Advantages and disadvantages of Community Interest Companies (CICs)

cover image for blog entitled "advantages and disadvantages of community interest companies" featuring richard jobling CEO of

In the United Kingdom, the concept of a Community Interest Company (CIC) has been embraced as an innovative business model since its inception in 2005. A CIC is a special type of limited company designed for social enterprises that want to use their profits and assets for the public good. While setting up a CIC is gaining popularity among social entrepreneurs, it is vital to weigh their advantages and disadvantages before deciding on this structure for your social enterprise.

Advantages of Community Interest Companies

1. Clear Social Purpose

CICs are designed to benefit the community rather than private shareholders. They have an explicit mission to provide social impact, which can attract support from consumers, investors, and local authorities who value their community focus.

2. Asset Lock

CICs feature an “asset lock”, which ensures that assets and profits are dedicated to the community interest. This legal commitment provides reassurance to investors and grant providers that the assets won’t be diverted to purely private benefit.

3. Flexibility

Unlike charities, CICs can be more flexible in their operations. They can engage in commercial activities and offer more diverse services without the strict regulations that govern charities. This flexibility allows CICs to be innovative in how they achieve their social objectives.

4. Attracting Investment

While CICs cannot issue charitable tax receipts, they can still attract investment through shares (if a CIC limited by shares) or from social investors who are interested in the social impact as well as a financial return.

5. Brand Recognition

Being a CIC can enhance an enterprise’s reputation and brand. It signals a clear commitment to community benefits, which can be attractive to customers, employees, and partners.

Disadvantages of Community Interest Companies

1. Regulation

CICs are subject to regulation by the CIC Regulator, adding an extra layer of compliance beyond that required for standard companies. They must submit an annual Community Interest Report and accounts to the Regulator, detailing how they have pursued the community interest.

2. Distribution and Dividend Caps

To ensure that profits are primarily used for the benefit of the community, CICs have caps on dividends and interest that can be paid out. This can make it less attractive for potential investors seeking maximum financial returns.

3. Limited Privacy

CICs are required to make certain details public, such as the remuneration of directors. This level of transparency may be more than some founders are comfortable with.

4. Conversion Challenges

If a CIC wishes to convert to a different kind of business or a charity, the process can be complex and restrictive due to the asset lock and the need to maintain the community interest.

5. Less Recognition Than Charities

While the CIC brand can be advantageous, it does not carry the same level of recognition or trust as a registered charity. This can impact fundraising efforts, as donors may be more likely to contribute to a charity due to tax incentives and established credibility.


Community Interest Companies occupy a unique place in the landscape of British social enterprise. They blend the entrepreneurial freedom of a company with a strong commitment to community benefit. This hybrid nature makes them an appealing choice for those looking to effect positive change through business.

However, the potential CIC should be prepared for the regulatory requirements and limitations on profit distribution. It is this balance between mission and margin that makes the CIC an innovative yet complex business model.

Social entrepreneurs in the UK should carefully consider these advantages and disadvantages when determining if a Community Interest Company is the right vehicle for their social enterprise goals. As always, it is advisable to seek professional advice tailored to the specific circumstances of your proposed enterprise.


What is a Community Interest Company?

CIC Articles of Association.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

The reCAPTCHA verification period has expired. Please reload the page.