Reply To: Not for profit


Community Interest Companies may be limited by shares or by guarantee. If they are limited by guarantee that is on the face of it a solid non-profit incorporation status because:

– as a Co LBG they have no shareholders to receive dividends

– as a CIC they must have an asset lock which prevents transfer of assets to the members when the company is dissolved

There would still be the possibility of disguised profit in the form of excessive lease rents to related parties for example.

If they are limited by shares, this is an interesting point which I don’t think has ever been tested. A CIC can distribute 35% of its profits as a dividend to shareholders but must reinvest the other 65% into its community acticity. Does this mean it is a for profit company or not? That will make an interesting appeal one day.

I find that most CICs are LBG, so that question about dividends doesn’t normally arise. I seem to remember that the Emaus in Bristol ran its accommodation through a subsidiary CIC limited by shares, Ali Costelloe might be able to confirm? That’s the only one I can remember off the top of my head. If a compamy limited by shares is wholly owned by a parent charity that is arguably still non-profit in the grand scheme of things (see obiter comments in Wirral/Salisbury Independent Living case)

Just bringing this up again as I now have a scenario Peter mentioned here in his post.

A CIS limited by shares but they have complicated matters by making the “care provider” (On behalf of the landlord, with an SLA in place) a share holder of the CIC. The landlord also claiming they provide “some” care which is not minimal. Well, as far as they are concerned.

They are not registered (RSL) but they want an exempt as a not for profit landlord,, currently being paid under the LHA scheme and I have to say the rent isn’t exactly crazy but once they do get the status I suspect the rents will start shooting up as they took over from a previous provider.

The previous provider was paid under the LHA scheme and never complained, the tenants are sitting tenants but the new provider have a new lease which is much more than the previous provider had to pay for the property and want the exempt status.

A bit late in the day, so may have rambled on a bit and missed some points, and I have probably overthought this so would appreciate comments and thoughts/questions.

Just before I forget, they are not due to provide accounts yet, which makes it more difficult to see any kind of trail.