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What is a community interest company – and how do you set one up?

4-minute read

Catriona Smith

4 May 2022

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A community interest company is a social enterprise designed to benefit the community rather than purely generating profits for shareholders and owners.

If you’re thinking of setting one up, but aren’t sure what you need to do first, read our step-by-step guide to get started.

Community interest company definition

A community interest company is a non-charitable social enterprise that uses its profits to benefit the community. Essentially, a CIC is a type of limited company structure which comes with a range of regulatory and compliance requirements (we’ll explain more on this later).

Community interest company examples

Transport, health and social care services, and creative arts projects are just some areas where you’ll find community interest companies. One example is The Isle of Skye Ferry, a community interest company in Scotland that was bought by the community and is now run as a social enterprise. Their mission is to connect the remote communities with the Scottish mainland by providing free travel for pensioners and half price tickets for locals.

To understand more about the work of community interest companies across the UK, take a look at the Community Interest Companies in Action blog from the CIC Regulator.

Community interest company vs charity – what’s the difference?

While a charity is specifically ‘not-for-profit’, a community interest company can make a profit and pay directors a salary. As long as a CIC is using its assets and profits to fulfil their social purpose, it’s possible to take a ‘reasonable salary’ as a director and retain some control.

There are also different rules for community interest companies when it comes to taxes, funding, and regulation.

As a CIC you’ll probably get most of your funding from trade, and then put any profits back into running the business. Meanwhile, a charity gets most of its funding from donations and grants.

It’s also important to note that you can’t get any tax relief as a CIC, whereas you can as a charity.

Thinking of starting a charity instead? Our guide to forming a charity will help you understand everything from finding trustees to government regulations.

7 steps to setting up a community interest company (CIC)

Follow these steps when setting up a CIC in the UK.

Choose your CIC directors

Your CIC needs at least one director, and it’s their job to run the company.

This could be you, or you could appoint someone to look after the legal and financial tasks that come with running a community interest company. Responsibilities include keeping company records, filing company accounts, and paying tax.

Register with Companies House

Online

The easiest CIC registration method is through the government’s online service.

You’ll need to create a Government Gateway user ID and password for your company (you can’t use your personal one). Once you’ve uploaded your registration documents, you’ll need to pay £27 by card or using PayPal.

By post

It’s also possible to set up your community interest company by post, although this is more expensive and can take up to 15 days to process.

You’ll need to post these documents:

Once you have your documents ready, you can post them to Companies House along with a cheque for £35. Find the postal address you need for England and Wales, Scotland, and Northern Ireland.

Choose a name

There’s a lot to think about when choosing a name for your community interest company. It should be unique, work online, and say something about your business.

Importantly, it should include ‘community interest company’ or ‘CIC’ in the name (or the equivalent in Welsh).

Try our Business Name Generator to spark your creativity when it comes to choosing your name. And, to be sure you’re not using a name that’s already taken by another business, read our guide to UK trademarks.

Write your community interest statement

Your community interest statement goes on Form CIC36 and is where you outline how your company will benefit the community, and the types of activities you have planned. You’ll also need to demonstrate how you’re different from a commercial organisation.

This then goes to the CIC Regulator to make a decision about whether to approve you as a CIC. You’ll then need to continue proving that your company is operating in the interest of the community by reporting to the regulator every year.

Establish your company’s constitution

Your constitution is made up of a number of important documents:

  • Memorandum of association – lists the names your members and is created automatically if you register your CIC online
  • Articles of association – documents the rules and social goals when it comes to how your business will work and benefit the community

Find out more about how to write a memorandum of association and articles of association and download a free template.

Create an ‘asset lock’

An ‘asset lock’ is a legal promise that says you’ll only use the company’s assets to benefit the community. You’ll also need to name an ‘asset-locked body’ – an organisation that will receive the assets if you choose to dissolve your community interest company. Your asset-locked body should be another CIC, a charity, a registered society, or a non-UK based equivalent.

Don’t forget insurance

Whether it’s a community project or a new service, CICs come with unique risks and it’s important to be protected.

If you employ people, you need to have employers’ liability insurance by law. While you might also want to consider public liability insurance to protect your business in case someone is injured or property is lost or damaged.

Simply Business offers tailored business insurance for charities and not-for-profit organisations, so you only pay for the cover you need.

CIC regulations

The CIC Regulator is responsible for approving and regulating community interest companies. Every year you’ll need to file an annual report to show the CIC Regulator how your activities are benefiting the community, along with details of how shareholders have been consulted, and what dividends have been paid.

A dividend cap for community interest companies means you can pay a maximum of 35 per cent of your distributable profits to shareholders at the end of each year.

You’ll also need to file your accounts and a company tax return every year – check our guide to important tax year dates for limited companies.

If you work with children or vulnerable adults, you'll need to have appropriate safeguarding in place too, such as DBS checks for all staff working with children.

For full guidance on setting up a community interest company, visit the UK government website.

Have you set up a community interest company? Let us know your experience in the comments below.

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Photograph: Viktoriia/stock.adobe.com

We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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