Community Interest Companies (CICs): When and Why This Model Makes Sense cover art

Community Interest Companies (CICs): When and Why This Model Makes Sense

Community Interest Companies (CICs): When and Why This Model Makes Sense

Listen for free

View show details

About this listen

 Community Interest Companies, often shortened to CICs, are designed for businesses that want to make a positive social impact while still operating commercially. In this episode of the I Hate Numbers podcast, we explain how CICs work, why they exist, and when they are the right structure for a business that wants purpose alongside profit. What Is a Community Interest Company? A Community Interest Company is a limited company created specifically for social enterprises. It allows a business to trade, earn income, and pay staff while ensuring that profits and assets are used primarily for the benefit of the community. Unlike charities, CICs are not restricted to grant funding and donations. They can sell goods and services in the same way as a standard company, making them a flexible option for organisations that want sustainability as well as impact. Why CICs Exist CICs were introduced to fill the gap between traditional companies and charities. Many organisations want to do good without the heavy regulation of charitable status or the perception that profit is the main driver. The CIC structure provides reassurance to customers, funders, and stakeholders that the business is genuinely focused on community benefit rather than private gain. The Community Interest Test To become a CIC, a business must pass the community interest test. This means clearly demonstrating that its activities benefit a defined community rather than a small group of individuals. The test is reviewed by the CIC Regulator and helps ensure that the structure is used correctly and not as a branding or tax shortcut. Asset Lock and Profit Restrictions One of the defining features of a CIC is the asset lock. This prevents assets and profits from being freely distributed to shareholders.

How the Asset Lock Works

The asset lock ensures that, if the company is sold or wound up, its assets must continue to be used for community benefit. This protects the original purpose of the business.

Dividend and Profit Limits

CICs can pay dividends, but they are capped. This allows investors to receive a return while ensuring that the majority of profits are reinvested into the community. CICs Compared to Charities While charities benefit from tax reliefs, they are tightly regulated and restricted in how they trade. CICs offer more commercial freedom, but without charitable tax exemptions. This makes CICs suitable for social enterprises that want trading income, flexibility, and transparency. Reporting and Compliance CICs must file annual accounts like any limited company. In addition, they must submit a Community Interest Report explaining how the business has benefited the community. This added layer of reporting builds trust and accountability with stakeholders. When a CIC Makes Sense A CIC may be suitable if your business has a clear social mission, wants to trade commercially, and needs to demonstrate credibility and accountability. However, it is not the right choice for every organisation, so understanding the long-term implications is essential. Final Thoughts Community Interest Companies offer a practical way to combine purpose with profit. When structured correctly, they allow businesses to grow while staying aligned with their social objectives. If you are considering a CIC and want to explore whether it is right for your situation, you can book a call with us to talk it through. 🎧 Listen &...
No reviews yet