Converting your limited company to a community interest company (CIC) can have some advantages and, of course, some disadvantages.
The primary reason that someone would want to convert a limited company to a CIC is to align their corporate model to their intentions. If you want your company’s primary function to be to serve the community charitably, then a CIC is for you.
A CIC provides a service to the community. Its primary function is not to turn a profit for shareholders. This is a major change from a limited company and requires a formal declaration to the government and the board to ensure that the new company structure is in line with government standards and laws.
A CIC gives you:
- Access to donations and charitable grants
- Limited liability and protection
- Commitment to your social goals
- Similarity to a limited company versus forming a charity
- Flexible structure
- Continuity of purpose
- No requirement to choose between strategic control and getting paid
The major disadvantages are:
- Some tax breaks aren’t available
- Public awareness of the CIC model is low
- Limited dividends
- Restricted use of assets
- Difficulty converting from CIC to another structure
Can you convert a limited company to a cic
To convert an ordinary limited company, the conversion process itself requires a few forms and some changes to the articles of association. You have over 5 schedules articles to choose from. Make sure you choose the right one for your company. You might need to amend a few things to tailor it to your company.
Getting a specialist is strongly advised to ensure you get it right!!
The first step is to change the articles of association to align with the regulations and laws governing a CIC.
The name will need to be changed in order to denote it as a CIC.
A special resolution:
will notify the shareholders and the government of your intent to make a change. The resolution declares the process to be taken and who will undertake it. It also defines what the CIC will look like after the change is made.
This form will need to be completed which is a formal request to convert a limited company to a CIC. When applying to convert a company to a community interest company (CIC), this form should be submitted to the CIC Regulator alongside the appropriate Companies House forms, memorandum of association and articles of association. This is the formal request to the government for permission to make the change.
The next form, NM01
This is a formal name change request. Since a CIC requires a name change that denotes it, this form will need to be submitted and approved.
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How long does it take to convert to a CIC?
Once all the paperwork is completed and submitted, the conversion usually takes about 21 business days.
There are many laws and nuances to the paperwork, the resolution, and the changes in accounting that will need to be put in place.
While many formation agents will help you make the paperwork change, it’s important to ensure that your company’s books align with the new structure. The reporting for a CIC differs greatly from that of a limited company .There’s no sense in starting your new CIC behind the curve by finding out you haven’t been tracking the right information.
Let the team at KG Accountants help you convert your limited company to a CIC, help you set up your books properly, and get your new community-forward company off on the right foot.
How we can help
Call us today on 0207 953 8913 or complete our enquiry form in order 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 then call us on 0207 953 8913. To ask us a question online click here.
Categories: cic formation, cic register, Community Interest Companies, Conversion
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