What Is a Community Interest Company?
13 May 2021
A community interest company is a sort of social enterprise – a business that channels its profits into schemes and initiatives for the public good.
This is an essential introduction to community interest companies. We’ll explain what they are, how they work, and list some examples of how they’ve made a difference.
What is a Community Interest Company?
A community interest company is like a cross between a business and a charity. Like a business, community interest companies offer products or services that they sell for a profit. But like a charity, instead of enriching shareholders, community interest companies use their profits to enrich the world.
A community interest company is a relatively new type of company. The UK government first introduced them in 2005, and now thousands of community interest companies exist across the UK in a diverse range of sectors.
So a community interest company is a business that’s committed to pursuing social objectives. These objectives might include creating employment opportunities for disadvantaged groups, or helping individuals and businesses switch to more sustainable practices.
How Does a Community Interest Company Work?
A community interest company is still a business. It’s a limited company, which means that it’s either limited by guarantees or by shares. But unlike standard businesses, community interest companies must commit to channelling most or all of their profits into their cause.
When you register as a community interest company, you commit to a statutory asset lock. This places a limit on the proportion of your profits you can distribute to your shareholders or members. Meanwhile, you must use your assets to achieve your social objective.
On top of this, you need to submit to ongoing regulation from the CIC Regulator. As part of this, you need to submit an annual report detailing your income and expenditure, which becomes public record.
So community interest companies are essentially required by law to work towards their goal for social change. But despite these strict regulations, setting up a community interest company is a relatively straightforward process. In addition, the structure of a community interest company offers a degree of flexibility and other benefits that you wouldn’t get with a standard business, nor with a standard charity.
Examples of Community Interest Companies
To best understand how community interest companies work, it’s worth taking a look at some of the scheme’s success stories:
Little Fish Theatre – This community interest company aims to produce inspiring theatre productions for young people in and around London. Their performances seek to challenge injustice while encouraging community growth and change.
Culture and Sport Glasgow Trading – A community interest company established by Glasgow City Council to look after the city’s museums, galleries and leisure services in the face of financial pressures for the public sector.
Bristol Together – This community interest company aims to create jobs for ex-offenders and for long-term unemployed people. They buy empty properties and employ workers to repair and refurbish them. They then sell these properties, channelling any profits from the sale back into the enterprise itself. So the more properties they sell, the more properties they can buy, and the more employment opportunities they can create.
Bookdonors – They take unwanted second-hand books from charities and libraries and sell them on the internet. Some of their profits go straight back to the charities and libraries that donated them. But they also save tonnes of books from the landfill, while providing multiple employment opportunities for people with disabilities and for the long-term unemployed.
The Expert Patients Programme – They provide specialist health schemes to help people manage long-term conditions through cognitive therapy.
Want to Set Up Your Own Community Interest Company? Some Essential Resources
If you want to set up your own community interest company, these resources will tell you everything you need to know to get started:
- Official Government CIC Resources – Including an FAQ, an information pack, and a guide to funding organisations.
- Case Studies – Nearly two dozen examples of successful community interest companies.
- The Advantages and Disadvantages of Community Interest Companies – Our essential guide won’t just help you decide whether running a community interest company is right for you. It’ll also tell you more about how community interest companies work in terms of structure and organisation.
- How to Set-Up a Community Interest Company – Our step-by-step guide will tell you everything you need to know, from choosing your cause to finding funding and securing long-term success.
Finally, like any business, running a social enterprise can be risky. So if you want to run a community interest company, you need to ensure that you have the appropriate insurance cover in place.
At Hazelton Mountford, we offer specialist social enterprise insurance to cover your unique requirements as a community interest company. Head here for more information.