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A Community Interest Company, or CIC, is a specific and defined type of company in the UK. It is designed to cover businesses that aim to work for the benefit of the public but do not qualify for charity status. It has several benefits by being more flexible than the rule that governs charities. The term may be used in other countries, but will not necessarily have the same legal implications.
An organization generally prefers to be a community interest company rather than a traditional limited company to protect its assets. With a traditional business, management is usually expected to use and even sell assets to maximize profits; in some configurations, this may be a required goal. With a CIC, the rules mean that assets generally cannot be transferred to owners or shareholders. When assets are sold, they should be sold at a fair market price and the proceeds used to work towards the company’s social goals. In the event of liquidation of a community interest company, its assets must be transferred to another company with a similar purpose.
The main benefit of running a community interest business rather than a charity is that the eligibility criteria are much weaker. There is a broader range of activities and objectives that can qualify a company for CIC status. A CIC also has much more flexibility in its behavior than a charity. For example, it does not need to be so rigorous as to justify that a specific decision or policy meets the stated objectives of the organization. The biggest disadvantage is that a CIC does not get the same tax benefits as a charity.
There are some specific restrictions to creating a community interest company, other than not being a charity. As expected, you cannot carry out any illegal activities. Unlike a traditional company, it cannot be established with the intention of serving a particularly restricted portion of society. You may not operate to carry out any politically motivated activity.