The Do’s and Don’ts of Forming a CIC Company

Preparation is EVERYTHING!

Often when getting started with a project it’s easy to make mistakes. Few processes are truly intuitive and without direct and rapid feedback, one erroneous assumption quickly becomes many. Add to this the difficulty of streamlining processes so that they are both fair and accurate and it’s easy to see why some wheels turn slowly.

Knowing what to expect, as well as what to do and to avoid doing, in the process of forming a CIC Company saves time. There’s no reason to pursue a more complicated route simply because it’s been around longer.

the purpose of forming a CIC for social enterprise is to offer some benefit to a community. Waiting six months to complete the paperwork and gain an officially registered status means six months less of pursuing that goal. 

The problems communities and neighbourhoods face are hardly going to wait for the ink to dry before intensifying.

CIC Company formation

cic formation
Forming a CIC Company

The legal structure of a Community Interest Company is a tricky one, not because of the processes and paperwork involved, per se, but because of the need for transparency. While charities face audits and must act in certain ways to maintain their status, to incorporate a CIC, certain tests need to be passed upfront.

This is why it’s best to start the registration process with a bevvy of knowledge about what is being looked for, how to exemplify that a CIC is beneficial, and a clear idea of what forms are required. 

From there it is a matter of ensuring the forms are correct the first time and that the information expect is presented without costly follow-ups and redirects.

The following two sections offer details on the by post and online registration processes. 

Formation Via Post

CIC Formation by post
Formation by post

Paper applications, submitted via post, require a total of four forms along with a £35 fee for filing. 

The forms required are:

  • Articles of Association
  • Memorandum of Association
  • IN01
  • CIC36

Of these, the CIC36 and Articles of Association are ubiquitous to all applications. The other two are paper only.

Form IN01

completing form
Completing forms

This form includes information that is covered during the online process.

Do’s

Since there is no direct feedback for the information selected here, proper research needs to be conducted beforehand. the first piece of information necessary to know is the available names for a company. If the name chosen is already taken, contains restricted words, or is otherwise forbidden, the application will be denied.

Checking with cic register is a solid way to avoid an issue but the turn around time of the paper leave room for another fresh registration to snatch up the name.

Part 5 needs specific details for any and all persons with significant control in the company. If nobody will be PSC for the company tick the box indicating such.

Box A4 needs to be ticked for the type of articles of association sent with the application.

Box L1 is ticked to confirm that those chosen as director and/or secretary consent to act in those roles.

For CICs with more than 2 directors, the IN01 continuation also needs to be completed.

Ask questions to the Companies House when in doubt about a section of the IN01.

Dont’s

Box A3 is to indicate that a company is exempt from using the word ‘limited’ within its name. A CIC ends with the letters CIC but can use limited within the name so this box needs to remain unticked.

Memorandum of Association

Contracts
Memorandum of Association

The online application covers this requirement in the process.

Do’s

It’s important that limited by guarantee or limited by shares is clearly stated and that the memorandum of association for that type of company is submitted.

All directors listed in form IN01 need to sign and date the document. 

Dont’s

The signatures required are all required on the same Memorandum. Separate forms are not required for each signature.

Formation Online

Online registration
Online Application

Completing an application to incorporate a CIC online requires fewer forms and costs only £27 fee for filing.

Articles of Association

The Articles of Asociation need to follow expected formatting and include necessary information.

Do’s

List and number asset locked bodies by clauses that correspond with respective conditions. This includes naming a Registered Society, a charity, or another CIC as the nominated asset locked body.

Use the correct schedule, 2 or 3, for dividends paid to asset locked bodies or shareholders, respectively. 

The proper Articles of Association must fit the type of company that matches. This means limited by shares or limited by guarantee.

Complete the objects clause thoroughly. This helps the Regulator considerably.

Dont’s

The director of the CIC and the CIC itself cannot be the asset locked body selected in caluse 3.5.

Remove any clauses that are stautory (shown in red) within the model.

Changes to clauses that negate statutory clauses are not allowed. 

CIC36

This form is also known as the community interest statement and is the most frequent hang up with registration.

requirements

Do’s

Completing all the sections provides clear information.

Describe the benefit to the community clearly in section A.

Describe the CICs activities and connect them to that benefit in section B. This includes the surplus statment in B.

Understand the declarations in section C to make the signature in section D with knowledge.

Confirm the number of directors listed in section D correspond to the numbers provided in the online profess or IN01.

Dont’s

A community interst statement, and a CIC, cannot be made to lobby or campaing for or against political parties or the decision of government.

In the surplus statement under section B don’t list dividends to be paid to shareholdrs if the CIC is limited by guarantee. 

How we can help

Support
Support and Guidance

It’s clear to see that working with a knowledgable source and filing online cut a lot of effort out of forming a CIC Company.

With clear guidance in preparation, the registration process can be completed swiftly, allowing a CIC to get to work while ideas are fresh and spirits are high. Reach out to the experienced accountants at KG Accounting for assistance.


Call us today on 0207 953 8913 or complete our enquiry form to book a FREE initial CIC consultation.

Require more information about CIC?

If you would like more information or would like to ask us a question about a CIC then call us on 0207 953 8913. To ask us a question online click here.



Categories: cic formation, cic register, Community Interest Companies

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