Info sheet: Community Interest Companies
A community interest company (CIC) is a limited liability company created with the specific aim of providing benefit to a community. It is a relatively new legal structure, designed to meet the needs of social enterprises and ‘not-for-profit' projects, which combine the pursuit of a social purpose with commercial activities.
A community interest company shares many of the features of a limited company, in that it is incorporated and the financial liability of its Directors is limited to a nominal amount.
Community interest companies cannot also be charities, but the form provides recognition of the organisation's ‘not for personal profit' status and community benefits, whilst providing greater flexibility than charitable status.
Type of organisation: Community Interest Company (CIC)
Legal status: incorporated
Governing document: memorandum and articles of association
Common examples: waste recycling, day care centres, local transport provision.
A community interest company:
- has the features and identity of a limited liability company;
- must comply with company law and special CIC legal requirements
- is approved and regulated by the CIC Regulator
- is defined by a ‘community interest test', which ensures it is set up to benefit the community
- has an "asset lock" which restricts disposal of assets
- has a"dividend cap" which limits dividend payments to shareholders to ensure profits are applied to benefit the community
- cannot also be a charity.
When is it appropriate?
A community interest company is usually appropriate where some or all apply:
- the company's profits are to be used for the benefit of the community (or channelled into a charity);
- its purpose, activities and beneficiaries meet the Community Interest Test (its activities do not involve political campaigning or support for political campaigning
- its purposes are not exclusively charitable
- the company wants more commercial freedoms than offered by charity law (e.g. paying dividends to shareholders or paying board members).
For more comprehensive information, click here look at the CIC Regulator's Information Pack on Community Interest Companies