Steward ownership and the Community Interest Company (CIC)

A comparison

The CIC (Community Interest Company) limited by guarantee is a specific legal form created in the UK. It is characterized by a 65% comprehensive asset lock (can be up to 100%) and limited liability. The CIC was developed as an alternative to purely nonprofit organizational forms and has a wide range of applications across various industries. It is open to for-profit enterprises that have a commitment to benefiting the community.

The CIC limited by guarantee has been widely utilized, with approximately 22,000 companies registered under this form (2022). These companies include social enterprises, charitable organizations, clubs, associations, and community projects. The CIC ensures that profits and assets are dedicated to the community and cannot be distributed to shareholders.

The CIC has clear regulations and safeguards in place to prevent the misuse of assets. It requires the involvement of a regulator and specifies rules for the continuation of the asset lock in the event of conversion or liquidation. Conversion to nonprofit organizations is allowed. In case of liquidation, the remaining assets after repaying initial contributions are transferred to another institution with an asset lock, as specified in the company's articles of association.

In terms of financing, the CIC limited by guarantee does not provide financial shares, and therefore, only debt financing instruments at market terms are applicable. The British legislation has set a cap on interest rates for performance-based debt instruments, limiting them to a maximum of 20% of the loan amount. The CIC's financing structure ensures that the commitment to the community is not undermined.

Can a CIC be classified as a steward-owned company? It depends. A CIC with the obligatory 65% asset lock violates the principle of a full asset lock that applies for steward-owned companies. However, a CIC can decide to install a 100% asset lock and would therefore be characterized as a steward-owned company - as long as it complies with the principle of self-determination with the majority of voting shares remaining within the company. In contrast to other legal forms for steward-owned companies that can be established for any commercial purpose, the CIC limited by guarantee is reserved for those companies that have explicitly dedicated their statutory purpose to a benefit for the community.