If you’re interested in incorporating a CIC, look no further. This will guide you through the CIC company formation and registration process.
Community Interest Companies (CIC) were first created in 2005. Since then the number of CICs registered in the U.K. reached 25,717 as of February 15th.
These organisations provide vital services to some of the most vulnerable people. Through compassion and social support, they help communities care for their own.
Organisations such as Provide are registered CICs who work to provide necessities. They serve the community through distribution and assistance programs for the less fortunate.
They have shown themselves resilient in the face of Covid. Their success is only one of many wonderful CIC stories from the U.K.
Maybe you see all their success and consider creating a CIC of your own? But, the CIC company formation and registration process is not a simple one.
CIC formation requires the applicant to complete the CIC registration forms. These forms require detailed information of the CICs purpose, mission, and function.
If you’re feeling a little overwhelmed with this process, don’t worry. We created this detailed article to help you successfully create your company.
CIC Company Formation and Registration Process
A CIC holds a very unique position in the U.K. These organisations are neither for-profit exclusively nor are they a charity. These companies are businesses seeking to improve the well-being of society.
These organisations perform an essential function for many in the U.K. Before they can start their good deeds though, they must officially register.
The CIC registration process is somewhat reminiscent of creating and establishing an LLC. An LLC is a limited liability company. These organizations register through the Companies House.
The Companies House is a government agency whose job is to register all new companies. Companies House registers CICs and verifies their purpose. Since CICs are not exclusively for-profit or non-profit it’s less difficult to prove your charitable cause.
Charities must undergo extensive review to ensure they are acting for non-profit purposes. CICs have much more leeway when it comes to qualifying as a positive social organisation.
The focus is not on proving they receive no revenue from their acts. Rather, they must demonstrate that what they do matters in the community.
How Should You Register Your CIC?
A CIC company should be careful which method of registration they choose for incorporation. For any company, not just a CIC, there are generally two methods of registering. These options are “limited by shares” and “limited by guarantee”.
In a limited by share CIC, the company operates as a public entity. Investors can invest in the CIC through the purchase of shares. These shares are given a set price. The price of the share determines the amount of liability the investor has in the company.
One of the best parts of a limited by shares company is it has more opportunity. The shares are an appealing investment opportunity for all kinds of investors.
Since under this system investors may receive a dividend, it is appealing. However, they are only allowed a certain percentage of the dividend under law.
With a CIC limited by guarantee, each individual is a member of the CIC. Under this designation, the Articles of Association determine the level of commitment. Members must commit to the guarantee. This means if the company fails they must pay the amount they committed to.
A CiC under this designation can only pay wages to its members and employees. There are no investment opportunities for investors in shares of the company. But, the appealing aspect of this designation is its private status.
Public companies tend to come under more heavy regulation and scrutiny. When selecting your preference be careful, since you cannot reverse the designation.
The CIC36 form is the primary document for starting your CIC. This form is vital in determining your CIC’s eligibility. Before submitting this form, you should thoroughly understand it.
This form has 4 main sections, A, B, C, and D. Each section must be completed and submitted to the Regulator of CICs.
The Regulator of Community Interest Companies is in charge of the approval of a CIC. They investigate the purpose and mission of the CIC and determine if it meets the criteria. Therefore submitting this form is an important part of establishing your CIC. To obtain approval you must complete each portion of the form persuasively.
Section A of the CIC36 form is where you will describe your demographic. What is the group of people your CIC hopes to help? This could be young inner-city men, single mothers, etc.
Section B is where you deep dive into your “how”. How will your company work with these communities and improve their well-being? Go into plenty of detail about this topic.
Sections C and D are the more simple straightforward sections. In section C your members confirm they are not affiliated with politics. In section D all directors must sign off as participants.
Without every director’s signature, the form won’t gain approval. This means you need an e-signature or a wet signature, not simply a typed-out signature.
Setting Up Your Articles of Association
Your CIC registration requires you to complete the Articles of Association. These forms are specific to the purpose and designation of your CIC. These articles are unique depending on whether you are limited by shares or guarantees.
A CIC limited by shares completes a separate form from those designated by guarantee. These forms are somewhat similar, so there will be some degree of overlap. For the CIC limited by shares, you must complete the form specific to this designation.
This form requires all members to be directors in the company, all directors are members, and it is a CIC limited by shares. This is for those designated as a small membership.
There is a different form for a large membership. For the large membership, the CIC must be limited by shares and have more members than directors.
The general structure for a CIC limited by guarantee is similar to those limited by shares. For a small membership, the company must be limited by a guarantee. All members must be directors and all directors must be members.
For large membership, the CIC must be limited by guarantee. There must be more members than directors. The primary distinction is in your registration and how this impacts your company’s financial management.
The Memorandum of Association and Asset Lock
Similar to the Articles of Association, the Memorandum of Association is a foundational document. This document essentially designates all of the members of the CIC for your company.
All members must sign and date the memorandum for it to be official and approved. Once the members complete and sign this document they are technically always associated in some manner with the company.
The Memorandum and the Articles of Association are both essential for the “asset lock”. The asset lock is an important part of establishing a non-profit and a CIC. Asset-locked corporations are one of the primary ways a CIC differs from a traditional business.
A non-profit and a CIC are both asset-locked companies. This is because they occupy a position of trust and are given more freedom to operate. But, they are limited by where they may move their assets. This helps ensure proper government oversight.
What Are People With Significant Control?
A person or people of significant control are individuals of importance in the execution of the CIC. This individual plays an important role throughout the entirety of the company.
These individuals must own at least a quarter stake in the company and hold a significant voting position. This means their opinion and concern for the company holds significant weight over the company’s operation.
They have the right and authority to override and remove board members of the company. They also appoint new members to the board of trustees when necessary.
You must select this individual carefully. Typically they are a foundational member of the company. Therefore, they are connected with the original goals of the CIC. This is not a requirement. But, it tends to work this way.
To register the person or people of significant control you must submit their details to the register. You should include their personal details such as their name, date of birth, and primary residency.
Designate how much stake in the company they have as well as their voting power. The minimum is at least a quarter. But, they can exceed this level of authority.
Standard Industrial Classification Codes (SIC) Codes
Standard Industrial Classification Codes (SIC) are the government’s designation for your company’s operation. Each code is unique for a specific function the company performs.
This isn’t unique to CICs, however. These codes can apply to tech companies, food production, and petroleum handlers. Essentially, the code specifies what you produce. Or, what service you provide.
As a CIC you operate as both a business and a community benefit group. Therefore, when you file your foundational documents you should specify your services.
The CIC Company Formation and Registration Process
Your CIC company formation and registration process may seem a little complex at first glance. At K.G. Accountants we can help you get your CIC registration forms completed within 24 hours.
As one of the the leading CIC Formation agents in the united kingdom, We can get you through the process with ease. And, we also provide an extensive variety of post incorporating accounting services.
Our services span every step of the process. So don’t stress out, let us help you.
Please call us at 0207 953 8913 with any questions you have. Or, fill out our form online for a free consultation!