Community Interest Companies - Increased Take-Up & Consultation On Dividend & Interest Caps

 
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Community Interest Companies (CICs) were introduced in 2005 as a

structure to enable social enterprises to carry out commercial

activity and deliver social benefits. The Regulator of Community

Interest Companies (CIC Regulator) recently

reported that between July 2005 and March 2009, 2781

applications for CIC status have been approved across the

UK, with 260 applications having been received in

the last two months of the period. The figures for

the last two months of the period are interesting,

as they suggest that take-up of the CIC structure may

currently be on the increase.

The CIC enables social enterprises to carry out commercial

activity and deliver social benefits. In particular, the structure

allows for investment in CICs, subject to the operation of

regulated caps on returns. The CIC Regulator issued a

consultation on the operation of these caps at the end of

March 2009.

The consultation seeks views from CICs, investors and

others on whether the various caps (the share

dividend cap; the aggregated dividend cap and the

performance related interest cap) should be altered. The

consultation makes reference to one

report which notes that social enterprises appear to make

only limited use of equity (shares) finance and that this may be a

barrier to growth for the sector as a whole.

The CIC Regulator has powers, under Regulation 22(3) of the

Community Interest Company Regulations 2005, to set a new share

dividend, aggregated dividend or interest cap.

The consultation document also reveals that of the 2507

approved and registered Community Interest Companies in the UK

as at February 2009, approximately one quarter are companies

limited by shares, the rest being companies limited by

guarantee.

Existing Community Interest Companies, investors in Community

Interest Companies and those considering establishing Community

Interest Companies may wish to consider...

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