You would certainly not choose to use a CIC structure if your main aim was to make money, so we can honestly say that CICs are not primarily for profit. However, can they really be said to be 'not-for-profit' when some of the profit - in a Share CICat least - can in fact be shared out? Also, there is no specific limit on what directors or anybody else can be paid – as long as the CIC is still judged to be operating in the community interest.
On the other hand, the Charity Commission no less views CIC dividends, because of the statutory cap, as similar to the legitimate interest that might be charged on a loan (they therefore allow a charity trustee to invest in and receive dividends from a CIC that is a subsidiary of their charity). Also, in countries where 'not-for-profit' is clearly defined in law it does differ from our 'charitable status', and it is quite normal to allow paid directors; it is not unusual even in Scotland – where the Charity Commission does not have jurisdiction - for at least a minority of charity trustees to be paid.
While it would obviously be quite wrong to describe a CIC as 'charitable', therefore, CICs are in fact similar to many 'not-for-profit' structures in other countries; they are primarily for social purposes rather than for profit, the dividends they pay can be seen simply as proper interest payments, and in this light I think they might legitimately be described as 'not-for-profit' in the UK context.
But this is admittedly a fine judgement, and I'd welcome other views.
Geof, They are 'profit for purpose' in our perception and the case for using this approach is made at some length in our founding white paper which pitched the concept at President Clinton. We'd probably have become one ourselves had it been available in 2004 but with the founder unable to visit the UK, we now have just one director.
The role of an investment trust mechanism and CDFIs has been an ongoing theme of advocacy.
CLG format painted us into a corner for attracting investment and since, here and in Ukraine we took the conventional share company format with a non dividend distributing philosophy.
A key point about CDFIs is that they attract tax relief for the investor, and hence suggesting this as a mechanism for SE propagation in 2004.
In other countries, other terms such as 'more than profit', benefit corporation' and 'low profit limited liability company' have been used to describe a business with at least part of its profit invested in a social purpose. Muhammad Yunus is best know with simply 'social business'.
I'm going to add to the confusion now because another thing to bear in mind is whether or not the CIC is Limited by Shares or Limited by Guarantee.
I have a CIC which is the former, which is probably the rarer of the two (I think). Because that means the company is essentially under the control of the two share holding directors it is treated quite differently from a CIC which is limited by guarantee.
Yes - I think about three quarters of CICs are Guarantee flavour - surprising because it is the Share CIC that is the true innovation.
The Guarantee CIC is more grant-friendly, partly because the Guarantee company form has always been used for philanthropic purposes while the Share company has been more commercial (a division which goes back to the basic nature of the limited liability - shares are negotiable instruments, which can be bought and sold, wheras guarantees are more like personal promises, which you can't trade). But I don't think this has much impact on the question of whether either Share or Guarantee CICs can be legitimately presented as 'not-for-profit'.
There is though a presentational, and grant-fundability issue around any CICs that have only one or two members who are also directors, especially if they are also employees. I don't think these issues would be much different if you were a Guarantee CIC. I know of Share CICs that have been good at raising grants, and obtained discretionary rate relief - but they have some not-for-profit articles in addition to the usual Regulator's models and more importantly broader governance arrangements - stakeholder involvement, non-executive directors, etc.
This all sounds very impressive!
Quite daunting also as it's a live discussion, so good luck with that.
One thought: I wouldn't get too tied-up with semantics of the various structures; this could go on forever and is subjective at best. Perhaps it might be more helpful and illuminating to highlight the variety of practical ways of operating - as you are clearly more than capable of doing!