CIC Association

Serving Community Enterprise

changed into a CIC in Mar 2010, applied for some funding via Big Lottery Fund to run a programme from the community centre, been told its unsuccessful & we need a management committee....

Wanted to know if there is any documentation around this & how it can be set up & works? 

myself & another business partner are directors, does this not make us the management members too? do we need 3 or more?

the reason given:

Your organisation does not have at least three unrelated people on its governing body or management committee

comments welcomed.

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hi Active4Life,

the Lottery (along with just about all grant making bodies) like to see that any group seeking funds is led by a primarily non-executive board, and that there are no potential conflicts of interest within its make up;

in practice this means - no married couples (unless they are the clear minority of all persons on the board: if my wife were a fellow director then I'd have an automatic conflict of interest in any matter that concerned her or myself), and that there are at least 3 people who are not in ongoing employment of the group (through payroll or shareholding) to further ensure that there is no clear risk that the monies could be 'sidelined' to private gain/benefit.

Naturally this proves a bit of a problem for most CICs as a key part of the legistation is to allow executive boards (which grant making bodies don't generally like...).

But then, all grant making bodies have been clear from the introduction of the CIC model that they wouldn't be showing CICs any preferential treatment on the basis of their legal form, but that they'd be considered in the same way that any other applicant group would be.

In terms of creating a 'management committee' - what's being referred to is that there needs to clearly be a group of people who are unrelated to the day-to-day running of the organisation and do not have a personal interest in its success (ie - they don't draw any money from it)

what it would mean in your case is cedeing/sharing control of the CIC to a wider group of other people who would be fellow Directors with you (and have the same rights and privelages) but would need to be clearly not involved in the running of the enterprise.

I'm beginning to wonder if there's a wider mis-understanding here about people's perceptions that being a CIC means its easy to apply for grants? (because actually it usually makes it much harder...)

Adrian Ashton
Hi Adrian, as suggested elsewhere on the forum, could you circumvent this issue by possibly appointing non-executive directors? and then having the executive directors run the company? What would be the other options to access grant funding in terms of management setup?

Do you think it matters if there is unequal ownership i.e. of the 2 executive directors, one has say, 20% and the other 80%.

From your knowledge / experience how would a situation such as this impact on funding applications?
Hi Robert
The key thing to understand is what the grant giving body might view as a risk. Its easier for them to have confidence if they know there is a strong governance system in place, as it means they wont have to spend time and effort keeping an eye on all the grants at a level that would prove very costly to monitor.

If you have an individual or group who are impartial and have that specific role will help the grant giving body approve you against their due diligence criteria.

I disagree with Adrians comments regarding being a CIC making things more difficult. In the basic application process it shouldnt, and mostly doesnt, make a difference. But it does allow any potential supporter/partner to see you've formally adopted a regulated social business model, which does help.

Suprisingly a lot of organisations are still putting their house in order regarding having a clear policy on CICs, but its reducing as an issue by the day.

On your point about unequal ownership, again it shouldnt be an issue. The new director/oversight group doesnt have to have any ownership, just formal responsibility for activity. (removing the vested interest concern)
Are you limited by shares or guarantee?

Best of luck

hi Robert - sounds like you're a CIC limited by shares by your reference to varying ownership levels; this will be the main sticking point for most grant making bodies, which is bourne out by research published by the CIC regulaor a couple of years back;
(and is echoed by the criteria of most (but not all) grant making bodies who won't consider an application from a company with share capital, recognising instead only charities, guranatee companies, community benefit socieities and unincorporated associations)

if however you're a CIC by guarantee then as long as there's a clear majority of the board who are non-exec, most grant making bodies will be happy.
Hi Robert,

You certainly do need three directors (who also form the management committee) in total and no married couples for the vast majority of funding bids.

None of the major grant funders who've funded us - Lottery, Tudor, Comic Relief - have ever demanded (or even suggested) that we should have a majority non-exec board. Having a majority executive board was, initially at least, the biggest single reason we became a CLG then a CIC CLG rather than a charity.

Although funders studying our (now fairly lengthy) record have plenty of evidence that this is to enable swift, effective decision-making rather than for the personal enrichment of directors.

Agree with Adrian that very few grants trusts would fund a CIC limited-by-shares, though - the Arts Council do, and I think the Lottery might for some funding streams.
Thanks to John, Adrian & Dave for the words of guidance & information.

We are limited by shares and on balance we had hoped to apply for grants as sources of funding- which now seems more difficult than anticipated. We will also be trying to secure some business / funds through contracts.

...I trust that in the tendering & commisssioning arena, these sorts of issues are of lesser importance than providing a quality service? Anyone with any experience / knowledge regarding contracting; specifically if there is similar scruntiny of management structures, etc??



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