24th July, 2015

A guest blog from Voluntary Action Worthing exploring the choice of registering as a Community Interest Company (CIC).

To be a CIC or not to be?

So, you want to set up a little group bringing people together in your neighbourhood to go for country walks, say once a month. It’s a healthy activity, gets people out of the house and is sociable. You have a couple of people who will be walk leaders, a person who is offering to publicise it and you have some routes already worked out. Simple. 

Then one of your neighbours gets talking to someone else who tell her the group should become a Community Interest Company (CIC) and that they can get the group registered. You are not sure what this means and many of the people who are signing up to go on the walks are just keen to get into the fresh air and share a bit of company. There will be almost no costs involved. So what should you do?

Don't be led into becoming a CIC. Community Interest Companies are businesses. They have social objectives but they are still businesses and it is neither suitable nor necessary for a voluntary group seeking to get people together for informal activities to register as anything much less to be a company.

So what about the group of entrepreneurs who want to set up a business to sell special needs equipment to people with disabilities? They have caught onto the CIC idea and seem to be attracted by the notion that this might suit their purposes. With further discussion it becomes clear that they have heard there might be grants available to Community Interest Companies (which traditional business don't get).

But their aim of selling goods to people with disabilities is about making a commercial profit; they have no plans to put profits back into anything other than building up the business. Well there is nothing wrong with commercial profit but it is not in itself a social objective and nor is selling to people with disabilities. This group should take their chances in the business market place (e.g. as a traditional limited company) alongside all the other companies.

Why is it beginning to happen more frequently that community groups are being encouraged to become community interest companies when this is often quite inappropriate? Why are more business start-ups looking at becoming CIC's when it is plain that their businesses are not providing social benefits?

Is it perhaps that agencies who are in receipt of funding that pays them to get more registrations have targets to meet? Or is it that the social enterprise 'mantra' has been absorbed by people who may lack the expertise to advise groups on all the other perhaps more suitable options?

Why does it matter?

Well it matters in the case of community groups because rather than encouraging small scale easily organised informal neighbourhood community development it can militate against it. It matters because it is an unsuitable 'vehicle' under which to 'regulate' community activity and it is unnecessary; it adds nothing to the activities of the group, it can burden the organisers with overstating their social objectives and producing an annual report on how they have achieved them. It matters because not every community activity can or should be 'monetised'.

Also just for the record a CIC is not a charity and does not have charitable status. It is misleading to the public and quite irritating to real charities to hear CIC's described in that way too.

It matters in the case of businesses because unscrupulous people who want to make a quick profit are being encouraged to exploit a business model that was designed to enable socially responsible and committed groups to offer something extra back into the community (and use their profits to do so). Such dodgy operators will apply for grants that are meant for the real needs-led, evidence-based socially driven projects and it is a finite pot being emptied. It should not be encouraged.

Leading directly from this unethical and muddled thinking is the increasing likelihood of the reluctance of some funders to support CIC activity (many already do not) and that could reduce opportunities for the authentic ones as well as everyone else.

So, if you are thinking of becoming a CIC make sure you look at all the choices and do not be led into something that is not suitable to your purpose, function and the ethos of your group. Your nearest Voluntary Action organisation or Council for Voluntary Service will discuss it with you and show you all the options for no other reason than because that is the right thing to do.

Nova would like to thank Voluntary Action Worthing for their kind permission to reproduce this blog.

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