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Community Interest Companies The Future for Ethical Business?

Community Interest Companies The Future for Ethical Business?. Gavin Smith Dublin 9 th November 2006. What is a CIC ?. New Type of Legal Entity in the UK Created in September 2005 Assets are ‘Locked-in’ Delivers ‘Community Benefit’ Has Shareholders and Limited Liability

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Community Interest Companies The Future for Ethical Business?

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  1. Community Interest CompaniesThe Future for Ethical Business? Gavin Smith Dublin 9th November 2006

  2. What is a CIC ? • New Type of Legal Entity in the UK • Created in September 2005 • Assets are ‘Locked-in’ • Delivers ‘Community Benefit’ • Has Shareholders and Limited Liability • Has a regulator – John Hanlon www.cicregulator.gov.uk

  3. Who are the CICs ? • Care – Education – Local Transport - Health • Talentstar CIC - performance and media work experience • EQ Health CIC – psychotherapy for children using horses • SM Pride - Devon ‘Fetish group bids to join sector - sadomasochist group is one of the first organisations applying to become a community interest company’ Third Sector - September 14th 2005

  4. Benefits • Raise capital and Pay Dividends to investors • Annual Community Interest Report produced • Borrow more easily than Charities • Assets Distributed – to a CIC, or Charity only • 33 CICs registered by 1st November 2005

  5. Limitations • No tax advantages to the CIC or the Investor • Dividends are ‘capped’ • No asset appreciation for the Investor • Less control for the Investor • Social Business – seen as less professionally managed and more risky investment

  6. The Future for CICs ? • Investments made by UK taxpayers in CICs should attract full income tax relief Triodos Bank • CICs should be granted: • the same 80% relief on business rates • exemption from corporation tax • ability to give interest, or dividends, tax free to the investor Stephen Lloyd of Bates Wells Braithwaite

  7. The Evidence for Investment • UK Community Interest Tax Relief (CITR) • The model for future CIC development • Tax incentives for investments by individuals • Funds raised via banks & finance bodies Triodos Bank raised £3.8m from individual savers through CITR to lend to community groups – in 2 weeks

  8. The Children’s Scrapstore

  9. More Evidence… • The ‘Green Funds’ – Netherlands • Triodos manages €400m of funds for lending to environmental businesses • Other banks control similar funds • Volume of investment has been huge • Creating competition to lend to ‘green businesses’ The cost of funds to green businesses fell below European base rate for lending

  10. Conclusion • CIC’s provide a more flexible way for socially motivated organisations to operate • Tax incentives for investors in CIC’s could raise much needed development funds • CIC’s deserve similar tax breaks to charities • CIC’s are being set up by people with a genuine interest in community benefits

  11. Gavin Smith 00 44 (0)117 9809 743 gavin.smith@triodos.co.uk Triodos Bank Brunel House, 11 The Promenade, Bristol BS8 3NN www.triodos.co.uk

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