CIC Association

Serving Community Enterprise

I'm currently working with someone who is in the process of registering a CIC who wants to set up a charitable subsidiary to the CIC.  I am aware that is quite common and normal the other way round ie a charity with a CIC subsidiary. However I haven't been able to get any guidance on whether a CIC can have a charitable subsidary from the CIC regulator website or elsewhere Can anyone help answer my query ?

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Hi Steve - the short answer is yes - a CIC can have a charitable subsidiary - I restructured a small group with precisely this arrangement a year or so ago.

how is it legally structured though to satisfy Charity Commissioners ?

The actual legal structures can be pretty standard - for example the Charity Commission's own model guarantee company and something like one of the Regulator's CIC models.

It sounds like you will register the CIC first - then you can go on the register the guarantee company with the CIC as its only member, then progress its charity registration.

Perhaps surprisingly, the Charity Commission is more interested in the charity's board (trustees) than it's membership structure (despite the fact that the member CIC will actually have the power to select/remove trustees) - and they do frown on having the same people on each board in these arrangements.

Having some directors in common is acceptable, but...

What you have to be very careful about is financial transactions between the two companies.  Both funds and in-kind benefits go from the CIC to the charity, not vice versa.  There can be no payment of trustees 'by the back door'.  So a director of both companies can be paid by the CIC, but not by the charity.  And if there are directors in common then the charity paying the CIC for anything much can become problematic.

If there are shared premises, staff, etc, make sure the charity does not subsidise the CIC.  (Though if premises are shared the likelihood of business rate relief for both companies will be increased.)

In other words the charity has to be a proper charity and use its resources for its charitable purposes.  It could however fund research or education or awareness-raising that might indirectly benefit the CIC, or support people in charitable need to access the CIC's services.

And of course the CIC can gift-aid profits to the charity and avoid tax on them.

Very interesting Geof - would you be able to say who the group you restructured was? I have personal experience of working for an independent supported employment charity that was taken over by a housing association and is now part of that group structure - I assumed that this was just an agreed association as did not think that a charity cold be 'owned'.

Is it the case that a company can only have a charitable subsidiary if it is a regulated social enterprise with IPS/CIC structure, ie will the commission allow a regular ltd by share company to do the same?

Thanks

Hi Richard - obviously this is something the Charity Commission will look at harder - see for example their guidance on 'corporate foundations' - but again I believe the short answer is yes a commercial company can 'own' a charity in the sense that it can be the only member - and for example reserve the right to appoint the trustees.

Hi Geof,

You seem to be the person I am looking for to answer a question I have. If you would be so kind to help?

Is it possible for a charity or community interest company to have a parent/ group? ...For it to be under the umbrella of a group that owns 51% or more of it's shares? ...In the same way a limited company is?

Hi Kelly - yes this is perfectly possible.

Do email me (geof@geofcox.info) if you need more details.

A similar question arose recently in talks about an environmental education centre being run as a community business. A Company Limited Ny Guarantee may apply for charitable status or become a CIC. Can it do both?

It can do both if there are two of them.

Hi - I am struggling to find some advise on this too. We are a CIC who are now looking at setting up some kind of charitable organisation to run alongside us. I remember speaking to a Business Link adviser a couple of years back who said this was perfectly OK, and I know a few high profile organisations (such as Eden project) who run a social enterprise and a charitable organisation alongside one another. As a CIC we will be gifting surplus to the charitable organisation, but we also want to use to to access grant funding for projects that the CIC can perhaps not access. Again I have been advised that in principle it is fine for the charity to apply for funding for a particular project and engage the CIC to actually deliver this, what I am struggling with is ensuring the trustee set up is clear and above board. Obviously we would like some 'control' over the charity, but if paid staff/directors from the CIC are trustees of the charity too, am I correct in thinking there would be a problem with the charity ever contracting the CIC to deliver a paid piece of work for them? Also, do we have to have a majority of charity trustees who are not paid or 'connected persons', even if that payment comes from the CIC?

Any help or advise would be gratefully received! 

Hi Emma - there would be a problem with the charity contracting the CIC to deliver a paid piece of work if members or directors of the CIC are trustees of the charity too - however contracting would probably not be a problem if the charity trustees were only paid staff of the CIC.

Charity trustees can only in exceptional circumstances be paid by the Charity for their duties as trustees, but they can be trustees - attend meetings, etc. - in time paid by another organisation.  The Charity can pay expenses of course, and for occasional pieces of work additional to trustee duties if the contracts are set up correctly.
My guess is that you'll need to set up the Charity as a subsidiary of the CIC (ie. the CIC is the only or the controlling member of the Charity) - which means the CIC can APPOINT the Charity trustees - thus it will have a lot of 'control' in fact - but you'll probably have to find trustees who are not either directors or members of the CIC.The usual caveats apply - this is complex stuff and without detail I can't be sure you're doing the right thing!Do email me (geof@geofcox.info) if you need more.

Hhhmmm.... our problem is that our CIC is quite small, so there are only two paid full time staff - one is a director of the CIC and the other (me) is company secretary....

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