Is a CIC right for you?
CICs are ideal if you want to trade for social purpose but need flexibility that charities cannot offer - such as paying dividends to investors, competitive salaries to founders, or operating in ways that are not exclusively charitable.
Understand how CICs compare to charities, co-operatives, and community benefit societies before deciding.
Social enterprise structure options
CICs are one of several options for trading with social purpose. Your choice affects tax treatment, funding options, and regulatory oversight.
Community Interest Company (CIC)
Most popular structure - asset lock, 35% dividend cap, regulated by CIC Regulator. Online formation costs £115.
Company Limited by Guarantee (CLG)
No shareholders or share capital, members' liability limited to nominal amount (often £1). Surplus reinvested. Popular for non-profit trading.
Charitable Incorporated Organisation (CIO)
Registered with Charity Commission, tax advantages, but must have exclusively charitable purposes. Cannot distribute profits.
Community Benefit Society (BenCom)
Registered with FCA, one member one vote, asset lock mandatory, can issue community shares. Withdrawal terms limited.
Co-operative Society
Registered with FCA, owned and run by members, one member one vote. No automatic asset lock (unlike BenCom).
Unincorporated Association
Simple to set up, no registration required, but members have unlimited personal liability. Suitable only for small, low-risk activities.
Social enterprise guidance (opens in a new tab)
CIC or charity? Charities get tax advantages (Gift Aid, Corporation Tax exemption) but must have exclusively charitable purposes and cannot pay dividends. CICs can pay dividends and have broader purposes, but pay Corporation Tax like ordinary companies.
If your purposes are exclusively charitable and you want tax advantages, consider registering as a charity.
Define your community purpose
Before forming a CIC, you must clearly define the community you will serve. The CIC Regulator must be satisfied that your activities genuinely benefit this community.
The community interest test
This is the fundamental requirement for becoming a CIC. You must convince the Regulator that a reasonable person would consider your activities benefit the community.
A CIC must satisfy the Regulator that a reasonable person might consider that its activities are or will be carried on for the benefit of the community.
Definition of community
Can range from entire populations to specific disadvantaged groups or geographic areas - must be broader than just company members
Ongoing requirement
The CIC must continue to satisfy the community interest test throughout its life
Excluded from CIC status
Political parties, political campaigning organisations, and their subsidiaries
Not permitted
Benefiting only members or employees; wide range of political activities
CIC guidance chapters (opens in a new tab)
Excluded from CIC status: Political parties, political campaigning organisations, and their subsidiaries cannot be CICs. Activities benefiting only members or employees do not pass the community interest test.
Choose your CIC structure
CICs can be limited by shares or by guarantee. This affects how you can raise funding and whether you can pay dividends. You cannot change between these after incorporation.
CIC structure types
Limited by shares allows dividends (within caps) and is suitable for attracting investment. Limited by guarantee reinvests all surplus and is more common for pure social purpose.
Limited by guarantee
No share capital, members guarantee nominal amount (often £1), no dividend distribution, uses Schedule 1 model articles
Limited by shares
Allows dividend payments (subject to caps), can attract investor capital, uses Schedule 2 or 3 model articles
Schedule 1 articles
For companies limited by guarantee without shares
Schedule 2 articles
For companies limited by shares with dividends restricted to asset-locked bodies only
Schedule 3 articles
For companies limited by shares with unrestricted dividends (subject to 35% cap)
Conversion between types
Not possible - cannot convert from guarantee to shares or vice versa after incorporation
CIC model articles (opens in a new tab)
Prepare your community interest statement
Form CIC36 is your community interest statement - a public document explaining what your company will do for the community. This is reviewed by the CIC Regulator before your company can be registered.
Form CIC36 requirements
Your statement must clearly explain your community, your planned activities, and how the community will benefit. Be specific - vague statements cause delays.
Form CIC36 is the community interest statement confirming the company will provide benefit to the community. It is placed on the public register.
Section A - Company name
Must end in CIC, C.I.C., or Community Interest Company (Welsh equivalents permitted)
Section B - Surplus distribution
If donating to charity, CIC or asset-locked body, must include wording 'with the consent of the CIC Regulator'
Section C - Declaration
Directors sign declaration confirming company will not be an excluded company (political party or campaigning organisation)
Public availability
CIC36 is placed on public register and available for download
Form CIC36 (opens in a new tab)
Register your CIC
Submit your incorporation documents to Companies House. The CIC Regulator reviews your community interest statement before registration is approved.
Complete the formation process including Form IN01, CIC36, memorandum, and CIC-compliant articles of association.
Understand the asset lock
The asset lock is what makes a CIC different from an ordinary company. Once your CIC is formed, assets are permanently locked for community benefit. This cannot be removed or overridden.
Learn how the asset lock works, what transfers are permitted, and what happens to assets on dissolution.
Asset lock essentials
The asset lock prevents distribution of assets except for full market value, to other asset-locked bodies, or for community benefit purposes.
The asset lock is a statutory safeguard ensuring CIC assets (including profits) are used for community benefit, not private gain. It is a permanent, compulsory feature that cannot be removed from any CIC.
Legislative basis
Companies (Audit, Investigations and Community Enterprise) Act 2004 and Regulation 23 of the Community Interest Company Regulations 2005
Effective date
1 July 2005
Geographic scope
UK-wide (England, Wales, Scotland, Northern Ireland)
Cannot be removed. Unlike voluntary asset locks in other company types, the CIC asset lock is statutory and permanent. You cannot vote to remove it, and it continues even if you convert to another company type.
Dividend and interest caps
CICs limited by shares can pay dividends, but the amount is capped to ensure most profits are reinvested for community benefit.
Dividend cap for private investors
Maximum 35% of distributable profits can be paid as dividends to private investors. At least 65% must be retained for community purposes.
Aggregate dividend cap
Maximum 35% of profits can be paid as dividends (65% must be reinvested for community benefit)
Per-share dividend cap
Removed (previously 20% per share, abolished 1 October 2014)
Dividend cap exemption
Does not apply to payments to named asset-locked bodies in the articles
Performance-related interest cap
Maximum 20% above Bank of England base rate on performance-linked debt
Effective date
Current caps apply from 1 October 2014
CIC dividend and interest caps (opens in a new tab)
Ongoing compliance requirements
CICs have additional compliance obligations beyond ordinary companies. The annual CIC report (Form CIC34) is mandatory and demonstrates continued community benefit.
Annual CIC reports, asset lock obligations, dividend cap calculations, and CIC Regulator oversight.
Annual CIC report (Form CIC34)
Every CIC must file an annual community interest report with their accounts. This describes how the company has benefited the community during the year.
All CIC directors must prepare an annual CIC Report (Form CIC34) filed with accounts, regardless of CIC size or any filing exemptions.
Filing fee
£15
Deadline
Filed with annual accounts (within 9 months of accounting reference date)
Purpose
To show the CIC continues satisfying the community interest test
Required content
Description of activities and community benefit, director remuneration, asset transfers, dividends paid, stakeholder consultation
Report types
Simplified (most CICs) or detailed (for CICs with dividends or performance-related interest)
CIC report guidance (opens in a new tab)
After registration
Once your CIC is registered, you have the same basic obligations as any limited company, plus CIC-specific requirements.
CICs must register for Corporation Tax within 3 months of starting to trade.
CICs need a business bank account in the company name.
CICs must file accounts with Companies House within 9 months of their accounting reference date.