§ The Minister for Women (Ms Patricia Hewitt)A joint DTI/Home Office/Treasury consultation document on proposals for a Community Interest Company (CIC) is being published today. The consultation document sets out the proposals in detail for a new type of company, not-for-profit, and working for the public benefit.
The CIC will present new opportunities for social enterprises to benefit the people they serve: it will be easy to set up, with all the flexibility and certainty of the company form, and some special features, to guarantee that it is working for the benefit of the community or the wider public. Easy for investors to understand, with an assured lock on profits and assets to attract social investors, it will help create a strong new brand for social enterprise and a new marketplace for social investment. By doing so, it will cut the costs of setting up and financing social enterprises. It will recognise the strong links between social enterprise and the wider community, encouraging stakeholders to engage in enterprising communities. This in turn will improve the delivery of local services.
The concept of the CIC was outlined in the Strategy Unit report "Private Action, Public Benefit", published in September 2002. The CIC consultation document fulfils the report's commitment to carry out a technical consultation on the concept before legislation. Responses to the Strategy Unit's consultation have been taken into account in developing the fuller proposals in the CIC consultation document.
The Government's aim is to widen and deepen the enterprise culture in our country, so that everyone, regardless of their background or circumstances, has the chance to go as far as their talents will take them. Our strategy is to support small and medium sized businesses and social enterprises to modernise and reform the delivery of services at local level, regenerate disadvantaged communities and spread the enterprise culture. Several initiatives have been introduced to boost enterprise and community development in our most disadvantaged areas, particularly through the Phoenix Fund. Other measures are focused on Enterprise Areas, such as exemptions on Stamp Duty for all commercial property transactions, the Community Investment Tax Relief, and Bridges Community Ventures. The introduction of CICs builds on these measures, enabling the growth of the Social Enterprise sector, and creating real opportunities for people in areas where they are needed most.
The Government do not intend that CICs should deliver essential public services in core sectors such as hospitals and schools. Rather, CICs should develop to meet the needs of local communities, complementing core Government services in areas such as childcare provision, social housing, leisure and community transport.
The key features of the CIC would be an assurance, delivered through an independent regulator, that profits and assets would be used to deliver the objectives of the company, which would be for the benefit of the public and the community. Otherwise, the companies will have the same freedoms and responsibilities as any other company. It is proposed that the regulator will apply a 14WS statutory community interest test, namely that a reasonable person could regard a CIC's purposes as being beneficial to the community or the wider public interest, and that its purposes are not for private benefit.
Some restrictions on the freedom of CICs to raise risk equity are also proposed, in order to preserve the lock on profits and assets. It is proposed that dividends should be limited to returns within a ceiling to be set by the regulator, and that investor shareholders would be able to influence, but not control, the direction of the CIC.
In addition to the normal publication of company reports and accounts, CICs will have to report to the regulator on action to promote the public benefit, including action to involve stakeholders. Views are sought on whether, in addition, there should be a statutory requirement to consult stakeholders, with an exemption for smaller CICs.
The core functions proposed for the regulator are: to check that applicants are non-profit distributing companies working for the community benefit, to publish CICs reports on action taken to promote the public benefit, and to ensure that when a CIC is wound up, any residual assets after creditors have been paid in the normal way will be used for the public benefit. It is proposed that the regulator will have powers to take action in order to protect the integrity of the CIC brand. It is envisaged that these powers would normally be exercised through publication of information and investigation of complaints, rather than intrusive monitoring.
Copies of the consultation document are available in the Libraries of the Houses and on the DTI website. We welcome views on all aspects of the proposals outlined in the paper by Wednesday 18 June 2003. An indicative regulatory impact assessment is included with the consultation document.