What are the key features of a community interest company?

  • The “CIC” brand is distinctive in describing a company working for the benefit of the community.

  • It has the advantage of the “company” legal form, which is familiar and well understood by the business community and is flexible enough to adapt to most organisational structures, membership, or governance from a single-member company to a co-operative.

  • It is quick, easy, and inexpensive to set up because, unlike a non-charitable company, the CIC has statutory clauses, which include an asset lock. These clauses provide legal protection against demutualisation and ‘windfall profits’ being paid out to its members, (shareholders, if appropriate) and directors, without all the necessary checks and balances of mutuality or charitable status.

  • There is the transparency of operation as a CIC has to deliver an annual community interest company report about its activities for the public record. This includes details of assets transferred for less than market value; dividends paid; stakeholder involvement; and directors’ remuneration.

  • Stakeholder involvement is integrated into its governance through its annual community interest report.

  • It can be a company limited by guarantee or limited by shares.

  • A CIC limited by guarantee, or limited by shares under schedule 2, is considered to

    be a ‘not for profit company.

  • It can take advantage of the risk-taking features of a company and can access the debt market for loans and bonds.

  • If limited by shares it may be able to expand through the selling of shares.

  • There is no limit to the level of profit a CIC is allowed to make as this profit will be used to benefit the community it was set up to serve.

  • The CIC has greater flexibility compared to a charity in terms of its activities. It does not have trustees and its directors can receive reasonable remuneration. This enables a tight structure to encourage good business decision-making in the interests of the community.
  • There are no tax advantages so regulation is light touch, a balance of minimal regulation whilst maintaining confidence in the "CIC" brand.
  • A CIC has continuity of purpose once it is incorporated it will continue in existence until it is either dissolved or converted to a charity. If it is dissolved the residual assets will be preserved for the community rather than distributed to members. So a CIC may find Community Finance Institutions a valuable source of funds.