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CIC form called into question

CIC form called into question
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CIC form called into question 3

Finance | Tania Mason | 7 May 2008

Nigel Kershaw, chairman of the Big Issue and CEO of Big Issue Invest, has called for reform of the Community Interest Company (CIC) legal entity, describing it as “half-hearted”.

Speaking during a panel debate at the Office of the Third Sector’s Good Deals social investment conference, Kershaw (pictured) argued the dividend lock, which prevents CICs from paying large dividends to investors, is discouraging investment.

He said that as far as he knew just two or three CICs had attracted any inward investment, adding: “It is so restricted. There is a need to open it up so there is an element of risk”.

Jonathan Bland, chief executive of the Social Enterprise Coalition, admitted the form was “under-utilised”, and proposed a ‘community interest reserve’ to provide finance for CICs.

He added he had been in discussions with the CIC Regulator over the possibility of changing some of the caps.

Charity and business better than CIC

The conference also saw criticism of the CIC form from Rose Marley, director of MOTIV CIC, a company which works to prevent truancy in schools.

During a question and answer session, she said she had been “very disappointed with the whole CIC experience to date”.

“It hurt us. It’s the right model to prove our social worth but if we’d set up as a business we’d have raised the money we need easily.”

Meanwhile, Felixstowe Community Radio has told Charity News Alert it is planning to register for charitable status, because as a CIC it cannot gain the same benefits.

“We keep getting told by funders and others that we aren’t eligible for what they offer because we are not a charity,” said the station’s chairman Trevor Lockwood.

He said he had applied for free Microsoft software through Charity Technology Trust’s CTX programme but had been told the station didn’t qualify because it was only available to registered charities.

“So I think we’re going to stop being a Community Interest Company and go for charitable status instead.”

Adrian Ashton
29 May 2008

Some research that's just been completed that was comissioned by Co-operatives UK found that social enterprises want to raise investment through equity invariably favour IPS models over CICs.

Norman Rides
Chief executive officer
The Social Enterprise People
8 May 2008

Ever since the CIC form came out I have thought that it was a solution in search of a problem. It did nothing that could not have been done a lot easier by tweaking the IPS BenSoc model. If the rules are changed to permit large didivends to investors then CICs will cease to be social enterprises and simply be return-on-investment vehicles instead. The whole purpose of social enterprise is that the social purpose is the driver of the business, not a piece of marketing fluff.

Adrian Ashton
7 May 2008

Well, I publicly lobbied the CIC regulator about 18 months ago (with some success) and attracted interest from many who started blogs both in favour of, and opposing, my actions. www.adrianashton.co.uk/articles

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