What is a Community Interest Company (CIC)?
"Most ordinary companies, even those that provide benefits to the community, are set up and run mainly for the benefit of their own members and employees.
Community Interest Companies (CIC`s) are different. Their primary purpose is to provide benefits to the community, rather than to the individuals who own, run or work in them, and their profits are Asset Locked.
The statutory `Asset Lock` is a fundamental feature of CICs. Asset Lock is a general term used to cover all the provisions designed to ensure that the assets of a CIC (including any profits or other surpluses generated by its activities) are, subject to meeting its obligations, either permanently retained within the CIC and used for community purposes for which is was formed, or transferred to another asset locked body, such as another CIC or charity.
Rather than thinking in terms of CICs being non-profit making, they should be thought of as making profits for their community purposes.
In the legislation, the core principle of providing benefits to the community is set out in terms of the "Community interest test".
The community interest test is a test of the motivation or underlying purpose of a company`s activities. In order to satisfy the test a company must show that a reasonable person might consider that the purpose towards which its activities are ultimately directed is the provision of benefits for the community or a section of the community. Although it is not necessary that each activity carried on by the company must in itself be directly beneficial to the community, it is important that everything that a CIC does should in some sense contribute towards achieving a purpose that is beneficial to the community.
All companies applying to be registered as CICs must provide the Regulator with evidence that they will satisfy the community interest test. To enable the Regulator to decide whether they will satisfy the test or not, applicants are required to deliver a community interest statement to the Registrar."
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