Registering as a Community Interest Company (CIC)
In order to be approved by the Home Office as a Community Sponsorship Group, your application must be made through a registered charity or community interest company (CIC). We are increasingly seeing Community Sponsorship Groups looking to register as a CIC, with recent success in doing so from a Group.
It is quicker and simpler to set up an organisation as a CIC than a charity, registering with Companies House, rather than the Charity Commission. In addition, the structure and working of a CIC lends itself more to individuals in a community who know one another, rather than being built around more formal structures. That is not to say that the governance ofa CIC is any less robust than that for a charity, but it is a different system that is solely for the benefit of the community.
You should note that one of the major differences between being a CIC and a Charity is that CICs do not qualify for Gift Aid Donations and cannot apply to the Inland Revenue to receive these. You will not be eligible for charity tax relief, so you may need to pay tax on any funds held and not spent by your Group.
It costs £35 to register as a CIC and £40 to register as a company.
There is a huge amount of guidance available from the CIC Regulator which you should acquaint yourselves with when you are applying, and do ask for help along the way. More organisations are being set up as CICs and as it becomes more well-known, more advice and support is available.
Community Sponsorship Experience
BIGG Welcome, a recent Community Sponsorship Group to receive CIC status has shared with us how they approached their application and what made it successful.
If you would like further advice or support when considering whether to register as a CIC, The Reset Team is always happy to help and assist your discussions.
Deciding whether to become a CIC
When BIGG Welcome decided that Community Sponsorship was for them, they considered whether or not they should partner with a charity, register as a charity themselves or become a CIC. They looked through the guidance from the Home Office and what was needed for Community Sponsorship in terms of status of an organisation. They heard from other Groups about the delays with the Charity Commission granting status due to the number of charities forming and were advised via a Reset Partner to pursue registering for CIC status.
Deciding who would be involved in the CIC
BIGG Welcome had a core team of 4 who were involved in the management of the Community Sponsorship project. It made sense that they would become the Directors of the CIC. It was important for the team to decide whether they would be a membership body, with Members of the Group as Directors. BIGG Welcome decided that they would have their structure based around their 4 core team members and as such, their CIC is led by their Directors.
Approaching the CIC Application
You can apply to be a CIC online or via post. The BIGG Welcome team decided to apply via post as, although the online process is cheaper, you have to complete the process in one go and they found it easier to work on paper as they worked through the process. You can find out more about the online application process on the CIC Regulator website.
The Group decided that one member of the team would lead on the work to become a CIC in order to keep the process clear and manageable. Gary, who led the application, had no prior knowledge of CICs and so started with a great deal of reading and research, and found a warren of potential links and paperwork. To manage the process and prior to picking up a pen, he;
- Printed all the forms and guidance he needed to complete, and read through all of these prior to picking up a pen in order to understand the process and terminology
- Looked at the Model Templates available from the CIC Regulator which were very helpful
- Spoke to the proposed CIC Directors on the key questions in order to answer the form fully and completely
The biggest decisions BIGG Welcome needed to make were:
- Deciding whether their CIC would be a Private Company limited by shares, a private company limited by guarantee or a public limited company. BIGG Welcome opted to be a Private Company limited by guarantee without share capital.
- Deciding whether to have personal details published. All details relating to a CIC are made publicly available on the Companies House website, so deciding whether to publish personal information such as home addresses was something to be discussed. The Group decided to not publish their details, instead using the addressof a local organisation for correspondence, having gained the permission of that organisation.
- Creating a constitution for the organisation was key. The Group had no previous knowledge of establishing one or the correct form and language. Gary spent time investigating the terminology. Now incorporated, the Directors will be looking at how the constitution works in practice. Template Articles of Association are available from the CIC Regulator, but it’s important you create what is most relevant to your Group.
BIGG Welcome didn’t get it right first time, but that didn’t stop their eventual approval by the CIC Regulator. The Group shared with us that they made 4 mistakes:
- They forgot to tick the Persons with Significant Control (H1/H2) box on the main form
- Even though the Group had decided not to publish their personal details, in his willingness to be helpful in moving the application forward, Gary placed some of his contact information on the back of the form, which was then scanned and was legible initially.
- The Asset Lock is a legal form that prevents the assets of the CIC being used for private gain, and the numbers on their registration form and on the Asset Lock form did not tally and had to be resubmitted
- The Group initially had their application rejected, as they failed the Companies House Community interest test, which is carried out on the CIC36 Form. The original application had made it sound as though the community who would benefit from the work of the organisation would be the refugee family only and not the broader community. The Community Interest Test is based on the principle of considering the question ‘If someone in the street was asked if the CIC would benefit the community, would they agree?’
When they received their rejection from the regulator, the BIGG Welcome team were invited to contact the Regulator to discuss, which they did and were given the very clear advice to refer to refugee families in the plural and to include that the community benefit was to welcome refugees. From this conversation, the Group Directors met again and re-wrote their form to demonstrate that they were welcoming refugees to Biggleswade and in doing so, were bringing the community together, using skills within their neighbourhood and reducing loneliness and social isolation so that the benefit of their work was twofold. The Group resubmitted and were successful in gaining their CIC status.
How long it took
From filling in the form the first time to approval the process took 2 months. However, the Group did extensive research in advance using the CIC regulator guidance and talking to Reset and Kings Arms, bringing the total amount of time spent on the process to around 6 months. As BIGG Welcome are the first Community Sponsorship Group to form as CIC that we are aware of, there was no roadmap for them to follow.
Recommendations for other Groups
We asked BIGG Welcome for their tips on applying for CIC status, and they told us:
- Print the form first – there is a lot of paper, but take the time to understand what is being asked of you
- Know your terminology – ‘Asset Locks’, ‘CIC36’, ‘Articles of Association’ may all be new to you and you may not know that the name of your CIC must include ‘Community Interest plc’
- Talk to your fellow proposed Directors – share your challenges and questions with one another. Everyone at BIGG Welcome brought their own skills, ideas and approaches to the application
- Decide on the details of your Asset Lock – this is a written, legal promise outlining that the activity carried out will be for the benefit of the community and setting limits on the money that can be paid out to shareholders
- Only once you have done the above should you then start writing, as you will understand what you are looking at and what is needed
- Make sure you fill in every section of the forms, and make sure you keep a copy of what you submit
Reaching out for help
Having decided to register as a CIC, BIGG Welcome reached out to Reset and Kings Arms Project to discuss their application and spoke to a member of the Reset Team who had experience of setting up a CIC. However, the best help the Group received was directly from the CIC Regulator at Companies House, who were able to give incredibly helpful, encouraging and specific advice over how to submit their application and how to rectify some of the key problems in their initial application.
Key documents used in the CIC application process
If you are a Community Sponsorship Group interested in registering as a CIC and would like to discuss this further, please don’t hesitate to contact the Reset Team.
With thanks to BIGG Welcome for sharing their experience – you can follow their journey via their website.
We have made this resource available as a downloadable PDF on the right hand side of this page - we know there's a lot to read!