CIC Association

Serving Community Enterprise

Thoughts on the way to submitting the CIC Association's response to Dividend Cap consultation...

Recently I have been working on the providing feedback to the CIC (Community Interest Company) Regulator regarding a consultation on the Dividend Cap - http://www.cicregulator.gov.uk/consultationintro.shtml

The condundrum of enabling private (institutional or individual) investment in to community owned assets has, as you can imagine, arisen as a fairly important element that seems to present itself as a probelm prior to the issuing of fair dividend. Against what is an investment secured? And if the assets can't be sold, where is the exit plan? Furthermore, most investors looking for a return - especially if the investment is percieved to be high risk - wil choose to waiver any available dividends in favour of re-investing them in to the growing company again with a view to the exit. A CIC can be created as either a CLG (company limited by guarantee) or a CLS (company limited by shares) - it is in, particularly, the application of Community Interest Company limited by shares that there lies a potential to create fundable community owned enterprises.

For the record, it is my opinion that the current understanding of "exiting" is also one of the factors underpinning our destructive way of being.

moving on... given that the assets held within a CIC are locked to the good use for community and cannot be sold, other than to a another CIC or similar charitable body it would appear that CIC's do not lend themselves well to the current understanding of achieveing an exit. They do, however, represent an opportunity to build sustainable, community owned enterprises that generate profit. Since shares can be issued in return for investment and dividend can be paid against them then, for those more "patient" investors - perhaps the same kind who were looking for % annual returns from bank and building society savings accounts - there is a role for some kind of "agent" to mediate these investors money in to community projects owned by CIC's...

We then thought that it would be useful if there was a CIC bond that people could buy in to that in turn organised structured investment in to these community enterprises on behalf of the investors. The bond could then deliver sustainable returns on enterprises that were not seeking to get as big as possible take over the world and then go bust... maybe something more like running the local postoffice? There is nothing to stop institutional investors, local authorities, the government etc investing in these bonds - they could be open to anyone - but the purpose of them is to invest in budding viable community enterprise opportunities.

Other ideas for CIC's that could be invested in by such a bond could be...

- public swimming baths
- public transport
- home help
- cafe's and community resources
- local pubs
- buying land to grow veg on
- creating local infrastructure to generate electricity

The bridge to cross in terms of CIC's is enabling the value of the shares to go up and down... we'll be making this point clear in our response to the consultation.

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Comment by Jeff Mowatt on February 1, 2010 at 13:48
Interesting.

You'll find the concept of forward investment in community purpose business described in several of our strategy papers going back to the founding paper of 1996.

http://www.p-ced.com/1/about/history/

"The corporate charter can require that these monies be directed into community development funds, such as a permanent, irrevocable trust fund. The trust fund, in turn, would be under the oversight of a board of directors made up of employees and community leaders."

Then In 2004 a paper which prescibed a national scale strategy to deliver broadband and yeiel profit to further social objectives. The proposal of greatest scope was part of a national scale initiative delivered as a strategy in 2006 to the government of Ukraine with a £1.5 billion price tag.

"Any number of other social enterprises can be created. Furthermore, any number of existing for-profit enterprises are entirely free to contribute any percentage of profits they wish to increase the proposed initial $1.5 billion social investment fund. If for example the total fund comes to $3 billion, that amount would generate at least $300 million per year in a hryvnia deposit accounts at any one of several major Ukrainian banks, to provide ongoing funding to continue to create and expand social enterprises. "

http://www.p-ced.com/1/projects/ukraine/national/

And last but not least in my (deleted) suggestion for the social enterprise summit

http://www.box.net/shared/ckzbep5h26

Jeff
Comment by Tom Barnett on October 6, 2009 at 17:21
then that means working exclusively with CSR budgets and philanthopists! do you not think there is scope, assuming the shares become liquid (as opposed to illiquid - dividend only being payable on the paid up value etc), for structured investment that yeilds dividend in to CICs that operate cash positively?
Comment by Irene Yvonne Lindsay on October 6, 2009 at 17:18
Hi
The only way this will work is if the investors use the investment as Grant/PR to show community involvement and sign away rights to assests.

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