CIC Association

Serving Community Enterprise

Caps set at 20% (shares) and 10% (performance loans)

Here's the link to the Regulators full response

Please put your thoughts on record here, from an initial reading I have to say this looks quite balanced and positive.

The concern regarding it causing a detrimental effect to any grant funding has been noted so hopefully we'll get some centralised work done on that, the current situation is pretty erratic already.

It definately opens up the potential in the CLS model. In my opinion 20% isnt too much but is generous,the shares will still be illiquid so rampant speculation isnt about kick the door in, its a positive step. This WILL attract a whole new range of potential funding, and even though its a slight stretch of the social investors imagination we can now say there is potential for a return of capital in 5 years. When matched against a testing environment this could help solve some of the funding issues anticipated, so we'll probably go all out and focus on the positive outcomes this should create. The Regulator will be reviewing again in 2/3 years, so its important we all ensure we keep feeding good data in.

We'll definately be discussing this at CIC Start 2010 on the 18th so come along if you want express your views, the afternoon session is destructured to allow the debate to develop on the day.


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Comment by John Mulkerrin on January 12, 2010 at 20:22
sure? cool!
Comment by Tom Barnett on January 12, 2010 at 18:58
Well... actually I think we could make it quite intereactive

I could set up a webcam to broadcast the event... and I could monitor twitter and email for questions.

hows about that then...?
Comment by John Mulkerrin on January 12, 2010 at 16:23
Hi Guy
Couldnt agree more, we'll not be interactive for this event but will be doing video and releasing pdf's online etc. We've looked at webinars etc and its definitely the way to go, but we were a little time and resource poor to get it done for this event.

Getting all the IT in place to allow online communication quickly and cheaply is one of the key targets and one of the areas Tom will be talking about at the event, being cautious id say we should have this type of thing in hand by summer.
Comment by Geof Cox on January 7, 2010 at 18:07
Hi Maria,
You're unlikely to have anything to do with the Regulator other than submitting your Community Interest Report with your Annual Return to Companies House each year. It's very straightforward.
Nor do the new dividend and interest caps affect grants or any normal business borrowing.
If you want to do something fancy in terms of raising investment (eg. issue shares or loan stock) which might come up against these new regulations you'll need more advice anyway.
As for opportunities for grants - there are lots! - but it is a complicated question as most grants are specific to certain areas (geographic, trade sector, or relating to other purposes - I'm sure you'll be aware of the many grant giving trusts and foundations that are interested in training and education).
Where are you based?
Comment by Maria DeMarks on January 7, 2010 at 13:51
I am running a Training Company, offering the unemployed practical and essential office skills and a qualification to NVQ level 2. I want to learn more about opportunities for grants and what exactly is what the CIC regulator does and when he/she goes around companies and what do we need to prepare... Yes indeed, so much to consider when you are so busy depeveloping a company to be successful, creating business and at tiem working in the blind about up-to-date issues of regulators and CIC policies, please let me have some information if you have it.

Many thanks,

Kind regards,

Maria de Marks
Comment by John Mulkerrin on January 6, 2010 at 19:56
Comment by Geof Cox on January 6, 2010 at 18:59
Yes I echo the comments to date - frankly I'm surprised the outcome has been this good. One point that hasn't been made I think is that the new caps and especially the de-coupling from Base Rate just make everything simpler.
All we need now is recognition of all employee share schemes as asset-locked bodies!
Comment by John Mulkerrin on January 6, 2010 at 18:15
Hi Jeff

The overall maximum of 35% has stayed the same, its the dividend cap thats been changed from Bank of England Base plus 5% (currently 5.5%) to a flat rate 20% maximum, heres an extract from the report:

43. It would seem, based on the responses to the Regulator’s consultation and supporting advice that the maximum aggregated cap is generally understood and accepted as providing adequate protection of the community’s assets and its social values. In addition, at the current level, which is a maximum of 35% of the distributable profits, it is incentive enough to attract equity investment.

44. On this basis, the Regulator does not intend to make any change, therefore, to the maximum aggregated cap at this time.

58. On this basis the Regulator intends to remove the reference to the Bank of England base rate and to increase the rate as follows:
”The share dividend cap shall be 20 percent of the paid up value of a share in a relevant company”.
Comment by Jeff Mowatt on January 6, 2010 at 15:29
I'd like to understand this better. My understanding was that distribution of dividend to shareholders was capped at 35% such that the larger part was invested in community. What I'm reading is that this 35% limit has been reduced to 20%. The comments suggest that I've misunderstood what this means.
Comment by Heidi Fisher on January 6, 2010 at 11:36
I think this is good news - the performace related loans are a good opportunity for CICs to finance themselves and 10% is more reflective of current market rates.


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