A guide to third sector trading - WCVA

It’s an idea, but is it business? A guide to third sector trading
1: Getting
started
2: First steps 3: Business
planning
4: Legal and
governance
5: Funding
and
resourcing
6: Financial
controls
7: Managing
growth
8: Management
and
governance
9: Social
enterprise
10: Sources
of support
The benefits: There are only minor benefits for small community
and charitable organisations becoming established as Community
Interest Companies limited by guarantee. Larger trading ventures
may find them more useful.
• CIC’s have most of the flexibility of ordinary companies limited
by guarantee or limited by shares.
• They are designed for and are well suited to expanding third sector
trading organisations which have significant assets to protect.
• The ‘asset lock’ arrangements means that CIC’s can be useful
for establishing partnerships with conventional businesses –
for instance, in order to attract private investment to support
a large-scale community development such as a wind farm
without risking the community assets being taken over at a
future date by the partner companies.
• The ‘community interest’ tag may underline the message for the
public that the organisation exists for community benefit. This
possible public relations benefit is the only real advantage for
most small CICs.
• So few CIC’s are being established that they are distinctive
– and this could be useful for marketing and public relations
purposes.
• CICs can be owned by charities as trading subsidiaries (though
it is not clear that this is really a benefit over other types of
subsidiary company, because charities already have a built in
‘asset lock’ arrangement).
Disadvantages:
• CICs cause confusion as additional options for the constitutional
structure of social enterprises. The confusion is exacerbated
because the alleged benefits have often been exaggerated, and
so do not make sense to newcomers when weighing up which
constitutional route to take.
• There is a small amount of extra expense (£35 annual return fee,
compared with £15 for an ordinary company).
• There is a small amount of extra bureaucracy. An annual
Community Interest Report must be written and submitted
to the CIC Regulator at Companies House to show how the
company has in fact acted in the interest of the community.
• CICs do not enjoy any of the tax benefits of charities which also
provide the ‘asset lock’ benefit.
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