VIEWS ON CICS

STRATEGY UNIT CONSULTATION RESPONSES ON CICs

Most of the Strategy Unit’s 61 recommendations concerned the charitable sector and the majority of responses to the Strategy Unit report focused on individual recommendations concerning charities in the report, including registration for small charities, the status of independent schools and issues around religion.

In all, the Strategy Unit received 96 responses endorsing the recommendation, including strongly supportive comments from most of the representative bodies concerned with social enterprise. 12 of the responses expressed reservations, generally commenting on the overall number of new legal forms recommended in the report, rather than the value of the CIC itself.

Part 2 of this paper offers a selection of comments evidencing the demand for CICs, and part 3 considers the substantive comments made by those questioning the recommendation for the CIC.

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1. Sample comments endorsing the CIC recommendation       

The comments listed below are a selection of responses to the Strategy Unit’s consultation welcoming the recommendation. A number of the responses also raised questions about the scope and operation of the CIC concept, and these are considered in the consultation paper "Enterprise for Communities: proposals for a Community Interest Company" and the related working papers. Full transcripts of the responses are available from the DTI.

"The proposed new legal forms – CIC and CIO are both welcomed in principle by our Charities Practice Group and its clients." Allen & Overy

"We welcome the proposal for new legal forms and the ability to assist social enterprises, which is also clarified in guidance recently issued by the Charity Commission." Association of Charitable Foundations

"ACEVO welcomes this recommendation. The CIC legal form would be suitable for small, community-based social enterprises, improving their access to finance and allowing the lock-in of assets and profits for public interest purpose." Association of Chief Executives of Voluntary Organisations

"We support the CIC proposal as providing for the first time a recognised vehicle for many social enterprises." ACRE (Action with Communities in Rural England)

"We support this proposal. There are a number of other key points that will need to be addressed." Bates, Wells & Braithwaite

"A CIC would reflect the financial and practical aims of many organisations very well. It’s good to see the difficulties that face community enterprises acknowledged, particularly when they fall between the stools of small business and charities." The Big Life Company

"CICs may be the route for many national organisations, in particular those giving information and advice as a network, as well as local ones" Bridgnorth Voluntary Action

"The CLA supports this proposal" CLA (Charity Law Association – the largest association of charity lawyers)

"It is natural that we should welcome legislation which will enable a wide range of social enterprises and community businesses to thrive" Charities Aid Foundation

"The existence of this new legal form will be of great value for community development and regeneration initiatives who provide support for new initiatives. We fully endorse the analysis regarding the difficulties with the current range of legal forms and expect there to be considerable demand for this form." Community Matters (national federation for community associations)

"We must stress that we do not need to see this as an alternative to the modernisation of Industrial and Provident Society legislation, but as a complimentary measure to provide choice for social entrepreneurs" Co-operative Party

"The development of a CIC model is particularly welcomed as it potentially had a range of benefits for small-scale community organisations, often for whom other legal forms are not suitable. This is important for rural areas…" The Countryside Agency

"The DTA welcomes the proposals for a new CIC and believes that this will be of direct interest to some of our members" Development Trusts Association

"We view this proposed legislative change as a major step forward in the development of the social business concept" Furniture Resource Centre

"Members believed that the proposed CIC would make social enterprise activities easier. The current use of the Company Limited by Guarantee thwarts enterprise and the Industrial and Provident Society model is too cumbersome." Exeter Council for Voluntary Service

"The recommendation to establish a CIC for social enterprise to enable improved access to finance, create a stronger ‘brand’ and preserve assets and profits for social enterprise is supported in principle." Guy’s & St Thomas’ Charitable Foundation

"The idea of a CIC especially designed with community based not-for-profit organisations in mind holds a good deal of interest for us." Housing Corporation

"NCVO welcomes, in principle, the proposals for a Community Interest Company. In due course we will want to respond to the proposed technical consultation." NCVO (National Council for Voluntary Organisations)

"We agree that the corporate forms currently available do not fully meet the needs of the not-for-profit sector" National Housing Federation

"The CIC would be a welcome addition to the range of legal forms that voluntary organisations can choose from" Northern Ireland Council for Voluntary Action

"SCVO welcomes the proposal to establish a Community Interest Company form, to be available to social enterprises across the UK." SCVO (Scottish Council for Voluntary Organisations)

"We support the development of a modern legal framework for organisations such as ourselves. The CIC is potentially very interesting, but perhaps not yet fully thought through." Servite Houses

"We welcome the proposals to introduce CICs and CIOs. The current tension between charitable law and company law has led to a number of barriers to development of social enterprise and increased administration and bureaucratic muddle for those who do break through them." Social Enterprise East Midlands

"SEL welcomes the proposals to reform the legal framework for social enterprise. We agree with the difficulties that have been identified with current legal forms. We agree with the characteristics [of CICs] set out in [the SU report]… We believe that if this model is to have any use as a vehicle for delivering public services and for a range of other social enterprise activity, these enterprises will have to operate on a reasonable scale and have clearly set out mechanisms for involvement of a range of stakeholders in their governance." Social Enterprise London

"The concept of the new CIC vehicle was seen as adding to the company structure options and thus a good thing." Sports and Recreation Trusts Association

"The report recommends a new legal form for social enterprises as Community Interest Companies as identified in the review. The Assembly Government welcomes this proposal and believes that there is a benefit in providing this clarification." Welsh Assembly Government

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All the substantive responses to the Strategy Unit’s report that questioned the CIC recommendation are quoted below. In the main, they expressed concern about the range of legal forms recommended by the report. This and other issues raised are considered in the consultation paper "Enterprise for Communities: proposals for a Community Interest Company" and the related working papers. Full transcripts of the responses are available from the DTI.

"It would be pointless if the new entity were much the same as a company, but with more rules" ICAEW

"We are doubtful about the need for this proposed new legal form. We would argue that the existing provisions of the Companies Act are in fact adequate to ‘lock’ assets e.g. under s.17. If the objection is raised that even this may be overcome with a s.425 scheme, such objection would seem to underestimate the protective powers of the court under that section…[etc]" Bircham Dyson Bell

"We understand the attraction of a greater choice in legal structures for organisations that exist for public benefit. However, we are not convinced that the CIC is sufficiently different from the IPS to be really necessary and are concerned that a proliferation of legal forms may confuse both the wider public and people wishing to set up a not-for-profit body or a social enterprise. The difficulties with the current legal forms set out in [the SU report] could all be resolved by reform of IPS legislation. They do not require a new legal form… Many features of the proposed CIC remain unclear and we look forward to the technical consultation paper." Co-operative Union Ltd.

"Whilst we are not concerned about plans for yet another legal form to add to the list, we are not convinced that there is a particular need for a new CIC… Overall, the case for a new legal form for Public Interest Companies such as the CIC is far from conclusive. In many ways it seeks to solve the problems of the sector through cosmetic issues, rather than choosing to grapple with some of the harder issues in the sector such as who bears the risk when these organisations are used to deliver public services, and whether private finance should or should not be involved." Institute for Public Policy Research

"Too many legal forms are to be created. I suggest consideration, if charities are enabled to trade more freely ie recommendation 3- the creation of a charity holding the assets and running the business. No equity return is envisaged, merely loan interest so this could then be included within the new style trading charity". The Middle Temple

"We acknowledge the current lack of a dedicated structure for the social enterprise and that the IPS legislation is outdated and overdue for reform. However we are concerned that the introduction of three new forms of entity [CIC, CIO and Co-operative/Community Benefit Society] will cause increased confusion both within the sector and the general public… Specifically, we believe that there will be a widespread lack of understanding as to how a CIC differs from a Community Benefit Society or, indeed, from a CLG with objects beneficial to the community. Our view is that further detailed consultation is required before the recommendations relating to these new forms of entity are taken further, with the aim of reducing the number of legal frameworks available." PricewaterhouseCoopers

"It is not clear why three different legal forms [CIC, CIO and IPS] are required. It would avoid confusion and simplify matters if there was only one form which was flexible enough to cope with the differing circumstances." Scottish Charity Directors Finance Group

"... the creation of such a new entity may serve to create confusion without any tangible benefit being delivered." Wills and Equity Committee of the Law Society

"The CIO proposal is very welcome but the case for such a wide range of other organisational forms was not felt to have been made. In particular, is the IPS form still needed if the others are introduced?" Directory of Social Change

"... the creation of a strong new brand might confuse and detract from the charity brand. In so far as CICs can be involved in activity that is non charitable this could be detrimental to the strictly charitable sector." Association of Corporate Trustees

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