CIC Association

Serving Community Enterprise

Hi,

 

Is anyone else frustrated by the fact that CICs with only 2 directors cannot apply for Lottery and Children in Need funding?

 

I would have thought that the asset lock would be assurance that the money will not be used unwisely.

 

Someone suggested that the Lottery is worried that 2 directors does not give a broad enough range of management experience, but in the commercial world a partnership can get finance.

 

However, the Lottery seems such a huge institution it might be hard to change their views.

 

Anyone else have views on this?

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Hi Debbie
yes, definitely a little frustrating. I believe the policy is in place to help prevent fraud, eg, you could have a husband and wife team as directors, which wouldnt really provide basic assurance. By having a third director it reduces this type of risk, making the fund easier to administer and approve grants. Im a two director set up too and know how you feel :-)
John
ps. Big Lottery is going to be redirecting its funding back toward the original aims, which means more limitation on CICs using it as a way to create social benefit.......the battle for funding goes on!
Funnily enough that's exactly our situation (husband and wife team). I quickly had to develop a tough skin when I realised that although we ourselves viewed that as a strength (friendly, family trustworthy, old fashioned values type of thing), in the eyes of funders it made us into some sort of Bonnie and Clyde ready to run off to the Bahamas! Ironically, one of the reasons we set up a CIC was because we had had negative experiences of charities with bigger boards of trustees, who can sometimes be only half committed, no real passion, and creative with finances.
Never mind, one of the other reasons we're a CIC is so that we don't just rely on grants and funding. But they do come in very handy when working with disadvantaged clients who can't pay their own way.
I know what you mean about a large board of trustees with only half (or less) having any real interest or passion.

Still They can get things done but just not as fast as the more passionate of us like. I guess there is room for both kinds.

Still the 2 director thing is a bind when you want to keep thing small and managable to start with.
I echo your thoughts on the frustration of trying to obtain funding from the Big Lottery with only 2 directors. We are hoping to overcome the problem by appointing 2 non executive directors with no responsibility for daily management issues. We'll try anyway!
Hi Ian, would love to know how you get on with this, please keep us posted. This is probably the route I'd go down myself. Just wondering? Do you suppose this will be the norm for most other funders? Are there any other options?

My example would of 2 directors having un-equal ownership with possible non-executives making up a board. How do you and others think this would bode with funders?

Hi Debbie! yes strange! as it seems to defeat the whole point of going down the CIC route! does anyone no the 'blue print' number of directors? and will a 'legal person' (a company) suffice from a funders perspective?

thanks nick

Up to now I have only seen problems regarding director numbers for companies with one or two, generally 3 should cover the basic concerns of funders (husband and wife team running off with the funds etc) In this respect the funders are really looking for independent governance within the company.

 

In a wider sense, how many Directors you should have should really depend on the scale of operations, if your a start up you should probably look to grow to six, opinion from some business guru's ive heard speak at events indicate it can get a bit unwieldy with more than 12 for larger, more established groups.

Thanks Jon, thats helpful do you know about the duties of directors? presumable they have to fill in a tax return each year? I've heard there is a website where you can find directors who may be interested in your project? anyone know of it?

hi Nik,

 

there are specific legal responsibilities for directors of companies that are listed in the Companies Act of 2006 that go beyond the requirement to ensure that directors are simply filing their annual returns (x3 sets of documents in the case of a CIC) and filing a corporate tax return.

 

If you used an incorporation agent to set up your CIC, I'd hope that they would have explained these to you? as well as the implications of not complying with them...?

Hi all - to (hopefully) offer some clarifications and clarify things a tad:

In terms of applying for grants, as well as the board of 3 rule, being a CIC makes not difference - you'd be looked at exactly the same way as if you were a 'regular' guarantee company with social objects and asset lock in your articles (and published research seems to bear this out)

There is an online 'dating agency' to match people with boards but its only set up for charities at the moment...
We have found the crucial issue is not usually the directors but who can sign the cheques and access the money. If it's husband and wife then you won't get funding. I know CICs with two directors that have obtained awards for all and lottery funding, so I guess it depends! But lottery are definitely not keen on ltd by share CICs.

I echo Heidi here. We recently obtained funding from Awards for All with two directors that live at the same address. We just had to stipulate that there was a third signatory and that the third, unrelated signatory had to always be one of the two signatories on a cheque. Once the bank confirmed that, they were happy. At that point, she wasn't a director, just our Children's Protection Officer, who was keen to be the senior contact on the Awards for All project. She's now a full director which might well help us with other bids. And yes, a Ltd by guarantee model is proving to be a good choice for us.

We were unsucessful with Children in Need just before the sucessful bid with Awards for All and we were not aware of their policy on this. We did get through to the telephone interview stage though, so I'm sure that they would have told us if that was the reason for rejection. Not that the rejection letter was very helpful to us. (A list of twelve common reasons for rejection pick one to suit...)

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