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 keeps the assets and profits of a community interest company (CIC) for the benefit of the community rather than private gain. The articles of every CIC must contain the asset lock provisions at all times. A CIC can stop being a CIC only by dissolution, by becoming a charity or, where regulations provide, by becoming a registered society.
Legislative basis
Companies (Audit, Investigations and Community Enterprise) Act 2004, sections 30 to 32 and 53; Community Interest Company Regulations 2005, Part 6 (regulations 17 to 25)
Regulations in force
1 July 2005
Geographic scope
The Regulations extend to England, Wales and Scotland
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
35% of distributable profits (total dividends declared for the year, less exempt dividends)
In force since
1 July 2005 (Community Interest Company Regulations 2005, regulation 22(1)(b))
When a dividend can be declared
Only if the articles allow it, the members approve it by ordinary or special resolution, and it does not take the total for the financial year over the cap
Exempt dividends
Dividends on shares held by, or on behalf of, an asset-locked body are outside the cap where the Regulator has consented or the body is named in the articles as a possible recipient of the company's assets
Changing the cap
The Regulator can set a new cap with the Secretary of State's approval; it cannot take effect less than 3 months after it is published
Per-share cap
Removed for dividends declared on or after 1 October 2014 (it had been 20% of the paid-up value of a share)
Carry-forward of unused capacity
Removed from 1 October 2014 (regulation 20 revoked)
New dividend and performance related interest caps now in place (opens in a new tab)
Cap on performance-related interest
Interest is capped only where its rate depends on the CIC's performance, which is rare. Ordinary interest on loans is not capped.
Current cap
20% of the average amount outstanding
Effective date
1 October 2014 (increased from 10% to encourage investment)
Previous cap (immediately before 1 October 2014)
10% of the average amount outstanding
Calculation basis
Expressed as a percentage of the average amount of a debt, or the sum outstanding under a debenture, during the 12-month period immediately preceding the date on which the interest becomes due
Lock-in rule
The applicable interest cap is fixed at the time the agreement to pay interest at a performance-related rate was made
Scope
Applies only to debentures and debts entered into on or after the date the company became a CIC, where a performance-related rate of interest is payable
Dividends on shares held by an asset-locked body , such as another CIC or a charity, fall outside the 35% cap where the Regulator has consented or the body is named in your articles as a possible recipient of your assets.
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.
The directors of every CIC must prepare an annual CIC report (form CIC34) and file it with the accounts. The report shows that the CIC still satisfies the community interest test and is engaging appropriately with its stakeholders. Reports go on the public register.
Filing fee
£15
Deadline, private company
9 months after the accounting reference period
Deadline, public company
6 months after the accounting reference period
Report types
Simplified or detailed
Simplified report
Completed by most CICs
Detailed report
For more complex financial arrangements
Dormant CICs
Must still file a report
What the report must cover What the CIC has done to benefit the community How it consulted the people affected by its activities, and the outcome Directors' remuneration Any transfer of assets for less than full consideration, including those the Regulator consented to The detailed report is for a CIC that has paid performance-related interest on a debt or debenture. A CIC limited by shares also uses it to show dividends. It must state the amount of any dividend declared or proposed on each share for the year and explain how that complies with the dividend cap, and state the rate of any performance-related interest and the cap that applies.
A dormant CIC explains what it has done to prepare to trade. If there has been no activity at all, it states that it was dormant throughout the financial year under each part of the form.
CIC34: community interest company report (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.
Scotland guidance
CICs in Scotland follow the same UK-wide rules. However, if converting a Scottish charity to a CIC, you need prior consent from the Office of the Scottish Charity Regulator (OSCR), not the Charity Commission.
OSCR charity conversion guidance (opens in a new tab)