Community Interest Companies (CICs): Could This Be the Right Business Model for You?
If you’re building a business that’s all about making a difference — but you still care about generating profit — a social enterprise might be your perfect fit. And when it comes to legal structures, a Community Interest Company (CIC) is one of the most popular options out there.
In this episode:
“Community Interest Companies (CICs): Could This Be the Right Business Model for You?”
We break down what a CIC actually is, how it compares to a charity, and what makes it different from a private company. From the community interest test to the all-important asset lock, you’ll learn what’s involved in setting up a CIC — and whether it’s the right path for your social enterprise.
After decades of working with social enterprises and CICs, I know that choosing the right structure is key to building a sustainable, impactful business. This episode explains your options in plain English — so you can make an informed decision.
Timestamped Summary:
[00:00:00] – Intro: Why social enterprises are more than just “good intentions”
[00:01:04] – How a CIC fits into the world of social enterprise
[00:02:12] – Profit for good: how social enterprises operate and grow
[00:03:00] – CICs explained: why they’re so popular and how they work
[00:04:11] – Defining your community: a vital first step for a CIC
[00:05:00] – The community interest test — what it is and how to pass it
[00:06:00] – Two types of CICs: limited by shares or limited by guarantee
[00:06:53] – The asset lock: how it protects your community’s interests
[00:07:55] – CIC vs Charity: which is right for your mission?
[00:08:54] – Recap: the key points to know before you set up a CIC
If this episode gave you clarity on CICs, feel free to share it with someone who’s thinking of starting a social enterprise.
If you enjoyed this episode, we’d love it if you could subscribe on Apple Podcasts — and leave a quick review. It really helps more people find these practical business tips.
Plan it. Do it. Profit.
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Transcript
Welcome to another episode of From Creative
Speaker:Passion to Profit.
Speaker:On this week's episode, I'm gonna continue the
Speaker:theme that we started in last week's episode of
Speaker:Social Enterprises, and specifically talk about
Speaker:one particular model, the CIC, or community
Speaker:interest Company to give it its full name.
Speaker:Now if you are interested in running a business
Speaker:that changes lives, impacts in a positive
Speaker:way on communities and still generates profit,
Speaker:so you still have that profit motivation in
Speaker:mind, a social enterprise could be right for you.
Speaker:Now, the whole of a social enterprise and
Speaker:more specifically a community interest, is
Speaker:this idea of not only generating profits, but
Speaker:actually use those four community benefits.
Speaker:Now I'm gonna specifically unpack
Speaker:why it's so special, whether this could be
Speaker:the right path for you.
Speaker:And I'm gonna explore what A CIC actually
Speaker:evolves, something called the community
Speaker:interest test, the different types of CIC.
Speaker:And yes, there are different types, the
Speaker:asset lock and the difference between
Speaker:a CIC and a charity.
Speaker:Let's crack off.
Speaker:Now a social enterprise is more than just a
Speaker:business that's got good intentions, a good heart.
Speaker:It's a business that exists to solve problems,
Speaker:whether those are social, community-based,
Speaker:environmental, and at the same time making money.
Speaker:And when I'm talking, making money, I'm talking
Speaker:about making profits.
Speaker:What every entrepreneur, what every business
Speaker:owner should be aspiring to do is that
Speaker:sweet spot between the charity world.
Speaker:And the corporate world.
Speaker:That's a social enterprise value.
Speaker:Now, social enterprises do trade.
Speaker:Don't confuse them with charities necessarily.
Speaker:They generate income in their own right,
Speaker:but instead of that money going into
Speaker:shareholders' pockets, nothing wrong with that.
Speaker:If you're a private company, most or all
Speaker:of the profits are reinvested back into
Speaker:the organization to help carry out,
Speaker:fulfill their mission.
Speaker:Did you know that the Eden Project and
Speaker:the big issue are two big examples of
Speaker:social enterprises?
Speaker:Now, these aren't just feel good names.
Speaker:To make people feel warm and fuzzy.
Speaker:These are fully operational businesses,
Speaker:creating jobs, paying tax, generating
Speaker:profits, and solving real world issues.
Speaker:Profit for good is a good way of looking at it.
Speaker:Now, social enterprises are not dependent just
Speaker:on donations or grants.
Speaker:If they were.
Speaker:By the way, they would not be able to be called
Speaker:social enterprises.
Speaker:They survive and thrive by selling
Speaker:goods and or services.
Speaker:And as they grow, the models can be copied,
Speaker:emulated, and rolled out in other places as well.
Speaker:And don't think, by the way, these are babies.
Speaker:They generate immense amount of wealth,
Speaker:have immense impact here, and they blend
Speaker:the entrepreneurial.
Speaker:With the ability to do good as well.
Speaker:Now, how does CICS fit into this picture,
Speaker:particularly now the idea of a community
Speaker:interest company?
Speaker:Believe it or not, it's come out to its
Speaker:20th anniversary and it was introduced in the
Speaker:United Kingdom in 2005.
Speaker:In my experience, I've over 30 odd years, it's
Speaker:one of the most popular legal structures for
Speaker:a social enterprise.
Speaker:It's a hybrid between a traditional, limited
Speaker:company and a charity.
Speaker:Now, even though they represent a
Speaker:small percentage.
Speaker:Of the overall limited companies,
Speaker:United Kingdom, approximately 3 million.
Speaker:They are growing and I've certainly seen
Speaker:a growth in their popularity based on the
Speaker:incorporations that we do for other clients here.
Speaker:We can certainly see there's more traction
Speaker:going on, but why?
Speaker:Well, they offer flexibility.
Speaker:And credibility.
Speaker:Whether it's a small local food bank or a
Speaker:nationwide training providers, cis operate
Speaker:across a great number of sectors and corners
Speaker:of the United Kingdom.
Speaker:The key bit with the CIC is that it is a
Speaker:business at its heart, but its main purpose is
Speaker:to benefit the community.
Speaker:However, one defines that it can make a
Speaker:profit and there's a solid note folks.
Speaker:Whatever your organization here,
Speaker:if you're not covering your costs
Speaker:and making a profit, then your reserves
Speaker:will dwindle down.
Speaker:We're not in the business of running hobbies here.
Speaker:We're in the business of doing good.
Speaker:Now.
Speaker:CICS can employ staff.
Speaker:It can also attract external investment,
Speaker:and here's the twist.
Speaker:It's the profit that's being used primarily to
Speaker:serve a social purpose.
Speaker:Now, if that ticks the boxes for you,
Speaker:then this could be your great ideal.
Speaker:I wanna focus now on this community aspect, the
Speaker:part of the community interest company,
Speaker:and you've gotta be really clear of who
Speaker:your community is.
Speaker:It could be broad, the entire population
Speaker:of the United Kingdom, for example.
Speaker:It can be more focused like young, unemployed
Speaker:people in Leicester.
Speaker:Carers in your local Bower or creative
Speaker:professionals across the United Kingdom,
Speaker:and it's actually part of the incorporation
Speaker:procedure that you define that community.
Speaker:Clearly for the regulator, whatever group
Speaker:you serve, they need to be clearly defined.
Speaker:CICS are built for community, not for the
Speaker:people running them, and that's a real important
Speaker:part of the process.
Speaker:It's also why groups of volunteers come together
Speaker:to create cis, even without outside help.
Speaker:That drive comes from within the
Speaker:community again.
Speaker:Broad or more focused.
Speaker:Now, part of the incorporation procedure,
Speaker:the test you, if you wanna call it, that,
Speaker:is the community interest test.
Speaker:And the test asks, would a reasonable
Speaker:person believe that your business exists to
Speaker:benefit the community?
Speaker:And when you apply to set up A CIC, you have to
Speaker:provide a short community interest statement,
Speaker:which explains what your business aims to do,
Speaker:who's gonna benefit, and how it's all gonna
Speaker:work in practice.
Speaker:One of the stumbling blocks in most
Speaker:applications that I've seen is that it's not
Speaker:clearly articulated.
Speaker:At the outset, the regulator will check that
Speaker:your goals and actions match your claims.
Speaker:And if you pass the test, you're halfway there.
Speaker:But if your idea is just a traditional business
Speaker:with a little bit of a social spin, that
Speaker:might not be enough and your application
Speaker:can be rejected.
Speaker:Now, having done that, you then gotta decide
Speaker:the type of CIC.
Speaker:You want a structure either limited by shares
Speaker:or limited by guarantee.
Speaker:Lemme break these down.
Speaker:The COSC limited by shares is there if
Speaker:you want to attract external investors
Speaker:who provide those funds, but they want a
Speaker:financial reward by, say, typically by dividends.
Speaker:You can issue shares just like a regular company,
Speaker:and you pay a limited dividend to shareholders.
Speaker:Typically, there's a dividend cap of 35%.
Speaker:That means people can support your mission and
Speaker:get a financial return.
Speaker:On the flip side, a CIC limited by
Speaker:guarantee, there aren't any conventional
Speaker:shareholders.
Speaker:The guarantee of the founders, if you want,
Speaker:is limited typically to a pound, and it's usually
Speaker:made up of members who guarantee a small amount
Speaker:if that eventuality happens, that the company
Speaker:has to be wound up.
Speaker:And this is very common for
Speaker:not-for-profit models.
Speaker:Either way, you are still a company separate
Speaker:from the people run it and responsible for
Speaker:its own finances and companies acts will be
Speaker:coming into place for A CIC now the big one.
Speaker:Is what's called the asset lock.
Speaker:Now, this, in my opinion, is one of the
Speaker:big differentiators between A CIC and what
Speaker:I call a conventional private company.
Speaker:This is a legal promise that your assets that
Speaker:you've got within your organization
Speaker:will only be used to benefit your community.
Speaker:You can't sell off the business and
Speaker:keep the profits.
Speaker:You can transfer the assets that you've got
Speaker:or sell the assets to somebody else, but it's
Speaker:gotta be at market value.
Speaker:If your CIC decides to be no more.
Speaker:Then those assets typically are transferred
Speaker:to another comparable CIC or charity, and
Speaker:that's reflected within the articles of the CIC.
Speaker:What does it matter?
Speaker:Well, it gives the reassurance to funders,
Speaker:partners, and the public that you're not in it
Speaker:just for personal gain, but the assets and
Speaker:resources, the funding you've received is
Speaker:going for a particularly defined purpose.
Speaker:Now, a big question I hear quite often
Speaker:is, should I set up a CIC or should it
Speaker:indeed be a charity?
Speaker:Now the trade off is as followed.
Speaker:A CIC in my experience is quicker and easier
Speaker:to set up than a charity on average.
Speaker:CIS that we set up for clients will take from
Speaker:the initial application being completed to
Speaker:submission, anything from between five to
Speaker:10 days to turn around if it's a charity.
Speaker:My experience has been that it can take
Speaker:several weeks, normally several months, and
Speaker:it's not unheard of.
Speaker:I come across cases that it could take up to nine
Speaker:months to a year to get a charity incorporated.
Speaker:A CIC, you get more control.
Speaker:You run the business, you make those key
Speaker:decisions, you get paid for your work.
Speaker:But in a charity, it's the trustees who
Speaker:aren't the people who run the organization,
Speaker:who work unpaid.
Speaker:They can't benefit directly from the
Speaker:charity's income without strict approval.
Speaker:And the flexibility can make A-C-I-C-A benefit
Speaker:for founders who wanna stay closely involved.
Speaker:Now remember, a CIC is not a charity.
Speaker:That means there'll be some grants or tax breaks
Speaker:that you can't access.
Speaker:Like gift aid that a charity may do.
Speaker:Remember, you can convert a CIC to a
Speaker:charity later on down the line, and that's
Speaker:something that should feature in your planning.
Speaker:Now some organizations use both.
Speaker:So charity, it's not unusual for it to have
Speaker:a separate CIC, which it effectively owns,
Speaker:if you wanna use that term very loosely as
Speaker:it is trading arm to generate the income.
Speaker:Let me recap.
Speaker:A social enterprise combines both business
Speaker:and social goals.
Speaker:Cics are illegal structure.
Speaker:That are there to support that objective when you
Speaker:set one up, you need a clear community purpose.
Speaker:You've gotta satisfy the community interest test.
Speaker:You make a decision about the shares or
Speaker:guarantee type company.
Speaker:You've gotta think about the asset lock.
Speaker:If you are a CIC, by the way, already established.
Speaker:And you haven't got that asset lock well
Speaker:defined, who the beneficiary organization
Speaker:is, then contact us and we've amended our
Speaker:school such to actually change that for cis.
Speaker:Cis offer more control in charities, but
Speaker:fewer tax breaks.
Speaker:Now it's not for everybody, but it's for
Speaker:the right people with the right objective.
Speaker:The right mission.
Speaker:Now, I hope this episode has given you a clearer
Speaker:picture of what a social enterprise and
Speaker:CI IC is, and if you've got questions you are
Speaker:thinking of setting up a CI CSL, check
Speaker:out the show notes.
Speaker:There's some links to help get you started.
Speaker:And if you're ready to have that chat that
Speaker:spark a purpose into a thriving, sustainable
Speaker:business, let chat.
Speaker:If you found this talk, which I hope you have
Speaker:done, share it with those you feel will
Speaker:get benefit from that.
Speaker:Until next time, keep the passion burning
Speaker:and remember, plan it.
Speaker:Do it and profit.
