A social enterprise is a business whose purpose is to help people or communities and which reinvests most of its profits for that purpose in the business or in the community. To set up a social enterprise, you will need to choose a business structure. There are several options:
For information on these types of structures, please see the relevant sections in this toolkit.
Useful websites for social enterprises include Social Enterprise UK, Inspire2Enterprise and UnLtd.
A CIC is a form of limited company designed specifically for social enterprises. To set up a CIC, you must follow the procedures for setting up a limited company and then apply to Companies House with a ‘community interest statement’, which explains the social purpose your business aims to achieve. You must also include an ‘asset lock’ in your articles of association. This is a legal promise to restrict the use of the company’s assets to the social objectives of the CIC and to limit the amount of money that can be paid to the CIC’s shareholders. To become a CIC, the company will need to be approved by the community interest company regulator. These measures ensure that the social purpose of a CIC is protected. The regulator provides a set of model articles of association which can be used by prospective CICs, helping to make the process more straightforward. Once established, a CIC may subsequently convert into a charity but it cannot convert into a standard limited company. However, you may convert an existing company or charity to a CIC. Please see this guide for details as to how to do this.
Similarly to a limited company, a CIC can either be limited by shares or by limited by guarantee. Most CICs are limited by guarantee as some funding bodies will only grant funds to CICs limited by guarantee. However, a limited by shares structure may be a more appropriate option if you think you can attract investors with dividend payments. It is important to note, though, that unlike a limited company, the dividend payments for the shares of a CIC are capped at a certain amount. TERN is set up as a CIC limited by guarantee.
Visit this site for more details on what a CIC is and what to put into your community interest statement. Visit this site for a step-by-step guide to setting up a CIC, and visit this blog checklist that ensures you submit all the right information. Lastly, here is a site that has the template and examples for the CIC36 form where you would write in your community interest statement.
Please visit the Taxation Section (Social Enterprise taxes) for more details
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