Record number of community interest companies amid rise of grant funds
The number of UK community interest companies grew by over a fifth last year – the biggest annual increase yet – with almost 24,000 registered as of March 2021.
An additional 6,800 CICs were approved in the 2020/21 financial year (compared with 5,100 the previous year, and 3,200 the year before), according to the CIC Regulator’s annual report, published last month.
The Covid-19 pandemic, which spurred people to help their community, made a “huge difference” to the volume of applications received, the report states.
Introducing the latest figures, interim regulator Louise Smyth, writes: “CICs have always been adaptable and at the front-line of change, meeting public need and adapting to that need as required… CICs now more than ever are providing vital benefit to communities across the length and breadth of the UK.”
CICs now more than ever are providing vital benefit to communities
The current figures include conversions from limited companies to CICs, requests for which “increased rapidly”, according to Smyth. She attributes this to companies “acknowledging the devotion and hard-working ethos of CICs delivering results to local communities and beyond”.
Of the 23,887 CICs on record as of 31 March 2021, 83% are companies limited by guarantee and 17% are companies limited by shares. Over 21,000 are based in England (with much smaller proportions in Scotland, Wales and Northern Ireland roughly reflecting population differences). The figures do not provide detail of average size, stating only that there is a huge variation from those with just a few directors, up to “multi-million pound organisations”.
Companies House also reported its highest number of incorporations on record in 2020/21 – though some have been attributed to Covid-related fraud – an increase of 22% since the previous year. However, the CIC growth rate is noticeably higher than that of companies generally in the UK, which grew by 8.4% from 2020 to 2021.
‘Soaring’ grant funds
One third of the 208 CICs incorporated in 2005/6, the first year the legal form was available, are still on the register.
Almost 1,800 CICs dissolved in the past year, 7% of the total (compared with 10% the year before). The CIC Regulator was unable to comment on whether the relatively low closure rates had been skewed by the temporary easement measures introduced by Companies House in response to the pandemic to suspend voluntary strike-off action for both limited companies and CICs. However, Companies House said that its low dissolution figures last year had been “impacted” by this.
A “soar” in grant funding opportunities for social enterprises and other businesses had enabled “the vast majority of CICs to survive”, according to the regulator.
Some CICs have been set up with a sole purpose of obtaining funding for a community project
Although the CIC form was designed in 2005 to meet the needs of social enterprises, CICs are not required to trade – though they are “encouraged” to do so – and may rely on funding. The regulator does not share data on CICs’ sources of funding, so it is unclear how many would meet, for example, the Social Enterprise UK definition of a social enterprise (generating 50% or more of their income through trade).
“We are aware that some CICs have been set up with a sole purpose of obtaining funding for a community project,” a spokesperson told Pioneers Post. “The criteria for these remain the same, that the CIC must be set up for the sole purpose of benefiting the community and therefore must meet the community interest test.”
The community interest test considers a number of factors to establish whether an organisation’s primary purpose is to provide benefits to the community, rather than to the individuals who own, run or work for it.
Header image: Ark at Egwood CIC, a community interest company in Somerset that provides health and wellbeing services, including animal and nature-based therapy. It was incorporated as a CIC in 2018 and was named a NatWest SE100 Trailblazing Newcomer earlier this year (photo courtesy Ark at Egwood)
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