Skip to main content

What is a Community Interest Company?

Posted: Mon 10 Jun 2013
Author:
The Moss Rose

The Moss Rose

Image by: mtfc

What does becoming a CIC mean to the Silkmen?

The plans for the future of the Silkmen involve conversion of the current limited company into a Community Interest Company that will in future, like its predecessor, will both own and operate the football club.

The CIC structure is relatively new, though there are good precedents for their use in football.

So what exactly is a CIC?

The current situation
Macclesfield Town Football Club is currently a “company limited by shares” which is the normal governance structure for small and medium-sized companies in the UK. In a limited company the liability of shareholders is limited to what they have invested and the structure is designed to support the generation of wealth for shareholders.

Community organisations have different objectives that are focussed on community needs. They still need to operate efficiently but within the context of creating value, not primarily for shareholders, but for the community they serve. Most football clubs at our level have more in common with this latter model.

What is a CIC?
The department of Business, Innovation and Skills describes Community Interest Companies as “limited companies, with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage.”

It is our intention to convert Macclesfield Town FC Ltd into a CIC limited by shares. Existing shareholders in the limited company will become shareholders in the CIC and the conversion will require the approval of shareholders at an Emergency General Meeting (details to follow).

The club will continue to be run, on the shareholders’ behalf, by a Board of Directors who will be able employ people, borrow money, and trade as before.

A CIC is subject to normal company law, but it must also act for the good of the community and to make the conversion we will have to satisfy the CIC Regulator (www.cicregulator.gov.uk) that the company’s objectives meet the required community benefit criteria. There are good precedents however; Stenhousemuir and Eastbourne Borough are examples of clubs that currently trade as CICs.

How does a CIC differ from a Ltd Company
Firstly, its articles have to specify the ways in which the activities of the company will benefit the community.

Secondly, the articles will include an 'asset lock' that ensures that its assets are retained in the community. The asset lock requires that all transactions must take place at full value and that the profits generated are retained in the business.

Should the assets of the business be liquidated or sold for any reason the funds generated do not pass to the shareholders but are retained by a specified asset lock body which has to be a local registered charity. In our case we intend to use Macclesfield Town (Community Sports Trust) Ltd, which has been a registered charity (Charity Registration Number 1136526) for some time, as the asset lock body.

Thirdly, the company will have the power to pay dividends (though it’s very unusual for football clubs to do so) but dividends paid to private shareholders are subject to a cap.

Because of these restrictions, a CIC will only attract investors, shareholders and directors who would be willing to invest time and money in the club for the good of the club and not primarily for profit.

Grant funding
It is very difficult for private limited companies to access grant funding from public bodies and other sources of funds. The switch to a CIC structure will open channels to grant funding that are reserved for charitable and community organisations. Though there are some limitations, the CIC will eligible to receive certain additional grants especially, in the context of the new stadium development, for facilities which will increase the health and social well-being of the local community.

Business performance
Becoming a CIC will not remove the need for it to operate effectively and manage its resources carefully. If the club runs its business badly it will still risk insolvency.

Is the CIC structure acceptable to the football authorities?
Yes. Stenhousemuir was the first UK club to adopt this structure and Eastbourne Borough operates as a CIC in Conference South.

Can a CIC revert to its original status?
Once a company becomes a CIC it cannot return to its original status as a limited company but it can become a full Charity if it chooses to do so.