What’s the difference between a CIC and a social enterprise?

Image - What's the difference between a CIC and a social enterprise?

You asked, so I’ll answer – What is the difference between a Community Interest Company (CIC) and a social enterprise?

The phrase social enterprise refers to the way in which you operate and run your business or organisation. So as a social enterprise you have a social or environmental purpose at the heart of your business and you seek to reinvest any profits to do more of this good work. Like a normal business you will trade and sell products or services to generate the profits.

Social enterprise and being a social enterprise isn’t specific to a particular legal structure. A CIC is a particular legal structure – one of many different legal structures that a social enterprise could choose. For example, a social enterprise could be:

  • A Charity or Charitable Company
  • A Charitable Incorporated Organisation (CIO)
  • A Co-operative
  • A Community Benefit Society
  • A Limited by Share Company
  • A Limited by Guarantee Company
  • A partnership
  • A sole trade
  • A CIC Limited by Shares
  • A CIC Limited by Guarantee

Whichever legal structure that is chosen the organisation would include its social purpose within the documents – to make it a social enterprise.

In terms of what a CIC is – it’s a company structure where a community that you will benefit is defined. So this could be people in a particular geographical area, those with particular characteristics etc. Then you state how you will benefit this community (i.e. what activities, services or products you will deliver that will benefit them) and how you will use any surpluses/profits.

A CIC has an asset lock in place, which prevents any assets that might be left if you decided to close the CIC down from being transferred to individuals or profit making organisations. You have to transfer any remaining assets to another CIC or charity – ideally one that works with the same community as you were set up to. There’s also a dividend cap and a cap on the rate of interest that’s paid on performance related loans to stop too much of the profits being paid to investors. The other thing that CICs have in place is that once you are a CIC you can only convert to be a charity – so you can’t change your mind and convert to a for-profit business.