Community Interest Companies in UK: CIC Directors’ Responsibilities

Every CIC must have directors. Directors have statutory obligations they must meet.

As vital parts of the structure and operation of a CIC, it’s important to understand what directors do, how many are needed in a CIC, and the specific duties legally required of each director.

Who are the CIC Directors?

The directors of a CIC hold a significant position of trust, just as in any other company, and standard company law imposes on them a variety of obligations to the company.

The directors of CIC are in charge of making sure the company fulfils its legal and other duties.

CIC directors are accountable for making sure the business is operated in a way that will continue to pass the “community interest test,” in addition to these general duties. In actuality, this will include taking into account the needs of the neighborhood that the CIC is meant to support.

How Many Directors Does a CIC Need?

You must have at least one shareholder and director if your CIC is share-based. There is no upper limit to the quantity you may possess.

A CIC that is guaranteed-limited must have one or more directors or subscribers. The bank or funding organisation you’re working with can demand three.

Duties of a CIC Director

The general obligations that directors have to the firm are codified in the Companies Act of 2006.

According to the Companies Act of 2006, a CIC director has the following obligations:

i. Adhering to the company’s authority

ii. To act in a way that, in good faith, he or she believes would most likely help the company fulfil its social responsibility, taking into account (among other things):

  • the likely long-term effects of any decision;
  • the interests of the company’s employees;
  • the necessity of fostering strong business ties with clients, suppliers, and others;
  • the company’s operations’ effects on the community and the environment;
  • the desirability of the company.

iii. To act independently at all times in the best interests of the CIC and the community it serves.

iv. To use due diligence, skill, and care.

v. To prevent conflicts of interest

vi. Refrain from accepting benefits from outside parties.

vii. To express an interest in any prospective deals or agreements as well as any current agreements or transactions, if appropriate.

John: A (Fictional) CIC Director

A Community Interest Company (CIC) dedicated to bridging the gap between underprivileged communities and top-notch education has recruited John as a director. Though excited about the chance, he was well aware that his new position came with heavy responsibilities as outlined in the Companies Act of 2006.

1. Complying with Company Authority: John was dedicated to comprehending Community Bridge’s articles of association and making sure that his decisions were in keeping with the authority given to him by the business.

2. Acting in Good Faith: John made judgements based on a real belief in the social responsibility of the business. He considered any decision’s potential long-term repercussions while always keeping the needs of the staff of the organization in mind. Strong commercial relationships with customers, suppliers, and other parties were essential, and the company’s operations had a big impact on the local area and the environment.

3. Independence: For John, independence was essential. To prevent bias and make sure he was operating in the best interests of Community Bridge and the community it served, he frequently sought outside viewpoints.

4. Due Diligence, Skill, and Care: John showed devotion and care in his position by attending training sessions to hone his abilities and meticulously conducting research before making judgements.

5. Eliminating Potential Conflicts of Interest: John established a clear company policy to manage possible conflicts of interest after becoming aware of them, assuring accountability and openness.

6. Refusing to Accept Benefits: An outside vendor approached John and offered gifts in exchange for a lucrative contract. He politely declined, abiding by his duty to forego favors that would jeopardize his integrity or the interests of the business.

7. Expression of Interest in Agreements John informed the potential partner of a link he had when a new collaboration was being discussed. He recognized it was appropriate to declare this interest to maintain transparency, even though it had no bearing on his choice.

Months passed, and Community Bridge prospered under John’s leadership. Along with being consistent with the company’s ethical goal, his judgements strictly followed the requirements outlined in the Companies Act of 2006.

His dedication to these values engendered confidence and honesty within the business, enabling Community Bridge to have a long-lasting effect on the communities it aspired to serve. It served as a brilliant illustration of how adhering to the requirements set for a CIC director promotes open, accountable, and efficient governance.

It’s important to be like John. Everything you do needs to adhere to the Companies Act, not only because it’s the law but because it’s the right thing to do.

Contact Us

At KG Accountants, we’re experts in helping businesses like yours make these crucial decisions.

Whatever you decide, make sure it’s a structure that allows you to fulfil your social mission while managing a successful organisation.

If you need ANY help with your CIC, give us a call Call us today on 0207 953 8913 or complete our enquiry form in order to book  a FREE initial CIC consultation.

Categories: CIC Directors, cic formation, Community Interest Companies

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