CICs 'snowballing' in the credit crunch

Community interest company applications are ‘snowballing' in the economic downturn, according to the regulator of the legal structure.

Social Enterprise revealed earlier this year that CIC regulator Sara Burgess would be carrying out a review of the structure, with particular focus on the 35 per cent cap on dividends.

Between July 2005 and March 2009, 2,781 applications were approved for CIC status and there are a further 100 applications pending.

Burgess said CICs have been going from ‘strength to strength' because the form is an ‘inclusive brand', which is recognised as ‘embracing socially motivated companies from the embryonic to the fully fledged and all those in between'.

‘We have approved over 260 applications in the last two months alone and the CIC's popularity seems to be snowballing even in these difficult times,' Burgess said.

‘The community interest company does what it says on the tin. The concept is straightforward. It has the interests of its community at heart and proves this by agreeing to regulatory oversight of the use of its assets and social purpose and by providing transparency in the way that it operates.

‘It is this that provides confidence in community interest companies.'

Burgess said successful and thriving examples of CICs were the Expert Patients Programme, a nationwide initiative helping patients take control of their illnesses, Glasgow-based Scotcash, which supports people in financial difficulty, and Doncaster's Directions Finningley, which trains people in the aviation industry. These were all community interest companies working in the heart of communities, she said.

‘Interestingly, as a spin-off, I am finding that a real community is forming with like-minded people getting together to share their experience,' Burgess said.

‘I am also finding that there is a great deal of diversity in not only the communities being helped, but the way in which they are being helped. All this seems to fit well with the Office of the Third Sector's action plan to create greater awareness, which has a roll-out strategy for November 2009, and I will be taking an active interest in the progress of this work.'

John Mulkerrin, who founded the CIC Association last year, said identification was key to the success of CICs.

‘New entrants to social enterprise are finding CICs exciting because the legislation provides a clearly defined structure to build from and what CICs are and how the legislation can be put to use is becoming better understood,' he said.

‘Some criticism of the dividend cap is relevant, but a lot of it is from a misunderstanding of its potential and a lack of developing new solutions to attract investors. Both of these will be overcome with time.'

As part of the review, Burgess is asking for views on the limits on dividends and performance-related interest paid to investors and financiers.