The CIC regulator felt unable to answer some of our questions. i wonder if you are in a position to share experiences and knowledge on this matter.
The situation is as follows
Our questions are
- We have a number of people involved in setting up the CIC who are investing in one of two ways
- people who will contribute cash in return for equity
- people who will provide their time in return for equity instead of charging for their services.
- We intend to pay dividends in line with the guidelines over time once the CIC is generating profits
- We have a CIC but we have yet to issue equity and plan not to do so until after April 2010
- Will people who invested their time in return for shares be entitled to dividend payments in the same way as a person investing cash (Nominal paid up value plus premium per share at point of investment drives the dividend calculation, as confirmed by regulator).
- Many of our team have experience of this approach in normal commercial start ups where it is termed sweat equity. The equity they are granted is identical in every way to equity sold for cash. Is that the same within a CIC equity model.
- We believe that we may be required to structure the process as several transactions within the CIC e.g. person invoices for services, CIC pays for services in equity at an agreed price which is then the driver for dividend payments.
- Whether an investment made in a CIC is eligible for EIS relief as defined by HMRC - http://www.hmrc.gov.uk/eis/
- Whether an investment made by management in a CIC is eligible to be part of an Enterprise Management Initiaitive http://www.hmrc.gov.uk/shareschemes/emi-new-guidance.htm
- Is it possible to create other share option schemes within a CIC for employee http://www.hmrc.gov.uk/manuals/essum/ESSUM10100.htm
- Is it possible to provide a Share option / Warrant scheme within a CIC - primarily in relation to providing incentives for employees, directors, partners and suppliers
We see this is a major area for clarification as it will dramatically affect our ability to get investment into the CIC over time as it develops and grows.