Law guide: Business start-up

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Ending a CIC

Ending a CIC

Ending a CIC

A CIC can only stop being a CIC by being dissolved or by being converted. If converted, it can only be to a charity, a Charitable Incorporated Organisation (CIO), or a community benefit society (a form of registered society which reflects a commitment to the wider community, with profits being ploughed back into the business, rather than being distributed to members).

Dissolution

The procedures applicable to companies generally apply also to CICs.

At the date of dissolution, the CIC should hold no assets (any assets held by the dissolved CIC would belong to the Crown).

Once a CIC has been dissolved, it can only be restored to the companies register (or the dissolution declared void) by court order.

If there are significant valuable assets that will pass to the Crown on dissolution of the CIC, the Regulator of Community Interest Companies may petition to the court to restore the CIC so that the assets can be distributed more appropriately.

Conversion

Scenarios where conversion is not allowed

A CIC won't be eligible for conversion if any one of the following situations applies:

  • The Regulator has appointed an auditor to audit the CIC and the audit has not been completed.
  • The Regulator has instituted proceedings on behalf of the CIC and the proceedings are ongoing.
  • The Regulator has appointed a director or a manager of the CIC.
  • The Regulator has suspended a director of the CIC.
  • The Official Property Holder holds property as a trustee for the CIC.
  • An order made by the Regulator is in force restricting the CIC from entering into certain transactions or, making certain payments, or preventing any person from parting with property that they hold on behalf of the CIC.
  • A petition has been presented for the CIC to be wound up.

Conversion to a charity

To convert, the CIC must submit the following to the Registrar of Companies:

  • special resolutions to state that it will stop being a CIC, to alter its articles of association as appropriate (including to remove the statement that the company is a CIC) and to change the name of the company so it no longer ends with the CIC-related wording;
  • a copy of the amended articles of association; and
  • a statement from the Charity Commission that, if the special resolutions take effect and the company stops being a CIC, the company will be a charity and not an exempt charity. The Registrar cannot register the special resolutions without this statement and so it must be obtained before proceeding with the proposed conversion.

The Registrar of Companies will forward a copy of the application documents to the Regulator to decide if the company is eligible to stop being a CIC. It will not be eligible if it submits incorrect documentation, or in any of the scenarios where conversion is not allowed (see above).

If the Regulator decides that the CIC can convert to a charity, they will notify the Registrar of Companies who will issue a new certificate of incorporation in the new name. The special resolutions will take effect and the company will stop being a CIC.

Conversion to a community benefit society

A CIC can convert to a community benefit society by special resolution, but only to a form of community benefit society that includes an asset-lock in its rules limiting distributions of profits, capital or surpluses.

The following must be sent to the Registrar of Companies:

  • a copy of the special resolution;
  • a copy of the rules of the society; and
  • a statement that, in its opinion, if those rules take effect, the company will become a community benefit society that has a restriction on the use of assets in accordance with the relevant regulations.

The Registrar of Companies will forward these documents to the Regulator, who will decide if the company is eligible to stop being a CIC. It will not be eligible if it submits incorrect documentation, or in any of the scenarios where conversion is not allowed (see above).

The FCA will register the CIC as a registered society if:

  • a copy of the special resolution and rules are delivered to the FCA;
  • a copy of the decision of the Regulator regarding the company's eligibility to stop being a CIC is delivered to the FCA; and
  • the company has a restriction on the use of assets in accordance with the relevant regulations.

The FCA will issue a certificate that the resolution and rules have been registered. The Registrar of Companies will then register the resolution and this certificate. Once this happens, the conversion from CIC to community benefit society takes effect.

Conversion to a Charitable Incorporated Organisation

The Charity Commission has published guidance on the process for converting a CIC into a Charitable Incorporated Organisation.

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