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 CIC Regulator:
• Although much of the constitutional structure of CICs is
familiar to anyone who has worked with companies limited
by guarantee and private companies limited by shares, the
introduction of a new regulatory system for community interest
companies is a significant innovation.
• The Regulator is responsible for ensuring that companies which
use this structure comply with annual reporting requirements
and do genuinely operate in the interest of the community.
• This regulation is effectively a trade off for the privilege of the
asset lock facility.
The value of CICs
The advantages: (See also section 4.2.)
• A simpler, more understandable structure: CIC’s offer a
relatively simple, standard constitutional format for social
enterprise organisations to make it easier for them to attract
commercial investments for their development. This was seen as
necessary because:
− some organisations (including larger community enterprise
groups, co-operatives, social firms etc) have often been
hampered by the need to manipulate existing constitutional
structures (such as non-charitable companies limited by
guarantee, charitable companies, industrial and provident
societies) none of which are particularly well-suited to their
activities
− the resulting hotch-potch of customised constitutional
arrangements has frightened off potential investors for some
expanding enterprises.
• The asset lock: The main purpose of CICs is to provide a form of
company which ensures that a company’s assets are locked’ to
be used only for community benefit without the same level of
restrictions which are imposed on charities.
• Community links: The regulatory arrangements are intended to
ensure that CICs create strong links between their activities and
the communities they serve.
• Less regulation than charities: CICs are an alternative to
charities. (CICs cannot be charities: the choice is either/or.) There
are some circumstances when the personal benefit restrictions
which come with charitable status are an obstacle – for instance,
when an individual entrepreneur establishes a trading venture
for community benefit but is forced to give control to the
charity’s trustees if they want to be employed by the business.
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