Dividend Cap on CIC’s.
Community Interest Companies (CIC’s) are a relatively new type of company designed for enterprises with social purpose that want to use their profits and assets for public good. There are now over 8,000 CIC’s on the public register at Companies House.
However, CIC’s are subject to an asset lock to ensure that their assets and profits are dedicated to community purposes and one of the main elements of the asset lock is the dividend and interest caps which strike a balance between encouraging people to invest in the company and ensuring that the profits of the CIC are used to the benefit the community.
As a consequence, CIC’s have to operate on the principle that any dividends, or performance related interest paid, should not be disproportionate to the amount invested and the profits made by the company In a CIC, while it’s not impossible for shareholders to receive profits, it is restrictive and requires careful consideration so as to not fall foul of the Dividend Cap.