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

IoF calls for annual income cap on society lotteries to be raised from £10m to £100m

1 Oct 2014

The Institute of Fundraising is calling for the annual income cap on society lotteries to be increased...

GOSH Children's Charity to resume telephone fundraising with NTT

30 Sep 2014

Great Ormond Street Hospital Children’s Charity has said it will resume telephone fundraising with NTT...

Help the Hospices rebrands as Hospice UK

29 Sep 2014

Help the Hospices has rebranded to become Hospice UK to better reflect the “breadth, dynamism and flexibility”...

Ipso would have investigated Mirror over Newmark sex text story regardless of complaint

1 Oct 2014

The chair of the new press regulator has said that the Sunday Mirror story which forced Brooks Newmark...

New buying group formed to support growth of social care charities

1 Oct 2014

A new membership group was launched today to support the growth of health and social care charities and...

Work Programme architect is new director of Office for Civil Society

30 Sep 2014

Helen Stephenson is leaving her post as director of the Office for Civil Society and being replaced by...

New organisation to arrange free data security support for charities

1 Oct 2014

A new scheme matching up IT professionals from the private sector to provide free advice on security and...

JustGiving page for Manchester Dogs’ Home receives four donations a second

15 Sep 2014

JustGiving has said that donations going to an appeal for the Manchester Dogs’ Home following an arson...

Commission's new online charity search to launch soon after delay

15 Sep 2014

The Charity Commission’s searchable online register of charities is due to launch in beta this autumn,...

Join the discussion

 Twitter button

@CSFinance