CIC Association

Serving Community Enterprise

Hello lovely people


We're a community radio station who registered as a CIC but declared ourselves not trading until we have got a bit more sorted.  However, I think we're a bit confused about what we need to have in place before we can declare ourselves trading. 


Our volunteer working on a lot of this stuff has a business background but not much experience of the voluntary sector, so I think we're getting out wires crossed - or it might just be me being vague!


Basically, he has come back to me saying "It is a criminal offence [for the Directors] to continue trading an insolvent company. Insolvent means that outgoings are more than projected income"

And extrapolates this to mean that we can;t declare trading until we have raised all the money (have it either in hand or confirmation in writing) that we need to cover the next financial year. I understand there are also a number of costs (tax etc) involved as soon as we do start trading.


For me this presents a challenge because it is hugely difficult to raise money without actually running the company, and also I do wonder whether anyone would have set up if this was the case?


In any case, I hope this makes sense, and thanks for any contributions! It may well be that I am missing the point (I'm more of an old-school just-crack-on volunteer) but we all have very limited experience of CICs so I worry that we are applying other rules here.




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Hi Becky
feel free to give me a call on Friday afternoons on 0203 262 3044. Basically I think your worrying about nothing, it doesnt sound like your insolvent, and you can start to trade without paying tax (you have to start making a profit first!)
If your genuinely just getting yourself ready to go you have nothing to worry about, other than maybe finding a good accountant :-)
Thanks John - we seem to be working through it now but I may well give you a ring!

hi Beccy,

i'd echo John's sentiments - 'trading insolvent' is a very scary term but essentialy doesn't automatically apply to an organisation where there's more owed that it has; if it did, every company with an overdraft or who had borrowed money to start up would be in trouble...

the general rule of thumb for insolvent trading is "there's no cash, there's no sign or hope of getting any more cash, but we've decided to carry on an keep running up our debts..."

Hope that helps to clarify and reassure, and like John, am happy for you to call or email me seperately (see my profile page for contact details)

Indeed. Not to make light of it as it can be serious, it matters slightly if you get to a year end without a plan for bringing in cash and only really matters if things go wrong. There are loads of companies who traded insolvently, but made it through and nobody noticed.



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