CIC Association

Serving Community Enterprise

I wonder if you can help guide us. We are a DWP working party looking at setting up a CIC to perform several functions:

Register Assistance Dogs
Check that people have a disability that could be mitigated by a well training dog
and that the partnership passes a public access test.

Register and train assessors for the Public Access Test.
Raise public awareness of registered assistance dogs.

We want the organisation to be as inclusive as possible and to be cost neutral. There will be a charge for taking the test that will pay the assessor, but we will look to attract funding to cap this cost and give the CIC funds for marketing the new standard for assistance dogs making it easier for disabled people with enabling assistance dogs to access transport, housing and education.

What we have been unable to grasp is the difference between the shareholding and the limited by guarantee option.

If we allow every disabled person who takes the test to become a shareholder can we keep increasing the shareholding - or is that fixed at the time of formation?

Could these members be voting members or non-voting? There was some concerns that the test could be significantly altered if members lobbied. Can the shareholders be non-voting? And could there be infinite shareholders or do we have a limited number  of shares issued at formation?

What are the pros and cons of Limited by Guarantee? Could we be limited but still operate a society that people could join?

The group have decided they want a CIC, but they have asked me to find some guidance as to whether shares or limited by guarantee would be the better option.

We will have employees - is it possible for someone to be employed and one of the directors. (are they called that?) at the same time - are they be like directors of a limited company with the limited by guarantee option?

Do we need to fix the number of directors/board members at the start? How do we replace people? We want to make the organisation future proof so that the ethos stays no matter who is on the board.

We need the body to be fairly entrepreneurial to attract the funding and grow and represent the sector. But which of the two formats to pick has us confused. We want to be inclusive, but someone needs to lead. Can you have a smaller board and shareholding? Do we go shares or limited and is there something I can show the working party so we can decide, most of our working party have no experience of starting a business, some have no experience of forming a charity and none have any experience of starting a CIC! 

Is there anyone we could talk to who could give us specific advice? 

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Replies to This Discussion

Hi Beverley

My advice is to go with a CIC limited by guarantee. CICs with shares are less common, and tend to be used where the CIC is looking to make a profit and pay dividends to the shareholders. From what you've said, I gather you aren't planning to distribute any of your profits to the CIC's members.

I've answered your specific questions as best I can below.

Hope this helps

James


If we allow every disabled person who takes the test to become a shareholder can we keep increasing the shareholding - or is that fixed at the time of formation?

Yes, but allotting new shares isn't as straightforward as adding a new member, which is another reason I would recommend CIC limited by guarantee.

Could these members be voting members or non-voting? There was some concerns that the test could be significantly altered if members lobbied. Can the shareholders be non-voting?

You can have different classes of members with different voting rights. But it might not be the best idea to make every disabled person who takes the test a member/shareholder. To me, these people would be your customers, and you would restrict membership to those who are involved in running the CIC and testing service only.

And could there be infinite shareholders or do we have a limited number of shares issued at formation?

There is no limit on the number of members a CIC can have (it is a practical matter not a legal one).

What are the pros and cons of Limited by Guarantee? Could we be limited but still operate a society that people could join?

The CIC regulator's guidance may be helpful in this regard - https://assets.publishing.service.gov.uk/government/uploads/system/...

The group have decided they want a CIC, but they have asked me to find some guidance as to whether shares or limited by guarantee would be the better option.

We will have employees - is it possible for someone to be employed and one of the directors. (are they called that?) at the same time - are they be like directors of a limited company with the limited by guarantee option?

Yes, someone can be both an employee and a director.

Do we need to fix the number of directors/board members at the start?

No, but you can if you wish.

How do we replace people? We want to make the organisation future proof so that the ethos stays no matter who is on the board.

You can put in your articles that the CIC must have a certain aim or must always provide a certain activity. Directors will usually resign but if need be they can be removed from office in accordance with the rules in your articles of association (and ultimately section 168 of the Companies Act 2006).

We need the body to be fairly entrepreneurial to attract the funding and grow and represent the sector. But which of the two formats to pick has us confused. We want to be inclusive, but someone needs to lead. Can you have a smaller board and shareholding?

Yes, one option is to have a small board of directors who are also the only members of the CIC. The other option is to have a large number of members, and have them elect a board of directors. The second option is more complicated but it is more democratic and may be preferred by funders.

Thank you so much James, really helpful

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