Defining a CIC

Not so long ago we had a meeting with club chairman Michael Johnston and the term CIC was mentioned, subsequently you may have wondered what that is. So here we have some information for you to hopefully shed some light on the subject should you need it.

What Is It?

CICs (Community Interest Company) are limited companies, with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage.

A CIC can be a public company limited by shares, a private company limited by shares, or a company limited by guarantee, and will have the same benefits and obligations as other companies of this type. CICs are registered with Companies House but regulated by the CIC Regulator.

This is achieved by a “community interest test” and “asset lock”, which ensure that the CIC is established for community purposes and the assets and profits are dedicated to these purposes. Registration of a company as a CIC has to be approved by the Regulator who also has a continuing monitoring and enforcement role.

The “Community Interest Test” means that the Regulator must be satisfied that activities carried out by the organisation are carried out to the benefit of the community it serves. The club would need to convince the Regulator that its activities would benefit the whole community so could not concentrate on solely “elite” sport.

The “Asset Lock” means that the assets of the company, eg the stadium, must be used for the benefits of the community. If the asset is sold then it must be sold at the market value, and not for £1 for example, any profits from the sale must benefit the community and not individuals.

Once a company chooses to become a CIC it cannot be converted back to a limited company, although members can choose to become a charity. The SFA will accept a club which is set up as a CIC or a Community Benefit Society (the trust model).

The CIC provides limited liability for its members.

Benefits:

reassurance for stakeholders as the asset lock and community interests are regulated;

CICs must produce annual reports which includes:

  • What has been done and how it has benefited the community.
  • How much directors have been paid.
  • Steps taken to consult with stakeholders and the outcomes.
  • Any profits are used for the benefit of the community and not distributed to owners.
  • Dividends and directors’ salaries are restricted.

Disadvantages:

An organisation cannot be both a CIC and a charity. Some grant funders recognise and fund CICs but not all.

CICs do not enjoy any tax concessions.

Examples of CICs:

The way a CIC is operated can vary, here are some examples from Scottish Football.

Clyde FC:

Clyde is owned by fans on a one-member one-vote basis.

Stenhousemuir FC:

Stenhousemuir FC’s shares in the previous company were converted into shares in the CIC. One share in the old company = ten shares in the CIC, meaning that shares were more affordable to more fans. There is a rule stating that no-one can own more than 10% of the shares in the CIC apart from the Supporters Trust who can’t own more than 20%.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s