Community Interest Companies:

A framework of governance
NCVO has been working with Bates Wells Braithwaite (BWB) and other partners to
develop a draft code of governance for community interest companies (CICs). The
code is designed to help CICs balance community purpose with making profits by
providing a tool for strong leadership, enhanced decision-making and demonstrating
your capabilities. This initiative was led by the late Stephen Lloyd, a BWB partner, who
sadly passed away recently, but we are keen to honour his memory by continuing to
promote the framework. If you or your organisation have an interest in the CIC model,
we hope you will find this a useful tool for ensuring your governance is in great shape.

Introduction
Limited companies have traditionally focussed on maximising profits. CICs are
different. Their primary duty is to serve their community purpose profitably. As with
any other company, a CIC must trade legally and be solvent.
The directors of CICs have to balance the community purpose with making profits,
which is not always easy. Directors of CICs are therefore helping to build new ways of
doing business.
Because CICs are established to achieve a community purpose, people will probably
expect them to meet higher standards than commercial companies, so its important
that CICs are seen to act as responsible corporate citizens.
Good governance is essential for the success of any organisation. The role of the
directors of CICs is vital in bringing their skills, commitment and experience to their
organisations.
CIC boards should set the long-term vision and protect the reputation and values of
their CIC. All CIC boards need to have proper procedures and policies in place, but
they also need to work well as a group of individuals and have good relationships with
the rest of the organisation, and know and understand the role of key stakeholders.
The purpose of this framework is to support CICs to provide strong leadership,
enhance their decision-making and demonstrate their capability. All CICs should aspire
to have good governance, but the recommendations will be most relevant for CICs
that are operating at a significant scale (over 1m turnover). For CICs at an earlier

Community Interest Companies: A framework of governance

stage of development or operating at a smaller scale, we hope this framework provides

useful information about what you should be aiming towards.
As your CIC grows and develops, you may need to consider adopting one or more
appropriate business standards, such as ISO 9000.

Principles
The following principles offer a framework to use in establishing your strategy.
1. Effective governance
Why?
A strong board will be able to develop a strategy for the long-term future of the
company to enable it to evolve and grow.
What?
The board of a CIC should have governance procedures to ensure that it works
effectively and directors should be clear about their role and responsibilities in leading
the organisation. The board should review this and keep up to date as markets and
legislation change.
How?
Ensure that all directors are given a good induction, and ongoing mentoring and
support thereafter. For example, the CEO should have a meeting with any new
director to discuss the CICs vision, mission and strategy; its articles of
association; latest published accounts; last three months management accounts;
budget and strategic plan; and who the stakeholders are in the community of
interest.
Be clear about who will lead/facilitate each board meeting.
Ensure that board meetings have plenty of time to make considered decisions
effectively.
Conduct regular reviews of the boards membership, making sure that there is
an appropriate balance of views, skills, knowledge and experience.
Ensure that there is an agenda, minutes of last meeting and any board papers in
good time to prepare for meetings.

Community Interest Companies: A framework of governance

Circulate a forward agenda with an action list so all directors are aware of key
decisions.
2. Leadership
Why?
Great leadership can help organisations achieve their goals. For a CIC, building an
effective board can help you to develop your vision and community purpose, execute
your plans effectively and manage risks.
What?
The board is collectively responsible for leading the CIC to long-term success.
How?
Where CICs start with a single director, you should think about how more
directors can help spread responsibility and grow the business.
Directors should understand their role as required by the Companies Act 2006
(and other relevant company law), and be clear about the purpose of the CIC
and what is going on around them in the external environment.
Directors should set and safeguard the vision, values and reputation of the CIC.
Hold regular meetings, whether in face to face meetings or using IT.
Have some fixed items on the agenda that are key to governance to deal with
on a regular basis.
Recognise the role of non-executive directors to constructively challenge and
help develop the CIC.
Ensure that directors appointed by third parties understand that their duties are
to the CIC and not to the appointing body.

Community Interest Companies: A framework of governance

3. Organisational effectiveness
Why?
The board is there to ensure that the CIC delivers its community purpose effectively.
What?
Have a day-to-day overview of the CICs outcomes, social impact and efficiency using
the balance of skills, experience, knowledge and independence to good effect. If
possible it should include inviting stakeholders to contribute their views.
How?
Set the CICs strategy.
Ensure that the CICs strategy remains relevant and achievable.
Agree an appropriate plan for the ongoing growth and development of the CIC
to deliver the strategy.
Regular monitoring of the performance plan, including impact and budget.
Evaluate the results, outcomes and impacts of the plan.
Ensure the CIC consults regularly with its stakeholders. This is part of the
reporting requirement to the CIC Regulator.
4. Accountability and transparency
Why?
It is important for CICs to build trust and confidence through being open and
transparent to the communities that they serve.
What?
Start with the assumption that the board will share its strategy, direction and decisions
across the community. Where confidentiality is needed, be clear about why this is the
case.

Community Interest Companies: A framework of governance

How?
Ensure that the CIC meets all legal requirements under company law, and in
particular CIC law.
We would encourage you, in the spirit of being a community interest company,
to post all public documents, accounts, articles, your annual CIC report and as
much other relevant information as possible on your website.
We would encourage all CICs to use the annual CIC report to show the extent
of their impact, even if the impact is unexpected or negative.
Be transparent about financial matters. In particular, wed encourage CICs to do
the following.
However large or small your turnover, publish your profit and loss
account in addition to standard accounts.
Consider publishing the ratio of the highest paid to the lowest paid
member of staff.1
Consider how all remuneration paid is reasonable.
Operate in a fair and equal way with staff, customers, suppliers and the
community of interest, and be environmentally aware.
5. Relevant only to CICs limited by shares who have adopted Schedule 3 Articles
Why?
As a profit distributing CIC, you need to be able to show that you remain true to your
community purpose.
What?
To balance the achievement of the CICs community purposes with providing
appropriate financial returns to investors.
How?
We recommend using the long-form version of the CIC annual report.2

www.ncvo.org.uk/images/documents/about_us/our-finances-and-pay/Executive_Pay_Report.pdf

www.gov.uk/government/publications/form-cic34-community-interest-company-report

Community Interest Companies: A framework of governance

These guidelines have been produced in conjunction with the following

organisations and with independent consultants who have worked with CICs.
The group has also referred to the CIC Regulator in producing them.
CIC Association
34 Kestrel Avenue
London SE24 0EB
NCVO
Society Building
8 All Saints Street
London N1 9RL
SEUK
The Fire Station
139 Tooley Street
London SE1 2 HZ
Bates Wells Braithwaite
26 Cannon Street
London EC4M 6YH
June Burrough Consultant
Flat 7 Portland Mansions
11/12 Portland Square
St Pauls
Bristol BS2 8SR
Mike Deacon Consultant
Asset Based Finance and Leasing Ltd
72 Central Avenue
Pinner
Middlesex HA5 5BP