Company and community

6Perceived lack of prestige

Similarly, a community interest company may not appear to carry the prestige of a registered charity. Even though it’s hard to put a value on, a registered charity generally carries a sense of trust that inspires confidence – and which is not fully replicated by the CIC brand.

 There are also specific CIC disadvantages when compared to a standard company:

7Restrictions on dividends

Only CICs limited by shares can pay dividends, and even then they are subject to a dividend cap. As well as the standard limits on dividends under company law, only 35% of a CIC’s distributable profits in a single year can be paid out in dividends to the company’s shareholders (with a limited facility to carry forward unused dividend capacity to future years).

While the dividend cap aims to achieve a balance between dedicated benefits to the community and potential personal gain by shareholders, in some circumstances this might feel quite restrictive and discourage potential shareholders from investment. This restriction will be particularly cumbersome if the social element is only one part of the business, especially if more commercial purposes are a much greater focus.