It’s getting on for a year ago that I posted about organic bodies, and the quest for a form of incorporation that I actually like. One that lets you organise a group of people, is efficient and agile enough to compete with for-profit companies, but which doesn’t sell out the world down the line. A form of incorporation which you could use to start a Google, that would enable it to grow just as large, but with a guarantee of “don’t be evil” that a stock-listed corporation could never have.
When I last wrote, Limited Liability Partnerships were the newest shiniest form of incorporation. In the fast-paced, heady world of organic body legislation, early adopters have already moved on from LLPs. The cools kids are getting ready to set up the first Community Interest Company (CIC) when the new legislation comes into force in July. And they look more relevant to me than LLPs.
- A Community Interest Company (CIC) is a slight modification of an LLC (Limited Liability Company, whether by shares or guarantee, or a public limited company). This is a good start, as it isn’t a wild new structure. You can easily convert an LLC to a CIC.
- The company must pass a community interest test that “a reasonable person could consider the CIC’s activities to benefit the community”. The definition of community is quite broad. Basically, any largish group of people other than the employees or owners of the company.
- The directors have to sign and file a “community interest statement” that the company will serve the community rather than private profit motives. The company must produce an annual community interest report, filed to Company House with their accounts. This records what the CIC has done to persue the company interest in the year.
- An “asset lock” keeps capital within the company, you can only transfer assets out of it at full market value, or by giving them to another CIC or charity. If the CIC issues shares to get investment, the dividends are capped by the CIC regulator. Similary, pay that directors receive must be considered justified for the benefit they give, or the asset lock and hence the community interest test is broken. And if the company winds up, money must go to another CIC or charity.
(Links to the factsheets with this info on are at the DTI website.)
It’s not quite clear that this legislation was really designed for people setting up businesses in general areas of industry. Business link gives leisure centres and housing associations as examples. But also, to be fair, worker-owned co-operatives.
So is this thing useful? It allows normal competitive trading, and has a light regulatory touch. It doesn’t prevent corporate buyout or floating on the stock exchange. But it makes sure that if either of those things happen, the goals of the company have to stay the same, and any profit can’t be sucked out of it. Perhaps this is the new corporate form to take over the world. A cautious thumbs up. Comments?