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Introduction
A community interest company (CIC) is a limited company which exists to benefit the community. A CIC operates in the same way as any other company, with characteristics of a limited company. A CIC must satisfy the regulator that it will carry out its activities for the benefit of the community. This is the “community interest test”. The CIC will have to continue to meet this test throughout its life.
CICs can have foundation (small membership) or association model (large membership) of governance. You will need to consider this carefully as membership in a CIC bring specific legal responsibilities not limited to the financial arrangements the forum enters into.
TOP TIP
If you choose a CIC structure, you will need to consider how you ensure you involve parent carers of children and young people with special educational needs and disabilities (SEND) in line with the Department for Education participation grant terms. To enable this, some CICs with small memberships, have a steering or reference group with clear Terms of Reference, who help to guide the direction of the forum. In line with the “community interest test”, a forum that is a CIC must seek the views of the wider parent carer community to ensure it is acting in their best interests.
Advantages and disadvantages
There are some advantages to becoming a CIC, which can include:
- Being a separate legal entity.
- Can enter into contracts, employ and own assets in its own name.
- Can borrow money and fund raise.
- Unlike trustees’, directors can be paid or unpaid.
- CIC will continue to exist despite changes in ownership or management.
There are also some disadvantages, which can include:
- The obligation to prepare an annual CIC report (CIC34) and evidence the CIC is still meeting the “community interest test”.
- CIC legislation lists a wide range of political activities regarded as not being carried on for the benefit of the community.
- CIC’s can only close or convert to a charity or Charitable Incorporated Organisation (CIO)
Setting up a CIC
Who will take on the role of a director is a key decision you will need to consider if the forum becomes a CIC. There are restrictions on who can become a director, so you will need to consider these.
To apply to become a CIC, you will need to recruit directors. This process will include writing a role description and person specification which outlines the skills, knowledge and experience required. You will also need to check applicants’ eligibility and ensure they understand their legal responsibilities.
In law, the directors are responsible for making sure the CIC is doing what it was set up to do. In some forums, all the members of the steering group involved in running the forum are the directors, but in others this may just be a small number. For most CICs, it is usual practice for directors to remain in post until they choose to resign and to appoint any future directors.
Directors are legally responsible for running the company and making sure it sends information to Companies House on time. This includes:
- The confirmation statement.
- The annual accounts – even if the company is dormant.
- Any change in your company’s officers or their personal details.
- A change to your company’s registered office address.
- An allotment of shares.
- The registration of any charges (mortgage).
- Any change in your company’s people with significant control (PSCs) or their personal details.
- Potentially needing to file a company tax return to HMRC and pay Corporation Tax on profits.
- Declare any payments to directors, including salary for work undertaken such as admin.
All CICs have a compulsory Asset Lock that cannot be removed. The Asset Lock is designed to ensure that the CIC uses its assets (including any profits) for the benefit of the community.
If a CIC closes, then items in the asset lock will be transferred to the organisation it names. It is important to understand this may not include items such as computer equipment purchased by a grant, as the terms of grant may require returning them to the funder. It is really important to understand the role of the Asset Lock before choosing this legal structure.
CIC’s are legally required to identify and register the people who own or control a company. While forums generally do not have shares, directors can still be a PSC if they meet one of the following:
- Hold more than 25% of shares in the company.
- Hold more than 25% of voting rights in the company.
- Hold the right to appoint or remove the majority of the board of directors.
For example, if you have 3 directors in a CIC with a small membership (the directors) you will have 33% of the voting rights, making you a PSC. You will need to register this with Companies House.
CICs must produce a governance document called Articles of Association. This outlines the way the company benefits the community and how it runs. You will also need to register with Companies House online submitting your Articles of Association, relevant forms and pay a fee. Companies House have a step by step guide and model documents, which you will want to review if considering this structure.
CIC’s are regulated by the CIC regulator and companies house. You can find out more information about CIC’s, including their additional features, through the office of the regulator of community interest companies.
Online learning session
Video: Running a Community Interest Company
Becoming a CIC: forum success stories
Supporting Parentsactive to become a Community Interest Company (CIC)
After 20 years of being hosted by Hammersmith and Fulham Mencap, Parentsactive – the Parent Carer Forum in Hammersmith and Fulham – became an independent Community Interest Company (CIC) to give them more flexibility, and a structure that would help them grow.
With support from one of Contact’s Associates, Ruth Hobbs, and Contact’s partner organisation Community Matters. They:
- Explored different governance models and chose to become a CIC
- Developed their steering group
- Registered the new organisation with Companies House
- Transferred staff through the TUPE process (a legal process that protects staff pay, rights and length of service when they move to a new employer)
- Introduced a new staffing structure including electing a new Chair and CEO
- Secured a Priority Grant via Contact to help cover some of the administrative and legal costs of becoming independent.
Although becoming a CIC required significant work, becoming independent has enabled Parentsactive to work more flexibly, secure new funding and develop the services they can offer families.
Nandini Ganesh the CEO said:
“We were delighted to be in a position to move forward with increased ambition and aspiration to offer more services and support to our parents but the process of moving from a hosted organisation to CIC needed significant investment in operational setup, legal compliance and administrative support to ensure long-term sustainability.
“Our adviser from Contact, Ruth Hobbs stood with us every step of the way and guided us through the entire process and making the complicated process as seamless as possible. We are truly grateful for the support.”
Parentsactive officially became a CIC in December 2023. Since then they have gone from strength to strength. They have introduced a Wellbeing programme, secured funding for an Administrative Assistant and a new Parent Carer Advisor and secured a one-off grants from the Local Authority and health partners for their Partners in Change initiative (a borough-wide collaboration led by Parentsactive to amplify the voices of residents who are too often unheard, including disabled people, parent carers, and vulnerable communities).
Parentsactive were awarded a CIVIC Honour in 2024 for helping to build a stronger, safer, kinder borough. In 2025 they celebrated their 25th birthday!
This work was funded via the PCF’s Annual DFE grant, priority grant and via Contact’s Associate Support fund.
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Last updated: May 2026
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