VIEW, Issue six, 2012
Website:
viewdigital.org
Page 12
Advice: Solicitor Jenny Ebbage from Edwards and Co in Belfast
Image: Kevin Cooper
Looking at community interest companies Legal matters
By Jenny Ebbage S
ocial enterprise is on the agenda in Northern Ireland but what sort of legal entity can be used to carry out a social enterprise? We are often asked about community inter- est companies (CICs). These are limited liability companies that are designed in such a way that their profits and assets have to be used for the public good. They are distinct from a charity how- ever – it is not possible for a charity to be a CIC. A CIC is specifically designed to provide a
are being carried on for the benefit of the commu- nity.
benefit to a community so any income, assets and profits it makes have to be applied for the commu- nity it is designed to serve. Compared with a commercial company the main purpose of a CIC is to benefit the community – not its shareholders, directors or any employees. A CIC must pass a special community interest test – at the time it is set up it has to demonstrate that a reasonable person might consider its activities
the activities are political it will not meet the test. A CIC is a limited company, either a shares or guarantee company, and is regulated by a UK- wide regulator but its details are listed at Compa- nies House. It has to deliver annual accounts and an annual community interest report. All the assets of the CIC have to be perma-
assets. They can be applied for normal trading or other activities and to meet the financial obliga- tions of the company.
If the activities only benefit its members or if
to declare dividends to its shareholders. This can be attractive to a potential investor who may wish to provide funding to the CIC as they can take a dividend subject to a cap. Unlike charities, these bodies do not receive
It is possible for a CIC to pay directors and
tax breaks from HMRC and cannot apply for Gift Aid status. In its most recently published annual re- port (2010/11), the Regulator noted a sharp in- crease in applications for registration of CICs in Northern Ireland – 75% up on last year. In all there were 28 Northern Ireland CICs over that time pe- riod.
nently retained within it and used for community purposes, or it can be transferred to another asset locked body such as a charity or another CIC. This does not mean that you cannot use the
but it is worth exploring as an alternative to set- ting up a charity or a straightforward company lim- ited by shares or guarantee. It can also be a useful alternative for a charity
wishing to undertake commercial trade as it can consider a CIC instead of a commercial trading company.
CICs do not suit everyone or every situation
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