Community interest company
Based on Wikipedia: Community interest company
Imagine you want to start a business that does good. Not a charity that survives on donations and must answer to regulators about every expenditure, but a real business that earns money by selling things—yet one that's locked into serving the public rather than enriching shareholders. For most of the twentieth century, if you lived in Britain and had this ambition, you were stuck. You could register a charity and accept severe constraints on how you operated. Or you could start a normal company and simply hope that future owners would maintain your altruistic mission.
Neither option was satisfactory.
In 2005, the British government created something new: the Community Interest Company, or CIC. The acronym is sometimes pronounced "see-eye-see," though many people affectionately call them "kicks." These organizations have become surprisingly popular. Within ten years of their introduction, more than ten thousand had been registered. They run everything from local food cooperatives to international development organizations, from community pubs to renewable energy projects.
What makes a CIC different from an ordinary company? And why might someone choose this form over becoming a registered charity? The answers reveal something interesting about the architecture of organizations and how legal structures shape what becomes possible.
The Problem of Permanent Purpose
When you create a normal limited company in Britain, you're building something with no inherent commitment to any particular mission. The company's directors have legal duties to the shareholders, and those shareholders can sell their stakes to anyone. Even if you start a business with the purest intentions—say, providing affordable housing in your community—there's nothing stopping a future owner from converting those homes into luxury flats.
Charities solve this problem through heavy regulation. A registered charity in England and Wales answers to the Charity Commission, which scrutinizes everything from trustee payments to investment policies. Charitable assets are permanently dedicated to charitable purposes. But this protection comes with significant constraints. Trustees typically cannot be paid for their governance work. The charity must pursue purposes that fall within legally defined charitable categories. Political campaigning is sharply limited.
For many social entrepreneurs, these restrictions felt stifling. They wanted to run real businesses—paying competitive salaries, responding quickly to market opportunities, perhaps even generating modest returns for investors—while ensuring that the organization's fundamental mission couldn't be hijacked.
An Asset Lock with Flexibility
The Community Interest Company solved this puzzle through a mechanism called the "asset lock." When you form a CIC, you write into your governing documents—the articles of association—provisions ensuring that the company's assets must be used primarily for community benefit. If the company is wound up, any remaining assets must go to another asset-locked organization, not to shareholders or directors.
This sounds similar to charity law, but the implementation is much lighter. The Regulator of Community Interest Companies provides oversight, but that oversight is explicitly designed to be "light touch." CICs file an annual community interest report alongside their normal company accounts, explaining what social benefit they've provided. But they don't face the detailed regulatory scrutiny that charities endure.
The trade-off is clear: CICs don't get the tax advantages of charities. They pay corporation tax like any normal business. They can't receive the special treatment that charities get on rates, stamp duty, or gift aid donations. What they gain is operational freedom.
What Counts as Community Interest?
To register as a CIC, an organization must pass what's called the community interest test. The standard is deliberately broad: the Regulator must be satisfied that "a reasonable person might consider that its activities are being carried on for the benefit of the community." This could be a geographic community—the residents of a particular town or neighborhood. Or it could be a community of interest—people with a shared characteristic or concern.
The test is wider than what qualifies for charitable status. Charities must pursue purposes that fall within specific legal categories and must benefit the public at large or a sufficient section of it. CICs face fewer restrictions on who they can serve.
But some boundaries exist. A CIC cannot be primarily political. It cannot serve an "unduly restrictive" group—you couldn't create a CIC that benefits only your immediate family, for instance. Political parties and their subsidiaries are excluded. And interestingly, a CIC cannot also be a charity. The two statuses are mutually exclusive.
Why Choose CIC Over Charity?
Given that charities get better tax treatment, why would anyone choose to be a CIC? Several reasons emerge.
First, CICs can pay their directors. Charity trustees generally serve as volunteers, and paying them requires jumping through significant hoops. For a social entrepreneur who wants to build an organization and also earn a living, this restriction is often unacceptable. They would have to hand strategic control to a volunteer board while they themselves worked as a paid employee. A CIC allows founder-directors to be compensated.
Second, CICs can raise investment capital more easily. While there are caps on dividends that a CIC can pay to shareholders, it can pay them. This opens possibilities for social investment that wouldn't work under charity law.
Third, some organizations simply don't fit the charitable mold. Their purposes might be clearly beneficial without meeting the technical legal tests for charity. Or they might want the explicit branding of "social enterprise" rather than "charity."
Fourth, CICs can pivot more quickly. Without needing Charity Commission approval for changes to their objects or activities, they can adapt to circumstances—responding to market signals, entering new areas of work, or restructuring their operations.
The Mechanics of Formation
Creating a CIC is remarkably straightforward. The process parallels forming any limited company, with some additional steps.
You prepare memorandum and articles of association, just as you would for an ordinary company. The articles must include the asset lock provisions and appropriate objects clauses. You file a standard incorporation form along with a special CIC declaration—currently called form CIC36—which all directors must sign. This declaration explains how the company will benefit the community.
The application goes to Companies House, which checks the standard company formation requirements, then passes the papers to the CIC Regulator. The Regulator assesses whether the organization meets the community interest test. If satisfied, they advise Companies House to issue a certificate of incorporation as a CIC.
The fee is modest: thirty-five pounds for paper filing, or twenty-seven pounds online. An existing company can convert to a CIC by passing the necessary resolutions and filing similar paperwork.
There's one important choice to make: CICs can be limited by shares or limited by guarantee. A company limited by shares can issue equity to investors, useful if you want to raise capital. A company limited by guarantee has no shareholders—members simply agree to contribute a nominal amount if the company is wound up. This structure is common for membership organizations where ownership isn't the point.
The Regulator
The CIC Regulator is an independent officer created by the Companies (Audit, Investigations and Community Enterprise) Act 2004—the same legislation that introduced CICs. Appointed by the Secretary of State, the Regulator serves a term of up to five years.
The current Regulator, Louise Smyth, was appointed in September 2020. Interestingly, she also serves as Chief Executive and Registrar of Companies House for England and Wales, giving her an unusual dual perspective on both mainstream companies and their socially-oriented cousins.
The Regulator's role is intentionally limited. They assess new applications, receive annual reports, and can investigate complaints or concerns. But they don't proactively audit CICs or second-guess their operational decisions. The philosophy is that light-touch regulation encourages innovation while the asset lock provides structural protection.
International Comparisons
Britain didn't invent the idea of purpose-locked businesses. Similar structures exist around the world, though the details vary considerably.
In the United States, several options exist. The benefit corporation is a for-profit corporate form that requires directors to consider environmental and social factors, not just shareholder returns. The L3C—low-profit limited liability company—is designed specifically to attract foundation investment in social enterprises. And B Corporation certification, provided by the nonprofit B Lab, offers a private certification that any company can pursue.
Canada has the community contribution company, which operates on similar principles to the British CIC. Various European countries have their own social enterprise forms.
The CIC was partly inspired by these international examples, particularly the American public benefit corporation. But it also emerged from distinctly British circumstances—a gap in the options available to social entrepreneurs who found charity law too restrictive but wanted more than a normal company's empty promises of good intentions.
The Diversity of CICs
Walk through Britain and you'll encounter CICs everywhere, though you might not always recognize them.
Community energy cooperatives use the CIC form to develop renewable power projects, allowing local residents to invest in solar panels or wind turbines while ensuring profits stay in the community. Community pubs, bought by residents when faced with closure, operate as CICs that guarantee the village will always have its local.
Social care providers use the CIC structure to deliver services that might otherwise be provided by the NHS or local councils, combining business efficiency with mission protection. Housing organizations develop and manage affordable accommodation. Training providers help unemployed people build skills and find work.
Some CICs are tiny—a handful of people running a community garden or local support service. Others are substantial organizations with significant turnover and national reach. The form accommodates both.
The Asset Lock in Practice
The asset lock deserves closer examination, because it's the key innovation that makes CICs work.
The lock has several components. Assets cannot be transferred out of the company except at full market value—you can't give away company property to benefit individuals. Any distributions to shareholders are capped: there are maximum dividend rates and caps on interest payments for loans from shareholders. If the company is wound up, surplus assets must go to another asset-locked body, not to members.
CICs are expected to specify in their articles which organization should receive their assets on dissolution. If they don't specify, or if circumstances change, they need the Regulator's approval before making any distribution.
This creates permanent protection. Even if the original founders leave and new people take over, the asset lock remains. The company's social purpose is baked into its legal DNA.
Charities and CICs Together
Despite being mutually exclusive categories, charities and CICs can work together. A charity can own a CIC as a trading subsidiary. This is actually quite useful: charities often struggle with trading activities that don't directly further their charitable purposes. A charity-owned CIC can run commercial operations, with profits flowing up to the charity.
Unusually, when a charity owns a CIC, the normal dividend caps don't apply. The CIC can distribute fully to its charitable owner.
A charity can also convert to a CIC, though this is a one-way door. The organization loses its charitable status and the associated tax benefits. It gains freedom from Charity Commission regulation but takes on the lighter CIC requirements instead. This might make sense for an organization that has drifted away from traditional charity work or that finds the regulatory burden unsustainable.
The Annual Report
Every year, alongside their normal company accounts, CICs must file a community interest report using form CIC34. This document serves as the primary accountability mechanism.
The report isn't particularly onerous. It confirms details of director remuneration—addressing concerns about people enriching themselves under cover of social purpose. It explains what community benefit the CIC has provided over the past year. The requirement ensures some transparency without imposing the detailed reporting burdens that charities face.
The Regulator reviews these reports and can ask questions if something seems amiss. But the review is not comprehensive scrutiny. The system relies on the asset lock and light-touch monitoring rather than detailed regulatory oversight.
Questions and Controversies
No legal structure is perfect, and CICs have faced criticism.
Some argue the light-touch regulation is too light. Without detailed scrutiny, organizations might claim community benefit while primarily serving private interests. The community interest test, deliberately broad, may be too easy to satisfy.
Others note that CICs lack the prestige of charitable status. When seeking donations or contracts, a charity's established reputation may carry more weight than the newer CIC brand. The tax disadvantages compound this—donors to charities can claim gift aid, while donations to CICs receive no special treatment.
There are also concerns about transparency. While CICs file accounts and community interest reports, these documents may not tell the full story of how an organization operates. Without the Charity Commission's investigative powers, questionable practices might go undetected.
These criticisms have not prevented CICs from flourishing. The form clearly meets a real need. But they suggest that CICs work best when there's genuine community engagement and accountability, not just legal compliance with minimal requirements.
A Place in the Ecosystem
The Community Interest Company doesn't replace charities. It complements them.
For organizations that fit comfortably within charity law—those pursuing established charitable purposes, led by people willing to serve without payment, and able to navigate regulatory requirements—charitable status remains attractive. The tax benefits are significant. The public trust in charities is well-established.
But for organizations that don't fit that mold—that want to blend commercial activity with social purpose, pay market-rate salaries, raise investment capital, or simply operate with greater freedom—the CIC offers something valuable. It's a commitment device, a way of permanently locking an organization to public benefit while retaining the flexibility of the corporate form.
Twenty years after their introduction, CICs have become a standard part of Britain's organizational landscape. Ten thousand experiments in social enterprise, each finding its own way to do business for good.