legal form

ALegal forms and social objectives

Regular limited liability companies that do not have charitable status find it difficult to ensure that their assets are dedicated to public benefit. There is no simple, clear way of locking assets of such a company to a public benefit purpose other than applying for charitable status. The community interest company is intended to meet this need.
When a CIC is requested, the CIC regulator considers whether applications meet the criteria to become a CIC. If satisfied, the regulator advises the registrar in Companies House who, providing all the documents are in order, will issue a certificate of incorporation as a CIC.
A charity can convert to a CIC with the consent of the Charity Commission. In so doing it will lose its charitable status including tax advantages. A charity may own a CIC, in which case the CIC would be permitted to pass assets to the charity. CICs are more lightly regulated than charities but do not have the benefit of charitable status, even if their objects are entirely charitable in nature.
Those who may want to set up a CIC are expected to be philanthropic entrepreneurs who want to do good in a form other than charity. This may be because:
CICs are specifically identified with social enterprise. Some organisations may feel that this is a more suitable than charitable status.
Members of the board of a charity may only be paid where the constitution contains such a power and it can be considered to be in the best interests of the charity. It means that, in general, the founder of a social enterprise who wishes to be paid cannot be on the board and must give up strategic control of the organisation to a volunteer board, which is often unacceptable. This limitation does not apply to CICs.
They are looking to work for community benefit with the relative freedom of the non-charitable company form to identify and adapt to circumstances, but with a clear assurance of not-for-profit distribution status.
The definition of community interest that applies to CICs is wider than the public interest test for charity.