Contact Details

Website: www.bis.gov.uk/cicregulator E-mail: cicregulator@companieshouse.gov.uk Address:

The Office of the Regulator Community Interest Companies Room 3.68 Companies House Crown Way Cardiff CF14 3UZ.

Telephone: 02920 346228

The Community Interest

Company Option

Sara Burgess

Regulator of Community Interest

Companies

Past

• In the past there were no CICs

• There were – Charities

– IPS and cooperatives

– Companies Limited by Guarentee

All of these allowed their founders to work for the benefit of an identified group of people or a community

BUT

• Some people were looking for something

else – for instance

– To be an ordinary business and earn a living

but with social purpose built into the business

– Be recognised like a charity but not be

branded as charitable

– To be accountable

Background

• Consultation

• CAICE Act 2004

• Culture of Social Enterprise/Brand

• Growth

• Ensure asset lock

Update

• Legislation is in it’s 10th year and CICs

have changed the social enterprise

landscape.

• Increasingly recognised and importantly

understood as a protected financial model.

Why become a CIC?

• No tax benefits

• No gift aid on donations

• Extra requirements » Yet 7700 are doing it

• The brand

• The statement

• The commitment

What are CICs?

• Companies with special features that are

regulated to ensure they provide

community benefit and use their assets for

the purpose of the company.

Activities

• CIC Activities - Range and type – health

and social care, business advice,

education and training, employment and

transport, media, radio, TV, tourism,

regeneration, recycling wind farms tidal

energy, even a vertical farm – interesting

from a regulators perspective.

The CIC Bubble

Legal Structure

Flexible Form

Statutory Clauses in Articles of Association

Statutory Asset Lock

Community Interest Test

Annual Report

Transparent

Regulation Regulation

Regulation

Regulation

The Asset Lock

• Statutory requirement to ensure assets are used for the benefit of the community

• Restrictions on winding up

• Prevents the CIC giving away the communities assets at less than the true market value unless to another asset locked body

• Caps dividends and performance related interest

Community Interest Test

• Reasonableness Test

• Activities for benefit of community

• Use of profit

• Publicly accountable

Community Benefit

• motivation for the activities of the company –

Community Benefit

• To define the community

• no political motivation

• Cannot be a charity

CIC 34 Annual Report

• Confirming objectives met through

activities/community benefit

• Confirming Directors Salaries

• Confirming Asset lock

• Ensuring no campaigning

• Ensuring no political activity

• Looking at viability

Finance • Grant and loan funding

• Donations

• Equity funding

• Bank loans

• Contracts

• Trading

Good Governance

• Integral to good governance – Clear Structure

– Meeting the criteria

– Understanding the process

– Understanding company law requirements

– Ensuring solvency

– Strategic Direction and managing the business/setting policy

– Ensuring compliance with governing documents

– Annual reporting

– Know your business

– Transparency

– Role of director (who is and who is not one)

Competitive advantage • Regulation is usually associated with

restriction

• CICs don’t take it this way

• The Regulator doesn’t use it this way

• Regulation can build confidence

– In behaviour

– In activity

– In use of funds

– In reputation

The CIC Regulator

• The CIC Regulator is appointed by the Secretary of State

• Based at Companies House to

– Create awareness of the CIC option

– Make decisions about eligibility

– Investigate where there is cause for concern

– Take action if needed

Dual Role

• Registration

• Regulation

Regulator Powers

• Investigatory and Supervisory

• For mismanagement or misconduct or

bringing CIC into disrepute

– Remove or put in directors

– Appoint a manager

– Audit accounts

– Hold property

– Hold up liquidation

Regulation • Ensures community benefit and the asset lock • Confirms eligibility • Light touch • The Annual report demonstrates transparency in

• How the activities benefited the community

• Who was consulted and the outcome

• What payments were made to directors

• What assets were transferred

• What dividends were paid

• What performance-related interest was paid on loans and

debentures

Regulation

• Complaints

– Starting to form the main area of work

– Increasingly complex

– Requiring deeper scrutiny

– Time consuming but important

– Often wider than just CIC legislation

The Value of Regulation Today

• Recognition that there is a body aimed at increasing and maintaining confidence in CICs.

• a CIC abusing it’s role could undermine the brand reputation and the wider work of the CIC community.

• CICs are not like ordinary companies and we expect them to make a positive effort to resolve issues at the earliest opportunity. We would rather not be involved but if we are and the matter is considered serious then we will take action.

Benefits of the Model • Limited liability; flexible company form; easy to set up

• Tight governance

• Greater transparency of operation

• More flexibility than a charity

• Light touch regulation, (but no tax advantages)

• A statutory asset lock and regulated community purpose

differentiates it from ordinary companies

• There is continuity of social purpose

• A unique brand which provides a higher profile

The future

• More complex and complicated businesses

• More need for Regulation

• New challenges with spin offs

• Better understanding by the general public

• Public service delivery

Contribution to the social economy

• CICs are a movement in their own right

• They are all over the UK and growing

• They range from very small to quiet large

• 90% of the recent health spin outs are

CICs

• They are unique

Contact Details

Website: www.bis.gov.uk/cicregulator E-mail: cicregulator@companieshouse.gov.uk Address:

The Office of the Regulator Community Interest Companies Room 3.68 Companies House Crown Way Cardiff CF14 3UZ.

Telephone: 02920 346228