A CIC is a type of company in the UK that aims to work for the public benefit but does not qualify for charitable status. It offers more flexibility than charities, protects assets, and has weaker eligibility criteria. However, it does not receive the same tax advantages as charities and has specific restrictions.
A community interest company, or CIC, is a specific and defined type of company in the UK. It is designed to cover companies that aim to work for the benefit of the public but do not qualify for charitable status. It brings several benefits, being more flexible than the rule governing charities. The term may be used in other countries, but it will not necessarily have the same legal implications.
An organization often prefers to be a community interest company rather than a traditional limited company in order to protect its assets. With a traditional company, management is generally expected to use and even sell assets to maximize profits; in some configurations, this may be a mandatory objective. With a CIC, the rules mean that assets generally cannot be transferred to owners or shareholders. Where assets are sold, they must be sold for a fair market price and the proceeds used to achieve the company’s corporate objectives. If a community interest company is liquidated, its assets must be transferred to another company with similar objectives.
The main benefit of running a community interest business, as opposed to a charity, is that the eligibility criteria are much weaker. There is a wider range of activities and objectives that can qualify a company for CIC status. A CIC also has much more flexibility in how it behaves than a charity. For example, you don’t have to be as rigorous about justifying that a particular decision or policy meets the organization’s stated objectives. The biggest disadvantage 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, in addition to not being a charity. As you would expect, you cannot carry out any illegal activities. Unlike a traditional company, it cannot be created with the intention of catering to a particularly narrow section of society. It cannot operate to carry out any politically motivated activity.
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