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How the CIC companies are different from an ordinary companies limited by guarantee: when registering your non-profit business, it's imperative that you know exactly what type it is so you establish correctly and don’t break any laws or industry regulations. Two types of companies that are frequently confused are community interest companies and ordinary companies limited by guarantee. These are both non-profit companies, so it can be easy to get the two confused. Outlined below are the key differences between these types of companies to help you identify exactly how and what to register.
CIC company: community interest companies are a fairly recent innovation, introduced by the government in 2005. These can be set up as a company limited by guarantee but contain some special features, making them a popular choice. They are easy to set up and any assets owned by these companies get placed in a secure ‘financial lock,’ allowing access to the funds only when they are going towards charitable or community projects. There are also limitations on what financial rewards and benefits investors can receive.
Ordinary company limited by guarantee: this type of company has members who guarantee finances, rather than shareholders or investors. Profits are not given to members but used for other purposes, such as funding charitable initiatives. Members meet regularly and vote on company issues and what direction to take going forward. Being limited by guarantee means the management are protected from liability if the company goes bankrupt or gets into financial difficulty.