Community Interest Companies (CIC)

The model combines the flexibility of a company with features that protect the community purpose:

• Separate legal identity: A CIC can enter contracts and own assets in its own name, and it continues to exist even if directors or shareholders change.
• Community benefit: A CIC must satisfy the community interest test – a reasonable person must consider its activities to be carried on for the benefit of a community and not solely for directors, members or employees.
• Compulsory asset lock: All CICs have an asset lock that ensures their assets and profits are used for community benefit and prevents them being distributed for private gain.
• Regulation: CICs are regulated by Companies House and the Office of the Regulator of Community Interest Companies. Directors must file annual accounts and a CIC Report explaining how the community interest test has been met, how stakeholders were consulted, and details of directors’ remuneration and any asset transfers.

CICs can be limited by guarantee (most common) or limited by shares. A CIC limited by guarantee cannot pay dividends; a CIC limited by shares may pay dividends but only within strict caps and conditions. In March 2025 there were over 37,000 registered CICs across the UK and more than 8,300 new CICs were incorporated in 2024/25.

Examples of genuine CICs

Not all enterprises need a CIC structure. A genuine CIC integrates trading and community benefit so that profit‑making activities directly support its social mission. Some recent examples from the CIC Regulator’s 2025 annual report illustrate what this looks like:

• Active Youth NI CIC – Founded in Northern Ireland to improve children’s physical and mental wellbeing. It delivers fun, inclusive physical‑activity programmes and prioritises funded support for disadvantaged or disabled young people. In 2023 to 2025 it supported over 7,000 children, with about 70% of income from paid‑for services and the remainder from grants. This blend of trading and grant funding allows it to reach more beneficiaries.
• Market Harborough Fixers CIC – A community repair hub in Leicestershire where people learn to fix household items instead of throwing them away. It saves waste, teaches repair skills and builds community networks. In 2024 it prevented roughly 4,688kg of waste and delivered over 2,300 volunteer hours.
• Mental Health Swims CIC – Provides peer‑supported outdoor swimming groups to improve mental health. Since becoming a CIC in 2020, it has trained more than 450 volunteers and recorded 19,000 swim sign‑ups in 2023. Surveys show 75% of participants reported improved mental health and 74% felt more connected.
• The Game Change Project CIC – Uses outdoor activities and skills‑based learning to help young people with autism, ADHD or social anxiety build confidence. When initial plans for local‑authority commissioned funding fell through, the directors adapted by diversifying income to include grants, donations and corporate sponsorship. In 2023/24 it expanded its sessions by 50% and reached over 100 young people.

These examples show genuine CICs delivering social impact alongside trading. Importantly, each mixes earned income with grant funding; the CIC structure allows them to take on paid work while reinvesting profits into community programmes and securing grants aimed at social enterprises.

Governance and regulatory requirements

A CIC faces more governance obligations than an ordinary limited company. Key points include:

• Articles and asset lock: The articles of association must contain a statutory asset lock that restricts how assets can be transferred. Transfers must be either for full market value, to another asset locked body specified in the articles, to another asset locked body with the Regulator’s consent, or directly for community benefit. If the company is dissolved, any remaining assets go to an asset locked body.
• Community Interest Test: Directors must ensure that activities continue to benefit a community and not just a closed group. Political parties or organisations established to benefit employees or members are excluded.
• Dividend cap: CICs limited by shares may pay dividends to shareholders or investors, but an aggregate dividend cap of 35% of distributable profits applies. Dividends to asset locked bodies are not subject to the cap.
• Performance related interest cap: Interest on loans linked to performance is capped at 20% of the average amount outstanding.
• Annual report and accounts: In addition to normal company accounts, directors must file a CIC Report (form CIC34) detailing the community benefit delivered, stakeholder engagement, directors’ remuneration and any transfer of asset. Even dormant CICs must submit a report explaining preparations for trading.
• Director remuneration: Directors may be paid but remuneration must be reasonable, transparent and proportionate to the company’s resources. Excessive pay may be considered a breach of the asset lock.
• Regulator’s oversight: The CIC Regulator can investigate complaints and must consent to any transfer of assets for less than full consideration.

These requirements create a higher level of accountability than a standard limited company. While less onerous than charity regulation, they represent “red tape” that founders should weigh up when choosing a structure.

Funding and grants – myth busting

Many founders believe that registering as a CIC opens the door to grant funding. In reality, funding is determined more by a strong business case and the funder’s criteria than by legal form. The CIC Regulator’s leaflet for funders notes that obtaining grants depends on factors such as the strength of the business case, market conditions and the financier’s requirements. High street banks and social investors provide loans to CICs, but they will scrutinise the organisation’s financial viability.

CICs can access some grant programmes aimed at social enterprises, for example from UnLtd or regional community foundations. However, many charitable trusts and national funders restrict grants to registered charities, and CICs do not benefit from charity tax reliefs or Gift Aid. Guidance from Charity Excellence summarises it: charities are more bureaucratic to set up but are “by far more useful for fundraising and enjoy a range of charitable tax reliefs that CICs do not,” while fundraising is “more difficult” for CICs.

Comparison with a limited company

A CIC can be more attractive to certain funders and investors than a conventional limited company because the asset lock provides reassurance that profits will be reinvested for community benefit. Ethical investors, social lenders and some grant programmes specifically support CICs.

However, being a CIC does not automatically lead to more grants than an ordinary company. The Start Up Loans guide notes that different structures are eligible for different funding schemes and that having a CIC “may limit your funding and support options,” while also allowing access to social enterprise funds and ethical investors. CICs also have fewer tax breaks than charities and must pay corporation tax on profits.

Blended income strategies

Successful CICs often adopt a hybrid income model, combining trading revenue (fees for services, contracts with local authorities, sales) with grants or donations. For example, Active Youth NI CIC generates roughly 70% of its income from paid‑for services and 30% from grants. Mental Health Swims and the Game Change Project similarly combine community funding with earned income. This approach reduces reliance on grants and enhances sustainability.

Alternative structures and when a CIC isn’t needed

CICs are not the only way to operate a socially minded business. Founders should consider whether other structures might better suit their goals:

• Limited company with a social purpose: A standard company can include a social mission in its articles and donate a portion of profits to community causes. It avoids the CIC asset lock and dividend caps but relies on director goodwill and may attract less social investment.
• Registered charity (including charitable incorporated organisation, CIO): Charities cannot distribute profits and must pass a stricter public benefit test, but they are eligible for Gift Aid, business‑rate relief and many grant programmes. They require at least three trustees and cannot pay them easily, so they suit organisations where trading is ancillary to the charitable mission.
• Community Benefit Society or co‑operative: Regulated by the Financial Conduct Authority, these models allow democratic member control and can raise community shares. They can also obtain certain tax reliefs.
• Community Amateur Sports Club (CASC): For local sports clubs, registering as a CASC with HMRC offers some charity‑type tax reliefs and Gift Aid without full charity regulation.
• Working with an existing charity or setting up a named fund: If the aim is primarily fundraising for a cause, it may be simpler to partner with an established charity or set up a named fund with a community foundation rather than forming a new entity.
• B Corporation certification: A B-Corp is a for‑profit company that meets high standards of social and environmental performance and transparency. It is a brand rather than a legal structure but may suit businesses that want to balance profit and purpose without adopting the CIC asset‑lock.

Conclusion

A Community Interest Company can be a powerful vehicle for combining business with social purpose. It offers credibility through the asset lock and community interest test and can attract social investment. But it brings governance obligations, dividend caps and limited access to some grants. For some enterprises, a conventional limited company with a social commitment or collaboration with an existing charity may provide greater flexibility.