Not all businesses are created to simply turn a good profit and go home at the end of the day, having only served their own interests and not those of the wider community as well. There are businesses, known as community interest companies (CICs) or social enterprises, are keen to use their profits and the assets that they have for the good of the general public.
They first came into existence in 2005 when the UK introduced the Companies (Audit, Investigations and Community Enterprise) Act 2004 and since then the idea has gone from strength to strength, with around 10,000 CICs registered in the first ten years since the Act was brought in. According to the Community Interest Companies Association, in fact, as of May 2016 there were over 12,000 such companies on the Regulators register.
Typically, these businesses will reinvest their surpluses back into the business or in the local community, instead of being driven by the need to maximise profits for the business owners or shareholders. They usually address a wide range of environmental or social issues, and use business solutions for the public good - so they have a truly valuable role to play in helping support the economy and ensure that it's socially inclusive and sustainable. There are some restrictions if you're interested in setting up a CIC, however. For example, your business cannot be politically motivated, it cannot be a charity and it cannot carry out illegal activities.
If you are interested in forming your own CIC, there are numerous forms you'll need to submit and it can be a bit of a minefield, but the government published some step-by-step guidance to help back in July, explaining exactly what you need to do in order to form a CIC, convert your existing company, convert a charitable company to a CIC and more so make sure you give it a good read if the idea appeals to you.
There are numerous benefits to becoming a CIC. For example, because the asset lock and community purpose of the firm are both regulated, this is very reassuring for stakeholders. There's also an expanding network and voice within the third sector that you can take advantage of - and it's certainly important to note that it's inexpensive, easy and quick to set up a CIC.
You'll also be able to enjoy more flexibility where your activities are concerned than if you were a charity, since there are no trustees and no trustee control, your directors can be paid (although this will be regulated) and there are fewer reporting requirements and administration.
Compared to an ordinary company, meanwhile, a CIC has an asset lock that's easy to set up, there is regulation in place to ensure that the CIC maintains its asset lock and continues to provide benefits to the community, and there is legal protection against demutualisation and windfall profits being paid to members and directors.
Are you looking into disaster preparedness & response plans at the moment? Call us here at HFR Solutions CIC today.