Just what is a community interest company?

In some of our previous posts, we have discussed the ways companies can engage in community-building efforts with their stakeholders in order to empower their brands.

The results speak for themselves, with community-conscious brands gaining the edge when it comes to localised branding and consumer engagement.

We briefly touched upon one of the more formal ways of harnessing the power of community—namely, through a community interest company (CIC). With an estimated 1 in every 200 new companies now being set up as CICs, they’re more popular than ever. Many commentators have spoken about how CICs are capable of moving past many of the issues faced by conventional organisational business structures. Indeed, they often enjoy greater success than many of their counterparts.

So just what is a community interest company?

In one sense, it’s quite similar to a charity. CICs prioritise socially-oriented goals and objectives at the forefront of their operations. These can be anything, from social outreach theatre groups to local primary care (for more examples, click here.) The name of the game truly is community, and as we’ve already discussed, these values can have innumerable benefits for both your team and your brand.

This is reflected first and foremost in the legislation governing the organisations. For example, in order to apply to register a CIC, the company’s directors must sign and submit an accompanying ‘Community Interest Statement’ to ensure the company is formed to serve a ‘community’, rather than ‘private’ profit motive.

Furthermore, and perhaps more significantly, CICs are subject to what is called an ‘asset lock’. This is written into the CIC’s articles of association and prevents any assets being transferred away from the company. They must be kept solely within the CIC and only used for the purposes outlined in the company’s community interest statement. This is arguably the most unique feature of a CIC.

So what makes a CIC different from a charity?

Although it sounds similar to a charity in a lot of ways, a CIC is actually very distinct from a charity organisation in a number of important respects.

If you’ve ever been involved in a charity, or even if you’re familiar with how they are run, you will know that charities are often very restricted in terms of how they are able to operate. For example, charities are unable to issue shares or pay dividends because of heavy legal and financial regulations.

A CIC, on the other hand, cannot be a charity. It must be a company limited either by shares or by guarantee (again, obliged to pursue goals in the interests of the community – accountable to the CIC Regulator). What this means in practice is that CICs have much more commercial freedom than charities. They are able to accept grants and take out loans (secured and unsecured), just like a regular company. In this way, CICs are able to attract innovative staff and investment that charities often lose out on, with their sights firmly set on the public or community good.

Put simply, a CIC is a cross between a profit-making company and a public charity, with its primary purpose being to benefit ‘the community’. It therefore offers a number of distinct advantages over both organisational types.