented this with my own experience and Internet research, but I am not competent to provide professional advice.  I have included links to the source guidance to enable you to check this yourself and, if you think you might need professional advice, use Help Finder to find pro bono support.

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