Community Interest Companies: The Perfect Blend of Purposeful Profit - Is a CIC Right for Your Organisation?

In this Blog:

1. What is a Community Interest Company (CIC)?

2. Why Are CICs Growing in Popularity?

3. Benefits of Setting Up as a CIC

4. Who Should Consider Becoming a CIC?

5. Thinking of setting up a CIC?

Introduction

Community Interest Companies, or CICs, are an innovative type of legal structure in the UK designed for businesses that exist to benefit the community rather than private shareholders. Since their introduction in 2005, CICs have become a popular choice for organisations that aim to combine purpose with profit.

In an era where businesses are increasingly expected to contribute to societal good, CICs represent a harmonious balance of purpose and profit. They empower entrepreneurs to deliver positive change while maintaining a sustainable business model. As community needs grow, CICs will continue to play a pivotal role in shaping a more inclusive and equitable economy.

Let's explore what CICs are, their growth trajectory, the benefits of this model, and the types of organisations that stand to benefit most from adopting this structure.

What is a Community Interest Company?

A CIC is a special type of limited company that operates to provide a tangible benefit to the community. Unlike traditional limited companies, CICs must:

• Pass a Community Interest Test to demonstrate that their activities are for the public good.

• Commit to a legal asset lock, ensuring that the company’s assets and profits are used exclusively for community benefit.

• Submit an annual Community Interest Report, providing transparency about how they are achieving their community-focused objectives.

CICs can be limited by shares or guarantee, allowing flexibility depending on the funding model they pursue.

The Growth of CICs

Over the last decade, the number of CICs has surged as social entrepreneurship and impact-driven businesses have gained momentum. As of 2023, there are over 20,000 CICs registered in the UK, with sectors ranging from education and arts to healthcare and environmental sustainability. This growth reflects a societal shift towards prioritising purpose and accountability in business.

Government initiatives and public awareness campaigns have further propelled this growth, making the CIC model an appealing choice for organisations looking to make a difference. Additionally, the increased appetite for ethical consumption and investment has amplified the demand for businesses that prioritise community impact.

Benefits of Setting Up as a CIC

1. Clear Social Mission:

   CIC status signals a strong commitment to community benefit, appealing to funders, stakeholders, and customers who value social impact.

   
   

2. Access to Funding:

   CICs are eligible for grants, social investment, and public funding not typically available to for-profit companies. This is particularly advantageous for organisations that require start-up or project-specific funding.

   
   

3. Credibility and Trust

   The CIC designation assures stakeholders of ethical practices, as profits are reinvested into the community and operations are transparent.

   
   

4. Flexible Governance:

   CICs allow directors and members to make decisions with a mix of commercial and social priorities, offering the best of both charity and private business structures.

   
   

5. Tax Advantages:

   While CICs don’t enjoy the full tax benefits of charities, they can benefit from reduced taxes if they qualify for gift aid on donations or partnerships with charitable organisations.

Who Should Consider Becoming a CIC?

CICs are ideal for organisations with a clear social purpose but who want the freedom and agility of running a business. Examples include:

• Social Enterprises: Companies aiming to address social, environmental, or cultural issues.

• Education and Training Providers: Organisations offering skills development or community education.

• Creative Arts Groups: Teams delivering accessible arts and cultural experiences.

• Health and Wellbeing Projects: Initiatives focused on mental health, elderly care, or disability support.

• Environmental Organisations: Groups tackling climate change or promoting sustainable living.

A CIC structure works well for organisations that need to demonstrate accountability while maintaining flexibility to earn revenue through trading activities.

Is a CIC Right for Your Organisation?

If your organisation prioritises community benefit and seeks a structure that supports both growth and social impact, a CIC could be the ideal choice. It combines the entrepreneurial spirit of a business with the community focus of a charity, unlocking new opportunities to make a difference.

Speak with JEM Consults for tailored advice on whether a CIC is the right fit for your organisation, and for help establishing, administering, marketing and securing grant funding for your organisation as a CIC.