A Community Interest Company (CIC) is a company for people who want to be involved in a business that benefits the community (the population as a whole or specific group), rather than just the owners, managers or employees – in essence a social enterprise.
A CIC can be a public company limited by shares, a private company limited by shares, or a private company limited by guarantee. A CIC may not be a charity but a charity can own a CIC to run its trading activities. Unlike other organisations, once a CIC is set up it must continue until providing benefit to the community until it enters a formal insolvency process, it is dissolved or it is converted into a charity.
A CIC is a limited company, therefore it is the company that is liable for its debts and contracts it has entered into and it is not those running it who face personal liability. Should a CIC be facing financial difficulty trustees can be assured that they are not personally liable for its principal debts should a formal closure or insolvency be necessary.
All Community Interest Companies feature an “Asset Lock” – a number of assets that must be put to one side and left more or less untouched. The “Asset Lock” can provide a useful tool to allow a rescue or restructure to be achieved, or in the event of a liquidation may provide a useful pool of assets/funds to be made available to creditors.
A Community Interest Company has the full range of corporate insolvency procedures available to deal with its financial difficulties:
- Company Voluntary Arrangement
- Voluntary Liquidation
- Compulsory Liquidation
The first 3 are driven by the directors, the last is predominantly by a creditor through the court.