What is a Community Interest Company?

A community interest company, or CIC, is a specific and defined type of company in the United Kingdom. It is designed to cover companies which aim to work for the benefit of the public, but do not qualify for charitable status. It brings several benefits while being more flexible than the rule governing charities. The term may be used in other countries but will not necessarily have the same legal implications.

An organization would usually prefer to be a community interest company rather than a traditional limited company in order to protect its assets. With a traditional company, it is usually expected that management will use and even sell assets to maximize profits; in some set-ups this may be a mandatory objective. With a CIC, the rules mean that assets cannot usually be transferred to the owners or stockholders. Where assets are sold, they must be sold for a fair market price and the proceeds used to work towards the social aims of the company. If a community interest company is wound up, its assets must be transferred to another company with similar aims.

The main benefit of running a community interest company as opposed to a charity is that the criteria for qualification is much weaker. There are a broader range of activities and goals which can qualify a company for CIC status. A CIC also has much more flexibility about how it behaves than a charity does. For example, it does not have to be as strict about justifying that a particular decision or policy meets the stated aims of the organization. The biggest drawback is that a CIC does not get the same tax advantages as a charity.

There are some specific restrictions on setting up a community interest company, beyond not being a charity. As would be expected, it cannot carry out any illegal activity. Unlike a traditional company, it cannot be set up with the intention of serving a particularly narrow section of society. It cannot operate to carry out any politically motivated activity.