As companies transform to address social and community requirements, new forms have arisen to balance profit with social responsibility. In the United Kingdom, one such type is the Community Interest Company (CIC).
A CIC is a limited company formed particularly for businesses that are more focused on serving the community than on maximising shareholders’ returns. This makes CICs an ideal choice for businesses that wish to be socially responsible while being sustainable.
Key Characteristics of a CIC:
● Community Purpose-
A CIC must have a well-defined communal interest. This means that its efforts must help the general public or a specific community, such as increasing access to education, promoting mental health, or addressing environmental challenges.
● Asset Lock-
A CIC is bound to have an asset lock, with the provision that its revenue and assets must only be deployed for the community’s sake. This lock sets the company’s resources apart from those utilised by private benefit companies.
● Governed by the CIC regulator-
The CIC Regulator oversees CICs and guarantees that the company runs by its stated communal purpose. The CIC Regulator also approves the formation of CICs and oversees their yearly reporting.
● Flexibility of a Limited Company-
A CIC can be structured in either the following ways:
1. A company limited by guarantee (CLG): This is frequently picked for non-profit organisations.
2. A Company Limited by Shares (CLS): This is a type of business that generates profits while serving a social purpose.
How to set a CIC-
To establish a CIC in the UK, the following procedures are necessary:
1. Choosing a Company Name: A person has to make sure the name matches Companies House guidelines and includes ‘Community Interest Company’ or ‘CIC’ at the end.
2. Selecting and Finalising a Company Structure: One must choose between a business limited by shares (which allows the payment of dividends under certain limits) and a company limited by guarantee (suited for non-profits without shareholders).
3. Preparing a CIC Statement and Articles of Association. These documents describe how the firm will benefit the community and comply with CIC laws.
4. Applying to Companies House: The person should apply (Form CIC36) with a fee, describing how the firm would benefit the community.
5. The CIC Regulator will assess the application to ensure that it meets the required criteria.
Advantages of a CIC: –
● Focus on social impact.
CICs are appropriate for organisations seeking to address social, environmental, or community issues while remaining economically sustainable.
● Flexibility
Unlike charities and other organisations, which are bound by more stringent regulations, CICs operate as any other business, enabling them to trade, enter into contracts, and generate profits.
● Public Trust
Having a CIC designation communicates to the stakeholders that the company is dedicated to serving the community, which can play a huge role in attracting consumers, investors, and partners.
● Access to funding.
CICs have access to grants, social investment funds, and crowdfunding options that typical businesses do not.
● Limited Liability.
The beauty of a Limited company stands in the fact that it protects directors and members from personal liability.
A Community Interest Company is a great option for business owners who want to operate a business while also contributing positively to society. CICs, with their legal structure focused on social benefit, balance business viability with community-oriented objectives
