UK – Community interest companies

The UK government is proposing to create a new legal form for non-charitable social enterprises, the Community Interest Company (CIC), based on existing forms of limited liability company, with entrenched public interest purposes and restricted profit and asset distribution.

The proposed framework includes:

  • appointment of an independent regulator;
  • a ‘community interest’ test to determine if an organization should be registered as a CIC (it seems CICs’ activities can be carried out wholly abroad and still meet this test, which is wider than the public benefit test for charities);
  • allowing CICs to issue shares with a capped dividend;
  • limiting investor control of CIC activities.

The government does not envisage a role for CICs in public services privatization, rather seeing them as a vehicle for social enterprise within the boundaries of a defined community. They will not be granted tax privileges, but can seek charitable status if they meet the qualifying criteria and accept the associated restrictions and obligations.

CICs will be able to seek finance from commercial and philanthropic sources, and will need to raise debt on normal commercial terms. The proposed dividend cap for equity investors will be a new concept in company law.

See the September 2002 report of the Cabinet Office Strategy Unit, Private action, public benefit, at http://www.cabinet-office.gov.uk/innovation/2002/charity/index.shtml and the consultation document, Enterprise for Communities, at http://www.dti.gov.uk/cics (consultation closes 18 June 2003).


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