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New model for social enterprise organisations launched

New model for social enterprise organisations launched

From today social enterprise organisations can choose a different method of corporate registration, the “Community Interest Company”.

Governed by the Companies (Audit, Investigations and Community Enterprise) Act 2004 and the Community Interest Company Regulations, the Community Interest Company (CIC), is a new form of company for nonprofit organisations.

Sinclair Taylor & Martin, the charity team at Russell-Cooke Solicitors, have explained the key features of CICs:

    “Objects and activities must pass a ‘community interest’ test. This means that the company’s objects and activities must benefit the community. In addition, the beneficiaries of a CIC must not come from a group that is unduly limited in size. Each year, the CIC will have to produce an annual report of its activities which will go on public record. It will have to show that it has involved its stakeholders including its beneficiaries and that it has pursued its objects during that year.

  • They may be limited by shares or by guarantee
  • They must have an asset lock. This means that:
    • The assets of the company must be used solely for the objects or transferred to another asset-locked company
    • The assets may be transferred only at full market value unless transferred to another asset-locked organisation
    • Assets cannot be returned to the members except in limited circumstances

  • They are regulated by a new Regulator of community interest companies
  • Dividends can be paid but there must be a dividend cap (set by the Regulator)
  • Interest can be paid but there must be a similar interest cap on loans and other debts
  • They are registered in a similar way to standard limited companies, however a separate declaration will need to be made if and when the company applies to register as a CIC. The Registrar of Companies liaises with the Regulator who will decide whether the company passes the community interest test and if appropriate approve registration.
  • They will also be subject to the usual regulatory constraints and powers that are associated with company status
  • The Regulator of Community Interest Companies has certain supervisory powers and may appoint managers and appoint and remove directors on mismanagement of the company”

CICs should be of interest to organisations which act in the community interest but whose objects fall outside those that would qualify them for registered charity status. Charities might also consider establishing their trading subsidiaries as a CIC.

Clare Booth at Russell Cooke can offer more advice on CICs on 020 8394 6498.

Howard Lake is a digital fundraising entrepreneur. Publisher of UK Fundraising, the world's first web resource for professional fundraisers, since 1994. Trainer and consultant in digital fundraising. Founder of Fundraising Camp.

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