Share

20 per cent CIC cap must be scrapped, insists Stephen Lloyd

Stephen Lloyd, senior partner, Bates Wells & Braithwaite
News

20 per cent CIC cap must be scrapped, insists Stephen Lloyd1

Finance | Jonathan Last | 17 Dec 2012

Community interest companies must scrap the 20 per cent cap on dividend pay-outs if they are to thrive, Bates Wells & Braithwaite senior partner Stephen Lloyd said on Friday.

Lloyd, who co-founded the original idea of community interest companies (CIC), was addressing a room of CIC stakeholders and social enterprise professionals meeting to discuss the cap and other issues surrounding CICs.

Currently 20 per cent is the cap for dividend pay-outs from the initial investment. A consultation launched last month, which is still ongoing, asks, among other things, if this should be increased to 49 per cent.

Dividend cap is 'mad'

Lloyd made it clear that he sees the 20 per cent cap as an obstacle:

"I think it's mad, I really do," he said. “At the moment, because of the cap, community interest company shares are pretty unattractive to investors.

“If you want to support a CIC, whether it’s limited by guarantee or by shares, the investment return profile basically means that what you pay in interest is the same as what you gain in capital growth. Fundamentally the capital growth is there for the social purpose, rather than the investor.

“This is a changing financial era, when the government doesn’t have very much money, and we’re under huge need to bring more capital to invest into social purpose organisations. Change must be made to help CICs thrive.”

Lloyd said that ‘profit’ should not be treated as a dirty word when associated with social enterprises, pointing out that no organisation can afford to be set up for a loss.

“We do need a proper profit motive put into CICs, and we do need to give people who provide capital a reasonable return, if we want to be able to build sustainable businesses,” he said.

Lloyd also advised tax reliefs for people who invest in social enterprises and recommended a proportional regime to regulate crown funding.

Stumbling block for attracting risk capital

John Mulkerrin, of umbrella body CIC Association which hosted Friday’s event, told civilsociety.co.uk that since the consultation is still ongoing the data will not be collated into a report until next year – but from the comments he has received, it is generally agreed that the cap is a stumbling block for attracting risk capital into CICs.

The stakeholder survey can be found here.

CICs were introduced in 2005 by the then Labour government as social enterprises which are also limited companies.

There are now 7,300 CICs, 23 per cent of which are limited by shares. The CIC Association says that the CIC regulator  receives over 125 new registrations each month.

The dividend cap was raised to 20 per cent from 5 per cent in January 2010, following consultation in the previous year. There is also an aggregate cap of 35 per cent on all distributable profit.

Jeff Mowatt
Director
P-CED
8 Mar 2013

Perhaps its time to take a look at an original concept of business for social purpose which makes the case that dividend distribution incurs risk of attracting predators. There are other ways of delivering a return on investment.

Comments

[Cancel] | Reply to:

Close »

Community Standards

The civilsociety.co.uk community and comments board is intended as a platform for informed and civilised debate.

We hope to encourage a broad range of views, however, there are standards that we expect commentators to uphold. We reserve the right to delete or amend any comments that do not adhere to these standards.

We welcome:

  • Robust but respectful debate
  • Strongly held opinions
  • Intelligent relevant discussion
  • The sharing of relevant experiences
  • New participants

We will not publish:

  • Rude, threatening, offensive, obscene or abusive language, or links to such material
  • Links to commercial organisations or spam postings. The comments board is not an advertising platform
  • The posting of contact details for yourself or others
  • Comments intended for malicious purpose or mindless abuse
  • Comments purporting to be from another person or organisation under false pretences
  • Gratuitous criticism, commentary or self-promotion
  • Any material which breaches copyright or privacy laws, or could be considered libellous
  • The use of the comments board for the pursuit or extension of personal disputes

Be aware:

  • Views expressed on the comments board are left at users’ discretion and are in no way views held or supported by Civil Society Media
  • Comments left by others may not be accurate, do not rely on them as fact
  • You may be misunderstood - sarcasm and humour can easily be taken out of context, try to be clear

Please:

  • Enjoy the opportunity to express your opinion and respect the right of others to express theirs
  • Confine your remarks to issues rather than personalities

Together we can keep our community a polite, respectful and intelligent platform for discussion.

Free eNews

Charity boxes ‘could fund terrorism’, warns senior police officer

24 Nov 2014

One of Britain’s most senior police officers warned yesterday that charity donation boxes could be used...

Band Aid 30 raised £1m in first day

19 Nov 2014

Band Aid 30 became the fastest-selling single of 2014 when it was released yesterday, with 206,000 people...

Society lotteries deregulation could lead to less trust in charities, says NCVO

19 Nov 2014

Deregulation of society lotteries could impact public trust and confidence in charities, NCVO has told...

RNIB chief executive criticises ‘arrogance’ of MPs who think charities must learn from private sector

21 Nov 2014

Lesley-Anne Alexander, chief executive of RNIB, yesterday said she had a “struggle with the arrogance”...

Don't lecture us on impact when government has failed to measure its own, Wilson told

21 Nov 2014

The minister for civil society was criticised yesterday for telling charities to measure their impact...

Volunteer managers say they need a stronger representative body

21 Nov 2014

The volunteering sector needs a more powerful representative body, volunteer managers have said in response...

OSCR launches new website

20 Nov 2014

The Office of the Scottish Charity Regulator has launched a new website which includes a new search function.

Data from controversial Samaritans app to be deleted

17 Nov 2014

Samaritans has promised that all data collected by its Twitter monitoring app will be deleted and the...

Post Office enables Children in Need donations through Twitter

11 Nov 2014

The Post Office has become the first UK organisation to allow Twitter users to donate to charity through...

Join the discussion

 Twitter button

@CSFinance