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THRIVE THROUGH CORPORATE SOCIAL RESPONSIBILITY : Companies with consciences; Changes in the law mean that supporters of community initiatives will soon have a new way of making a commitment. Simon Littlejohns, a partner at accountants and business advisers PKF in Birmingham, reflects on the fresh opportunities.

Social enterprises will soon have a new choice of legal entity available to them, the community interest company, CIC.

The first CICs are likely to be registered this summer, so it is important that the social entrepreneurs, who may be thinking about incorporation, understand their key features and the legal rules which will apply to them.

So why could this change be of interest?

Put simply, the new CICs will be very flexible ways in which to organise and manage social enterprises or community interest groups, while at the same time giving valuable protection of limited liability status to the group's founders, ie its members.

A CIC is a new type of company. Like other existing companies, CICs will have a two tier structure, with members and directors. A CIC will be able to acquire, use and deal with all types of property and other assets, enter into contracts and other legal agreements, employ staff, borrow funds and give security for borrowings.

CICs will be limited by shares or by guarantee. A unique feature is that, if they have shares, certain levels of dividend can be paid on investor shares However, there will be a statutory cap on dividends, as well as a cap on interest levels on certain loans.

The CIC registration process will involve submission of a number of statutory forms, a constitution anda community interest statement with payment of appropriate fees.

It is likely that there will be two fees. One is for registration by Companies House and the other for registration with a CIC Regulator. Effectively, CICs will be regulated by, and be accountable to, both the Registrar of Companies and the CIC Regulator.

Like existing companies, CICs will have to file annual company returns, plus additional material such as their annual community interest statement. All this information will be accessible to the public.

It will be the CIC Regulator's responsibility to ensure the organisation is one that meets the community interest test and the CIC Regulator will monitor the delivery of benefit to the public on an ongoing basis.

The community interest test will be determined by whether a reasonable person might consider that the company's activities are being carried on for the benefit of the community. This can be the community as a whole or a part of it and can also include overseas communities. Some activities will not be allowed to be undertaken through CICs, such as party political activities and lobbying for changes to the law.

The CIC Regulator will have a range of supervisory powers, similar to those available to the Charity Commission. The CIC Regulator's permission will be needed for a range of matters, such as a change of name, changes to the CIC's objects and certain transfers of property and assets.

Social entrepreneurs will still have other options open to them.

Other legal forms, such as traditional companies limited by shares or guarantee, will remain on offer. Careful thought and analysis will be needed to ensure the right choice of legal form is made for the organisation's particular circumstances. If you would like more information on how a CIC could manage a social enterprise, contact a financial adviser.

PKF advisers are available on 0121 212 2222 or email using
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Jun 7, 2005
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