Frequently Asked Questions

A CIC is a new type of company, designed for social enterprises that want to use their profits and assets for the public good. CICs will be easy to set up, with all the flexibility and certainty of the company form, but with some special features to ensure they are working for the benefit of the community.

What is a Social Enterprise?

"A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.

Social enterprises tackle a wide range of social and environmental issues and operate in all parts of the economy. By using business solutions to achieve public good, the Government believes that social enterprises have a distinct and valuable role to play in helping create a strong, sustainable and socially inclusive economy.

Social enterprises are diverse. They include local community enterprises, social firms, mutual organisations such as co-operatives, and large-scale organisations operating nationally or internationally. There is no single legal model for social enterprise. They include companies limited by guarantee, industrial and provident societies, and companies limited by shares; some organisations are unincorporated and others are registered charities." from the BERR publication ' Social Enterprise - a strategy for success'.

Why were community interest companies needed?

Social enterprises are an exciting and fast-growing sector. Yet some of the legal forms were originally designed for completely different types of organisation. The Government wants to support the sector by creating a modern and appropriate legal vehicle and to help raise their profile.

What will a community interest company do?

CICs will be organisations pursuing social objectives, such as environmental improvement, community transport, fair trade etc. Social enterprises are playing an increasing role in regenerating disadvantaged areas, empowering local communities and delivering new, innovative services at local level.

What was wrong with the existing legal forms?

Currently companies that do not have charitable status find it difficult to ensure that their assets are dedicated to public benefit. There is no simple, clear way of locking assets to a public benefit purpose other than applying for charitable status. The Community Interest Company will help to meet the need for a transparent, flexible model, clearly defined and easily recognised.

CHARITIES AND COMMUNITY INTEREST COMPANIES

Can a charity be a community interest company?

A charitable company registered in England or Wales can convert to a CIC with the consent of the Charity Commissioners. In so doing it will lose its charitable status including tax advantages. A charity may however own a CIC in which case the CIC would be permitted to pass assets to the charity. Charitable companies in Northern Ireland and Scotland will not be able to convert to a CIC until the necessary legislation comes into force.

Can a company be both a community interest company and a charity?

No, an organisation must choose whether it wishes to incorporate as a CIC or a charity. CICs will be more lightly regulated than charities but will not have the benefit of charitable status, even if their objects are entirely charitable in nature.

What are the differences between community interest companies and charities?

Charities must be established exclusively for charitable purposes, but a CICs can be established for any lawful purpose, as long as their activities are carried on for the benefit of the community
Charities have certain tax advantages that CICs do not have
In return for those advantages, charities are subject to more onerous regulation than CICs
The CIC legal form was specifically designed to provide a purpose-built legal framework and a “brand” identity for social enterprises that want to adopt the limited company form
CICs will be free to operate more “commercially” than charities (e.g. CICs limited by shares can pay dividends to individual shareholders, subject to a cap), but stakeholders in CICs will still have the assurance of community benefit provided by the asset lock and transparency about their activities ability through the community interest report

Can a charity have a subsidiary which is a community interest company?

Yes, and the CIC would be permitted to pass its assets to the charity. This for example enables a CIC to run a charity shop and pass all the profits to the charity that owns it.

Why be a community interest company rather than a charity?

There is no doubt that charitable status is exactly right for many who wish to further charitable objectives and it is likely that most organisations operating for the public benefit (and who are eligible for charity status) will choose to be charities, not least for the fiscal advantages.

The sort of people who will want to set up a CIC will typically be entrepreneurs who want to do good in a form other than charity. This may be because:

They are looking to work for community benefit with the relative freedom of the non-charitable company form to identify and adapt to circumstances, but with a clear assurance of not-for-profit distribution status.
Members of the board of a charity may only be paid where the constitution contains such a power and it can be considered to be in the best interests of the charity. It means that, in general, the founder of a charity who wishes to be paid cannot be on the board and must give up strategic control of the organisation to a volunteer board, which is often unacceptable.
The definition of community interest that will apply to CICs will be wider than the public interest test for charity.
CICs will be specifically identified with social enterprise. Some organisations may feel that consequently this is a more suitable than charitable status.

Could a community interest company convert to charitable status and vice versa?

Although it will be technically possible to convert from CIC to charitable status and vice versa, it is not thought there will be much demand for this.

A CIC that became a charity would no longer be subject to the community interest test and the regulator. Instead it would be subject to the more restrictive provisions for charities and the Charity Commission. Similarly, a charity that converts to CIC status would need to satisfy the regulator that it was working in the community interest but it would lose the tax breaks.

An existing charitable company which wishes to convert to a CIC will be subject to the same sort of controls as apply at present when a charitable company seeks to use the powers in the Companies Act 1985 to convert to a non-charitable company. A CIC which wishes to convert to a charitable company will, of course, have to have exclusively charitable purposes.

Scottish charitable companies will be subject to the constraints of Scottish charity law and Northern Ireland charitable companies to Northern Ireland charity law.

What is the effect of converting a charitable company in England or Wales to a CIC?

The conversion process will not interrupt the corporate personality of the companies concerned. The bodies throughout will remain subject to company law but after conversion will cease to be subject to charity law and regulation but become subject to the CIC regulatory regime.

The resolutions have effect only when the Registrar of Companies registers them on the authorisation of the Regulator. The Registrar will also issue a revised certificate of incorporation.

A CIC cannot be a charity once the conversion takes effect and the company will be removed from the register of charities. The removal will have effect from the date on which the Registrar of Companies registers the conversion resolutions. The directors of the company are required to notify the Commission of the constitutional change. [See Charity Act 1993 s.3(7)(b)].

Converting a charitable company to a CIC brings new constraints and obligations and a change in the regulatory regime. You are recommended to consult the Charity Commission and/or to take professional legal or accountancy advice on whether a CIC is the best way to run your enterprise before proceeding with the conversion of your charitable company. Also, please read Chapter 6 of the guidance on this site regarding the asset lock and Chapter 8 regarding continuing obligations.

What happens to the pre-existing corporate property of the charitable company on conversion to a community interest company?

On conversion, the existing corporate property of the company, other than its corporate capital, becomes impressed with a trust for charitable purposes in the same way as when a charitable company ceases, by some other form of constitutional change, to be a charity.

The company will, in relation to its corporate property acquired whilst it was a charity, become a trustee for the charitable purposes contemplated by the objects of the company immediately before conversion.

Can a Scottish or Northern Ireland charitable company convert to a CIC?

Whereas the Act provides for a charitable company registered in England and Wales to convert to a CIC, [see Chapter 4.3] it prohibits such conversion of a Scottish or a Northern Ireland charity. It also provides, however, that this prohibition may be repealed by regulations, which would have the effect of bringing into force sections of the Act enabling such conversion. It is expected that regulations will be made in the next 12 months enabling the conversion of Scottish or Northern Ireland charities to CIC status, subject to the approval of the Scottish Charity regulator or the proposed Charity Commission for Northern Ireland.

Can a CIC convert to a Scottish or a Northern Ireland charitable company?

A CIC may convert to a Scottish or a Northern Ireland charitable company (see Chapter 10.2. of the guidance on this site).

Can an unincorporated charity, or charitable trust, convert to a community interest company?

A community interest company must be a limited company. Therefore an unincorporated charity (including charitable trusts) cannot convert to a community interest company.

However, the community interest company could be appointed as a corporate trustee of the charitable assets belonging to the unincorporated charity (or charitable trust) and could then apply the charitable assets for the furtherance of the charity's objects.

If the community interest company was incorporated, with the same charitable objects as the unincorporated charity or trust, the assets could be transferred to the community interest company for the furtherance of its objects, although the tax concessions from which the charity benefited would be lost.

If the unincorporated charity, or trust's assets, were depleted to a point where there were no assets remaining it could be wound-up. The option to wind-up would not apply to an unincorporated charity, or trust, that held a permanent endowment i.e. an asset, including land and investments, which must, under a legal document, be held permanently by the unincorporated charity.

INDUSTRIAL PROVIDENT SOCIETIES (I&PS) AND COMMUNITY INTEREST COMPANIES

Will community interest companies replace Industrial and Provident Societies?

No. The I&PS tradition is very strong in some sectors and some areas of the country. It can offer democratic accountability through IP&S membership structures. The Government is extremely supportive of the co-operative sector and recognises the importance of the I&PS as a legal form. That is why it supported a recently enacted Private Member's Bill which will help bring I&PS legislation up to date.

Can an Industrial and Provident Society convert to a CIC?

The Industrial and Provident Society must pass the necessary resolution and deliver them to the FSA (for companies registered in England, Wales and Scotland) or the Registrar of Companies for Northern Ireland. The Society must also deliver, in respect of the application to form as a CIC, the following documents to the Registrar of Companies.

Form CIC 36 ( a community interest statement),
Form 10 (name and particulars of first director(s) and secretaries & Registered Office) or Form 21 in Northern Ireland,
Form 12 (statutory declaration of compliance with requirements of CA 1985) or the Form 23 in Northern Ireland, and
Memorandum & Articles (as altered to comply with community interest company legislation)

The Registrar of Companies will pass these documents to the Regulator of Community Interest Companies to consider whether the society is eligible to form as a community interest company (CIC). If eligible and if the documents are acceptable to the Registrar of Companies the documents will be placed on the public record and a certificate of incorporation issued.

Can a CIC convert to an Industrial and Provident Society?

The Companies (Audit, Investigations and Community Enterprise) Act 2004 prohibits a CIC from converting to an Industrial and Provident Society (IPS) but also provides that regulations may be made authorising such conversion. It is expected that such regulations will be made in the next 12 months. [See CAICE Act 2004 s.56.]

COMMUNITY INTEREST TEST

What is the Community Interest Test and what is it meant to achieve?

Community interest is the heart of the CIC and the community interest test is what differentiates CICs from other not-for-profit organisations. Demonstrating community interest is of value to those seeking grant funding or philanthropic investment.

The test is intended to be light touch. To become a CIC, an organisation would need to satisfy the regulator that its purposes could be regarded by a reasonable person as being in the community or wider public interest. It will also be asked to confirm that access to the benefits it provides will not be confined to an unduly restricted group (see chapter 4.5 of the guidance on this site).

Can political and campaigning organisations be CICs?

To ensure that the regulator does not become involved in debate about whether particular political purposes are beneficial, it is proposed that political parties should not be able to become CICs, or to set up CIC subsidiaries. It is also proposed that organisations whose purposes are support for a political party, or political campaigning, should be unable to become CICs.

What would be an example of an organisation that would satisfy the community interest criteria and thus could become a CIC?

Each application will be studied and assessed on its own merits. However, I can advise you that to be eligible to be a CIC, an enterprise/business must pass the "Community Interest Test". This means that the Regulator must be satisfied that a reasonable person might consider that the activities of that enterprise/business will be carried on for the benefit of the community. To enable the Regulator to make this decision, all applicants for CIC status must make a Community Interest Statement, indicating why they believe that they satisfy the test. In addition, the constitution (memorandum and articles of association) of a CIC must comply with the relevant legislation.

FINANCIAL CONSIDERATIONS

Do CICs have any special tax status?

No, CICs will not enjoy any special tax status as such. They will generally be in the same position as any other organisation in obtaining any tax concessions or grants otherwise available, for example due to their type of activity or location. A charity which becomes a CIC will lose its charity tax status.

Can community interest companies issue shares?

Yes, in order to raise investment, CICs limited by shares will have the option of issuing shares that pay a dividend to investors. In order to protect the asset lock, the dividend on these shares is subject to a cap set by the Secretary of State (see chapter 6.2 of the guidance on this site).

How will community interest companies be financed?

Like other social enterprises, CICs will find funds from a variety of sources, including grants and donations, loans from high street banks and other institutions. The Government is proposing limited access to equity finance.

The Government is supporting finance for social enterprises, through community development finance institutions and the Community Investment Tax Relief. As the concept of social enterprise becomes more widely understood by the finance community, social entrepreneurs should find it easier to explain what they are doing and to get a competitive price for finance. Clear recognition of the CIC form will help this process (see chapter 7 of the guidance on this site for further detail).

Can a CIC apply to the Inland Revenue for tax reliefs?

The Government is supporting social enterprises through the tax system. The Community Investment Tax Relief (“CITR”) gives tax benefits to investors who back businesses in less advantaged areas through Community Development Finance Institutions (CDFIs).

CITR provides tax relief of 5% per annum to investors who invest in an accredited CDFI, which then in turn lends to or invests in a qualifying profit-distributing enterprise or community project. Accredited CDFIs may invest in qualifying CICs.

CICS will be eligible for the same tax reliefs available to other companies. The Government is considering carefully the various technical points about fiscal matters that were raised during the consultation, in order to ensure that the introduction of the CIC will be of real practical value to the social enterprise sector.

THE ASSET LOCK

What is the asset lock?

The Asset Lock is a fundamental feature of CICs. It is important that you understand the concept before setting up a CIC as it has permanent long-term consequences.

“Asset Lock” is a general term used to cover all the provisions designed to ensure that the assets of the CIC (including any profits or other surpluses generated by its activities) are used for the benefit of the community.

The transfer must satisfy certain requirements. This means that, subject to the CIC meeting its obligations, its assets must either be retained within the CIC to be used for the community purposes for which it was formed, or, if they are transferred out of the CIC, the transfer must satisfy one of the following requirements:

it is made for full consideration (i.e. at market value), so that the CIC retains the value of the assets transferred;
it is made to another asset locked body (a CIC or charity, or non-GB based equivalent) which is specified in the CIC's memorandum or articles of association;
it is made to another asset locked body with the consent of the Regulator; or
it is otherwise made for the benefit of the community.

Provision to this effect, as prescribed in the Regulations, must be included in a CIC's memorandum or articles of association. CICs are permitted to adopt asset lock rules that impose more stringent requirements, provided they also include these basic provisions.

The asset lock will be established in legislation, and will prohibit CICs from distributing their assets or profits to their members, except to the extent permitted where CICs issue equity. The lock will not prevent CICs from using their assets efficiently in pursuit of community benefit; for instance, they will be able to use assets as collateral for finance. The regulator will be responsible for ensuring that the asset lock is maintained, and stakeholders who believe that it is being breached will be able to ask the regulator to take action.

EQUITY FINANCE

How will the equity finance work?

The Government proposes to structure legislation so as to allow CICs to issue suitably capped investor shares, while recognising that demand for such shares may initially be limited. The level of demand will be influenced by the way in which the cap is set. The Government intends that the cap should be set at a level which will allow CICs to access investment, without undermining their focus on community benefit.

The Government set the restriction on distributions and interest in part 6 of the Community Interest Company Regulations 2005, and the CIC regulator will be responsible for setting the cap in a way that will balance need to encourage investment with the primacy of community interest. The Regulator will take the views of the social enterprise sector into account in setting the cap (see Chapter 6 of the guidance on this website).

The Cap has three elements:

The maximum dividend per share limits the amount of dividend that can be paid on any given share. Currently, the limit is 5% above the Bank of England base lending rate.
The maximum aggregate dividend limits the total dividend declared in terms of the profits available for distribution. Currently, the limit is 35% of the distributable profits.
The ability to carry forward unused dividend capacity from year to year to a limited extent. Currently the limit is 5 years.

Why is the Government not providing for real equity?

The concept of unrestricted distribution of dividends to shareholders is fundamentally contradictory to the concept of a company which is not-for-profit. This point was confirmed in the technical consultation where most of the respondents who favoured the ability of CICs to issue shares and pay dividends, thought these should be capped in some way to protect the finance of the CIC, meet the statutory requirement for an asset lock and still attract some investors.

Those who want to use unrestricted equity can set up as normal companies, and CICs set up unrestricted subsidiaries e.g. to raise real equity for higher-risk ventures, provided the arrangement with the subsidiary is purely commercial.

How does the equity finance proposal fit with the lock on assets? If people invest in CICs and get returns surely CICs are not not-for-profit?

We think a balance can be struck between the flexibility needed by CICs to raise finance and the need to provide a meaningful asset lock. Although investors have the possibility of making a modest return, this will be restricted in order to ensure that the main beneficiary of the CIC is the wider community. One of the aims of the CIC proposals is to expand the access to finance available to community organisations, permitting them to offer a reasonable return to investors is key to achieving this.

How do CICs relate to CDFIs and/or the CITR?

Funds invested by individuals and corporate bodies in accredited Community Development Finance Institutions (CDFIs) will be eligible for Community Investment Tax Relief (CITR) at a rate of 5% per annum of the amount invested and may be claimed in the tax year in which the investment is made and in each of the four subsequent years. The organisations that CDFIs invest in and lend to may include CICs.

REGULATION

How will we know that CICs are acting in the public interest?

CICs will report annually to an independent regulator on how they are delivering for the community and how they are involving their stakeholders in their activities (See chapter 8 of the guidance on this site).

What teeth will the Regulator have?

It is intended that the CIC regulation will be ‘light-touch’. The majority of CICs will have a similar relationship with the CIC regulator as companies have with Companies House (i.e. registration followed by annual returns). The very active regulation which is necessary for charities will not be required for CICs.

However, the regulator will be able to investigate complaints from stakeholders and will have powers to act if it is found that a CIC is not working in the interest of the community or that the profit/asset lock is not being observed. These powers will include the ability to change the directors or wind up the company.

Who is the Regulator and how was he or she selected?

The Act establishes the Regulator as an independent public office holder appointed by the Secretary of State for Trade and Industry. The appointment was subject to an open public recruitment process monitored by the Office of the Commissioner for Public Appointments

John Hanlon, the first Regulator of Community Interest Companies (CICs) was appointed on 1 April 2005. His powers are set out in the Act and regulations. The Act requires him to discharge his functions in accordance with good regulatory practice.

His main duties are (see Chapter 11 of the guidance on this site):

to consider applications to form a CIC;
to ensure that a CIC complies with its legal obligations; and
to take enforcement action where serious infringements occur.

The Regulator also has an important role:

in the development of CICs as a new company type i.e. the brand; and
in providing help and guidance to CICs, to those people considering setting up a CIC, and to business professionals advising CICs.

SCOTLAND

Do the CIC regulations apply to Scotland?

The Companies (Audit, Investigation and Company Enterprise) Act 2005 and Community Interest Companies Regulations 2005 will apply to England, Wales and Scotland. The only difference being that, for the moment, a Scottish charitable company may not become a CIC.

DIRECTOR'S REMUNERATION

Will there be limitations on the pay for community interest companies directors?

The decision as to how much an individual director is paid will be a matter for each CIC to decide itself. The Government does not wish to hold back the development of the sector by setting artificial limits. Stakeholders will be able to go to the regulator if they consider remuneration levels are inconsistent with a CIC’s community benefit aims. There will be some additional reporting requirements on directors’ pay (See chapter 9 of the guidance on this site)

STAKEHOLDERS AND COMMUNITY INTEREST COMPANY GOVERNANCE

Will CICs be obliged to involve their stakeholders?

CICs will be encouraged to involve their stakeholders as a matter of best practice and will be required to report to the regulator on how they have done so (See Chapter 8 of the guidance on this site).

Who will actually control CICs?

In the same way as a private company or a charity, each CIC will be controlled by those individuals who are appointed to its board and by those who become shareholders/members. The precise structure that is put in place will be a matter for each CIC to determine and will reflect the particular needs that apply in specific cases.

Please clarify the tax rules if I am a shareholder.

Unfortunately, we are not in a position to advise you with regard to tax queries and would urge you to seek professional advice. You may also wish to consider referring this question to the Inland Revenue who will be able to provide advice on your personal tax position.

Is there a 'specific' organisational structure a CIC must have?

Community interest companies are limited companies subject to general company law, like other companies registered under the Companies Act 1985. A private company limited by shares or guarantee must have one member and any other company must have at least two members. There is no maximum number of members. The members of a company are the subscribers to the company's memorandum (who are deemed to have agreed to become members) and all other persons who have agreed to become members of the company. In a company limited by shares, members purchase shares, with their liability being limited to any amount owing to the company in respect of their shares. In a company limited by guarantee, members agree to be liable to contribute a specified amount in the event of the company being wound up.

Every private company must have at least one director. Every other company must have at least two directors. Where a company has only one director that person cannot also be the company secretary, or a corporation whose sole director is a company secretary.

See the Companies House publication, "Company Formation".

REGISTERING A COMMUNITY INTEREST COMPANY

Who will decide whether an organisation can be a community interest company?

The CICs Regulator will consider whether applications meet the criteria to become a CIC. If satisfied, the regulator will advise the registrar in Companies House who, providing all the documents are in order, will issue a certificate of incorporation as a CIC (See Chapter 4 of the guidance on this site).

Can anyone form a community interest company or are there any restrictions?

Most people or organisations able to form a company can form a CIC. Restrictions on forming a CIC are related more to the purpose of the CIC than to the people or organisation involved. A CIC cannot be formed for the personal gain of a particular person or group of people or to support political activities. A charity may not be a CIC.

Which company forms can a community interest company take?

A CIC can choose from one of three company forms:

A private company limited by shares, a private company limited by guarantee or a public limited company.

Can existing Limited Companies (whether limited by shares or by guarantee) convert to CIC status?

Yes, all applicants for CIC status must complete a form CIC37, a community Interest statement, and ensure its constitution (memorandum and articles of association) complies with the relevant legislation. Your memorandum and articles of association must be altered by special resolution so as to comply with the provisions of Part 3 of the Community Interest Company Regulations 2005 (See Chapter 4 of the guidance on this site).

What are the pros and cons of a not for profit limited by guarantee company?

The Registrar of Companies is best placed to answer this query.

NAMES FOR COMMUNITY INTEREST COMPANIES

Are community interest company names different from other companies?

A CIC must have a name ending in one of the prescribed designations. For public limited companies these are ‘community interest public limited company’ or ‘community interest p.l.c.’ For other companies ‘community interest company’ or ‘c.i.c.’

Companies with a registered office in Wales may use the prescribed Welsh alternatives. For public limited companies these are ‘cwmni buddiant cymunedol cyhoeddus cyfyngedig’ or ‘cwmni buddiant cymunedol c.c.c.’ For other companies ‘cwmni buddiant cymunedol’ or ‘c.b.c’.

These designations must not be used by companies, which are not CICs.

FEES

Are there any additional fees for community interest companies?

Yes, as well as paying the same fees to Companies House as for other companies, there are additional fees to pay to the CICs Regulator. For convenience, Companies House on behalf of the Regulator will collect these.

	CH Fee (£)	CREG Fee (£)	Total CIC Fee (£)
Incorporation	20	15	35
Conversion	10	15	25
Conversion involving change of status (Re-registration)	20	15	35
Change of status (if a CIC)	20	Nil	20
Name Change (if a CIC)	10	Nil	10
Annual Return (paper)	30	Nil	30
Annual Return (electronically)	15	Nil	15
Annual Accounts (and Community Interest Report)	Nil	15	15
Dissolution (Voluntary)	10	Nil	10

INCORPORATION

What is the procedure for incorporating as a community interest company?

A CIC can be registered at Companies House in the same way as a normal company with the same incorporation documents. There are however additional incorporation documents for CICs – a CIC36, a community interest statement and a declaration that the company will not be an excluded company (see the “Forms” section of the website and Chapter 4 of the guidance on this site).

What is a Community Interest Statement?

Form CIC36 (and Form CIC37 to convert an existing company to a CIC) contains the community interest statement. The purpose of the community interest statement is to confirm that the company will provide benefit to the community. It does this by describing its intended activities who they will help and how.

The community interest statement is an important element in the Regulator’s consideration of the company’s eligibility for CIC status. Chapter 4 should be read in conjunction with Chapter 5.1 of the guidance on this site particularly with regard to what is considered as best practice with regard to setting out the objects and proposed activities of the company. Once delivered and registered the community interest statement cannot be changed unless the company changes its objects, in which case it would need to deliver to the Registrar of Companies a new community interest statement (see Chapter 5 of the guidance on this site).

The form CIC36 contains explanatory notes, which you should read carefully before completing the form. Each person who will be a first director of the company must sign this form. The form contains the following:

A declaration that the company will not be: A political party; a political campaigning organisation; or a subsidiary of a political party or political campaigning organisation (see Chapter 2.8 of the guidance on this site).
A declaration that the company will pursue activities for the benefit of the community, or section of the community.
A description of the community or section of the community that the company's activities will benefit.
A description of the companies activities.
A description of how the activities benefit or will benefit the community.
A description of how any surpluses will be used.

The Form CIC37 contains an extra declaration either that the company is not a charity, or if the company is a charity, that the Charity Commission have consented to the change of name of the company.

The application form and an example of a completed form CIC36 can be found in the "Forms" section of this site.

The application form and an example of a completed form CIC37 can be found in the "Forms" section of this site.

What is an Excluded Company Declaration?

This is one of the documents which must be filed on formation of (or conversion to) a CIC. This declaration is automatically contained in the Forms CIC36 and CIC37 that have been approved by the Regulator.

The declaration, which must be signed by all the directors (or intended directors) is required to confirm that the company will not be an excluded company i.e. will not be a political party or pressure group or controlled by a political party or pressure group.

Can I register a community interest company electronically?

Initially it will not be possible to register a CIC electronically although some CIC documents can be filed by these means. We will be aiming to make electronic registration of CICs available in the future.

Can I incorporate a community interest company in Welsh?

Yes, a CIC can be incorporated in Welsh. Welsh versions of Forms 10 and 12 are available on the Companies House website as for all companies. Welsh versions of the Community Interest Statement and Excluded Company Declaration can be found in the Forms section of this site.

How long does it take to incorporate a community interest company?

Although we will endeavour to deal with each application within 5 days of receipt, each case will be unique and the Regulator may need to request more information before reaching a decision. This could result in delays.

DOCUMENTATION FOR COMMUNITY INTEREST COMPANIES

Are there extra statutory clauses required in the memorandum and articles of association?

Yes, the Memorandum must contain a statement that the company is a Community Interest Company. For a company to be eligible to be a CIC, the Memorandum and articles of association must comply with the detailed requirements of the CICs Regulations. These are concerned with the preservation of the asset lock and other essential CICs features (see the “Forms” section of the guidance on the site and Chapter 4 of the guidance on this site).

Where can I find examples of the memorandum and articles of association for community interest companies?

Please click on the following link “model memorandum and articles of association”.

How can a community interest company change its objects?

If a CIC wishes to amend its objects, it may pass a special resolution to change its Memorandum and send a copy of it together with a community interest statement (Form CIC14), a statement of the steps taken to bring the proposed alteration to the notice of persons affected by the company’s activities and a copy of the memorandum as altered to the Registrar for registration.

The Registrar will refer the documents to the CIC Regulator for approval of the alteration. If approved, the Registrar will record and register the documents. The Regulator will only approve a change if it meets the community interest test (See Chapter 5 of the guidance on this website and the Forms section).

What is the community interest test?

To be eligible to be incorporated as a CIC a company must, in the judgement of the Regulator, satisfy the community interest test. The test is whether a reasonable person might consider that the company's activities are being (or its proposed activities will be) carried on for the benefit of the community. A company must continue to satisfy the test so long as it remains a CIC (See Chapter 4 of the guidance on this website).

Does a CIC need to file any additional documents once it’s been incorporated?

Yes, a CIC will be required to file with its accounts a Form CIC34, an annual community interest report, which will be placed on the public record at Companies House and will be copied to the CIC Regulator (see Chapter 8 of the guidance on this website).

What needs to be included in the annual community interest report?

The report, Form CIC34, will need to include details of the remuneration of the directors, the dividends paid on shares and the interest paid on capped loans. It will also need to explain what the CIC has done to benefit the community and how it has involved its shareholders in its activities (See Chapter 8 of the guidance on this website).

Where can I find examples of the annual community interest report?

Please click on the following link “Examples of community interest company reports Form CIC34”.

CONVERTING TO A COMMUNITY INTEREST COMPANY

Can a private limited company convert to a community interest company?

An existing company may apply to be converted to a Community Interest Company (CIC).

To be eligible to be a CIC, an enterprise/business must pass the "Community Interest Test". This means that the Regulator must be satisfied that the activities of that enterprise/business will be carried on for the benefit of the community. To enable the Regulator to make this decision, all applicants for CIC status must make a Community Interest Statement. In addition, the constitution (memorandum and articles of association) of a CIC must comply with the relevant provisions of the CIC Regulations 2005.

How can I convert an existing company to a community interest company?

To convert an existing company to a CIC you need to deliver the following documents (which are considered in detail in Chapters 4 and 5 of the guidance on this website) to the Registrar of Companies for England and Wales, in Companies House, Cardiff, or the Registrar of Companies for Scotland in Edinburgh:

Memorandum and articles of association that comply with the Regulations which are available in template form or with explanatory notes in this site
Special resolutions:
- To alter the company’s memorandum to state that it is to be a CIC.
- To alter the memorandum and articles of association so that they conform to the requirements of the Companies (Audit, Investigations and Community Enterprise) Act 2004.
- To change the name of the company to one of the CIC designations. There is no need to invent a new name unless you want to; a simple change from “Ltd” to “c.i.c.” will be enough. Model resolutions are available in the "Forms" section of this site.
A Form CIC37. This contains the community interest statement. The purpose of the community interest statement is to confirm that the company will provide benefit to the community. It does this by describing its intended activities who they will help and how.

The community interest statement is an important element in the Regulator’s consideration of the company’s eligibility for CIC status. Chapter 4.2 should be read in conjunction with Chapter 5.1. Particularly with regard to what is considered as best practice with regard to setting out the objects and proposed activities of the company. Once delivered and registered the community interest statement cannot be changed unless the company changes its objects, in which case it would need to deliver to the Registrar of Companies a new community interest statement [See Chapter 5 of the guidance on this website).

Forms

CEASING TO BE A COMMUNITY INTEREST COMPANY

How can a company cease to being a community interest company?

A company can cease to be a CIC only by dissolution (which may follow liquidation) or by conversion to a charity. In both cases the CIC Regulator will need to be satisfied that the proper procedures have been followed and that the necessary resolutions have been passed by the CIC (see Chapter 10 of the guidance on this website).

What happens to the assets if the company ceases to be a community interest company?

To protect the asset lock, the Regulator must be satisfied that any surplus assets (subject to any allowable return to investors) are transferred in a way which ensures that they continue to be retained for community interest or charitable purposes rather than distributed to investors (see Chapter 10 of the guidance on this website).