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The Community Interest Company Regulations 2005 in Wales

S.I. 2005/1788 · Made 30 June 2005 · Extends to England, Wales and Scotland

Up to date with all changes known to legislation.gov.uk, revised to 21 July 2025.

COMPANIES

Made 30th June 2005

Coming into force 1st July 2005

Whereas a draft of these Regulations has been laid before and approved by a resolution of each House of Parliament;

Now therefore, in exercise of the powers conferred upon her by sections 30(1) to (4), 30(7), 31, 32(3), (4) and (6), 34(3), 35(4) to (6), 36(2), 37(7), 47(12) and (13), 57(1) and (2), 58, 59(1) and 62(2) and (3) of and paragraph 4 of Schedule 4 to the Companies (Audit, Investigations and Community Enterprise) Act 2004f1, the Secretary of State hereby makes the following Regulations:

Annotations to the whole text

Footnotes

f1

2004 c. 27.

Contents

  1. Part 1: Citation, commencement and interpretation
  2. 1Citation and commencement
  3. 2Interpretation
  4. Part 2: The community interest test and excluded companies
  5. 3Political activities not to be treated as being carried on for the benefit of the community
  6. 4Other activities not to be treated as being carried on for the benefit of the community
  7. 5Section of the community
  8. 6Excluded companies
  9. Part 2A: CONVERSION TO A REGISTERED SOCIETY
  10. 6ABecoming a registered society
  11. Part 3: Requirements concerning the articles of association
  12. 7Company without share capital
  13. 8Company with share capital
  14. 9Alternative provisions
  15. 10Declaration of dividends
  16. Part 4: Prescribed documents
  17. 11Prescribed formation documents
  18. 12Prescribed conversion documents
  19. Part 5: Alteration of objects
  20. 13Requirement for Regulator’s approval
  21. 14Documents to be delivered to registrar of companies
  22. 15Decisions etc
  23. 16Exemptions
  24. Part 6: Restrictions on distributions and interest
  25. 17Declaration of dividends
  26. 18Maximum dividend per share Repealed
  27. 19Maximum aggregate dividend
  28. 20Carrying forward of unused dividend capacity from previous financial years Repealed
  29. 21The interest cap
  30. 22Initial level and subsequent variation of dividend cap and interest cap
  31. 23Distribution of assets on a winding up
  32. 24Redemption and purchase of shares
  33. 25Reduction of share capital
  34. Part 7: Community interest company report
  35. 26General
  36. 27Information about dividends
  37. 28Information about debts or debentures on which a performance-related rate is payable
  38. 29Application of provisions relating to directors' report
  39. 29ADelivery of community interest company report to the registrar of companies
  40. Part 8: Managers
  41. 30Remuneration
  42. 31Security
  43. 32Failure and removal
  44. 33Reports
  45. Part 9: The registrar of companies
  46. 34Modifications and amendments
  47. 35Documents
  48. Part 10: Fees
  49. 36Fees payable by a community interest company
  50. Part 11: The Appeal Officer
  51. 37Time limits
  52. 38Notice of appeal
  53. 39Appeal procedure etc
  54. 40Determination of appeal
  55. 41Dismissal of appeal
  56. 42Reasons
  57. Signature
  58. Schedule 1: PROVISIONS PRESCRIBED FOR THE ... ARTICLES OF A COMMUNITY INTEREST COMPANY LIMITED BY GUARANTEE WITHOUT A SHARE CAPITAL
  59. 1Paragraph 1
  60. 2Paragraph 2
  61. 3Paragraph 3
  62. 4Paragraph 4
  63. Schedule 2: PROVISIONS PRESCRIBED FOR THE ... ARTICLES OF A COMMUNITY INTEREST COMPANY LIMITED BY SHARES, OR LIMITED BY GUARANTEE WITH A SHARE CAPITAL
  64. 1Paragraph 1
  65. 2Paragraph 2
  66. 3Paragraph 3
  67. 4Paragraph 4
  68. Schedule 3: ALTERNATIVE PROVISIONS PRESCRIBED FOR THE ... ARTICLES OF A COMMUNITY INTEREST COMPANY LIMITED BY SHARES, OR LIMITED BY GUARANTEE WITH A SHARE CAPITAL
  69. 1Paragraph 1
  70. 2Paragraph 2
  71. 3Paragraph 3
  72. 4Paragraph 4
  73. Schedule 4: CALCULATION OF THE AVERAGE DEBT OR SUM OUTSTANDING UNDER A DEBENTURE DURING A 12 MONTH PERIOD
  74. 1Paragraph 1
  75. 2Paragraph 2
  76. Schedule 4A: INFORMATION ABOUT DIRECTORS’ BENEFITS
  77. Part 1: INFORMATION REQUIRED TO BE DISCLOSED
  78. 1Total amount of directors’ remuneration etc.
  79. 2Payments for loss of office
  80. 3Sums paid to third parties in respect of directors’ services
  81. Part 2: SUPPLEMENTARY PROVISIONS
  82. 4General nature of obligations
  83. 5Provisions as to amounts to be shown
  84. 6Exclusion of sums liable to be accounted for to company etc.
  85. 7Meaning of “remuneration”
  86. 8Meaning of “long term incentive scheme”
  87. 9Meaning of “shares” and “share option” and related expressions
  88. 10Meaning of “pension scheme” and related expressions
  89. 11References to subsidiary undertakings
  90. 12Other minor definitions
  91. Schedule 5FEES PAYABLE TO THE REGISTRAR OF COMPANIES
  92. Explanatory note

1Citation and commencementI1

These Regulations may be cited as the Community Interest Company Regulations 2005 and shall come into force on 1 July 2005.

2InterpretationI1

In these Regulations—

  • F1“the 1965 Act” means the Industrial and Provident Societies Act 1965;

  • “the 1969 Northern Ireland Act” means the Industrial and Provident Societies Act (Northern Ireland) 1969;

  • F2...

  • ...

  • “the 2004 Act” means the Companies (Audit, Investigations and Community Enterprise) Act 2004;

  • F3“the 2006 Act” means the Companies Act 2006;

  • “aggregate dividend cap” means a cap set under regulation 22 for the purposes of determining maximum aggregate dividends;

  • “appellant” means, in respect of an appeal to the Appeal Officer, the person bringing the appeal;

  • F4...

  • “applicable interest cap” has the meaning given in regulation 21(3);

  • “asset-locked body” means—

    1. (a)

      a community interest company, F5a charity or a F6permitted society; or

    2. (b)

      a body established outside F7the United Kingdom that is equivalent to either of those;

  • F8“authenticated” means that the person required to authenticate the document in question has signed, or printed their name on, that document;

  • “the Authority” means the F9Financial Conduct Authority;

  • “community interest statement” means a statement in a form approved by the Regulator which—

    1. (a)

      contains a declaration that the company will carry on its activities for the benefit of the community or a section of the community; and

    2. (b)

      indicates how it is proposed that the company’s activities will benefit the community (or a section of the community);

  • “distributable profits” means, in relation to a company, its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made, F10...;

  • “election” means any election to public office held in F11the United Kingdom or elsewhere;

  • “employee” means a person who has entered into or works under (or, where the employment has ceased, worked under)—

    1. (a)

      a contract of service or apprenticeship; or

    2. (b)

      a contract for services under which it is agreed that a specified individual is to perform services,

    whether express or implied, and (if it is express) whether oral or in writing;

  • “employer” means the person by whom an employee is (or, where the employment has ceased, was) employed;

  • “exempt dividend” has the meaning given in regulation 17(3);

  • F12“governmental authority” includes—

    1. (a)

      any national, regional or local government in the United Kingdom or elsewhere;

    2. (b)

      the European Community;

    3. (c)

      any inter-governmental organisation; and

    4. (d)

      any organisation which is able to make rules or adopt decisions which are legally binding on any governmental authority falling within sub‑paragraph (a), (b) or (c);

    or any of their organs, institutions or agencies;.

  • “interest cap” means a cap set under regulation 22 for the purpose of determining the maximum rate of interest payable under regulation 21;

  • “manager” means a person appointed by order under section 47(1) of the 2004 Act;

  • “maximum aggregate dividend” has the meaning given to it in regulation 19;

  • F13...

  • “paid up value” means, in respect of any share in a company, the sum of—

    1. (a)

      so much of the share’s nominal value as has been paid up; and

    2. (b)

      any premium on that share paid to the company;

  • “performance-related rate” means any rate which is linked to the company’s profits or turnover or to any item in the balance sheet of the company;

  • F14“permitted society” means a registered society which has a restriction on the use of its assets in accordance with regulation 4 of the Community Benefit Societies (Restriction on Use of Assets) Regulations 2006 or regulation 4 of the Community Benefit Societies (Restriction on Use of Assets) Regulations (Northern Ireland) 2006;

  • “political party” includes any person standing, or proposing to stand, as a candidate at any election, and any person holding public office following his election to that office;

  • “political campaigning organisation” means any person carrying on, or proposing to carry on activities—

    1. (a)

      to promote, or oppose, changes in any law applicable in F15the United Kingdom or elsewhere, or any policy of a governmental or public authority (unless such activities are incidental to other activities carried on by that person); or

    2. (b)

      which could reasonably be regarded as intended to affect public support for a political party, or to influence voters in relation to any election or referendum (unless such activities are incidental to other activities carried on by that person);

  • F16“public authority” includes—

    1. (a)

      a court or tribunal; and

    2. (b)

      any person certain of whose functions are functions of a public nature,

    whether in the United Kingdom or elsewhere;

  • F17“quoted company” has the meaning given by section 385 of the 2006 Act;

  • “referendum” includes any national or regional referendum or other poll held in pursuance of any provision made by or under the law of any state on one or more questions or propositions specified in or in accordance with any such provision;

  • F18“registered society” means—

    1. (a)

      a registered society within the meaning given by section 1(1) of the Co-operative and Community Benefit Societies Act 2014; or

    2. (b)

      a society registered or deemed to be registered under the Industrial and Provident Societies Act (Northern Ireland) 1969;

  • “relevant company” means a community interest company which is a company limited by shares or a company limited by guarantee with a share capital;

  • F19...

  • “subsidiary” has the meaning F20given to it by section 1159 of the 2006 Act; F21...

  • F22...

3Political activities not to be treated as being carried on for the benefit of the communityI1

(1)

For the purposes of the community interest test the following activities are to be treated as not being activities which a reasonable person might consider are activities carried on for the benefit of the community:

(a)

the promotion of, or the opposition to, changes in—

(i)

any law applicable in F1the United Kingdom or elsewhere; or

(ii)

the policy adopted by any governmental or public authority in relation to any matter;

(b)

the promotion of, or the opposition (including the promotion of changes) to, the policy which any governmental or public authority proposes to adopt in relation to any matter; and

(c)

activities which can reasonably be regarded as intended or likely to—

(i)

provide or affect support (whether financial or otherwise) for a political party or political campaigning organisation; or

(ii)

influence voters in relation to any election or referendum.

(2)

But activities of the descriptions prescribed in paragraph (1) are to be treated as being activities which a reasonable person might consider are activities carried on for the benefit of the community if—

(a)

they can reasonably be regarded as incidental to other activities, which a reasonable person might consider are being carried on for the benefit the community; and

(b)

those other activities cannot reasonably be regarded as incidental to activities of any of the descriptions prescribed in paragraph (1).

4Other activities not to be treated as being carried on for the benefit of the communityI1

For the purposes of the community interest test, an activity is to be treated as not being an activity which a reasonable person might consider is an activity carried on for the benefit of the community if, or to the extent that, a reasonable person might consider that that activity benefits only the members of a particular body or the employees of a particular employer.

5Section of the communityF1

For the purposes of the community interest test, any group of individuals may constitute a section of the community if—

(a)

they share a common characteristic which distinguishes them from other members of the community; and

(b)

a reasonable person might consider that they constitute a section of the community.

6Excluded companiesI1

For the purposes of section 35(6) of the 2004 Act, the following are excluded companies:

(a)

a company which is (or when formed would be) a political party;

(b)

a company which is (or when formed would be) a political campaigning organisation; or

(c)

a company which is (or when formed would be) a subsidiary of a political party or of a political campaigning organisation.

6ABecoming a registered societyF1F3

Pursuant to section 56 of the 2004 Act, a community interest company may convert itself into a F2permitted society and section 53 of the 1965 Act and section 62 of the 1969 Northern Ireland Act apply to community interest companies, modified so that they read as follows—

(a)

section 53 of the 1965 Act—

“Conversion of company into registered society

53.
(1)

A company registered under the Companies Acts which is a community interest company may, by special resolution, determine to convert itself into a registered society which has a restriction on use of assets in accordance with the provisions of the Community Benefit Societies (Restriction on Use of Assets) Regulations 2006; and for this purpose, in any case where the nominal value of the company’s shares held by any member other than a registered society exceeds the maximum for the time being permitted by section 6(1) of this Act in the case of a member of a registered society the resolution may provide for the conversion of the shares representing that excess into a transferable loan stock bearing such rate of interest as may be fixed, and repayable on such conditions only as are determined by the resolution.

(2)

Any such resolution as aforesaid shall be accompanied by a copy of the rules of the society therein referred to and shall appoint three persons, being members of the company, who, together with a director, shall sign the rules and who may either—

(a)

be authorised to accept any alterations made by the Authority therein without further consulting the company; or

(b)

be required to lay any such alterations before the company in general meeting for acceptance as the resolution may direct.

(2A)

The following documents shall be sent to the registrar of companies—

(a)

a copy of the resolution;

(b)

a copy of the rules of the society therein referred to; and

(c)

a statement by the Authority that, in its opinion, if those rules take effect, the company will become a registered society which has a restriction on use of assets in accordance with the provisions of the Community Benefit Societies (Restriction on Use of Assets) Regulations 2006,

and, on receiving them, the registrar of companies must forward each of the documents to the Regulator.

(2B)

The Regulator must decide whether the company is eligible to cease being a community interest company.

(2C)

The company is eligible to cease being a community interest company if none of the following applies—

(a)

the Regulator has under section 43 of the 2004 Act appointed an auditor to audit the company’s annual accounts and the audit has not been completed,

(b)

civil proceedings instituted by the Regulator in the name of the company under section 44 of the 2004 Act have not been determined or discontinued,

(c)

a director of the company holds office by virtue of an order under section 45 of the 2004 Act,

(d)

a director of the company is suspended under section 46(3) of the 2004 Act,

(e)

there is a manager in respect of the property and affairs of the company appointed under section 47 of the 2004 Act,

(f)

the Official Property Holder holds property as trustee for the company,

(g)

an order under section 48(2) or (3) of the 2004 Act is in force in relation to the company,

(h)

a petition has been presented for the company to be wound up.

(2D)

The Regulator must give notice of the decision to the company.

(2E)

The Authority shall register the community interest company as a registered society under this Act if the following conditions are met—

(a)

a copy of the resolution aforesaid and a copy of the rules aforesaid is delivered to the Authority;

(b)

a copy of the decision of the Regulator that the company is eligible to cease being a community interest company is delivered to the Authority;

(c)

the company has a restriction on use of assets in accordance with the provisions of the Community Benefit Societies (Restriction on Use of Assets) Regulations 2006.

(3)

The Authority upon the registration of the society under this Act, shall give to it, in addition to an acknowledgement of registration under section 2(3) of this Act, a certificate similarly sealed or signed that the rules of the society referred to in the resolution have been registered.

(4)

A copy of any such resolution as aforesaid together with a copy of the notice of the decision issued by the Regulator and the certificate issued as aforesaid by the Authority shall be sent to the registrar of companies and, upon his registering that resolution and certificate (but not the notice of the decision issued by the Regulator), the conversion shall take effect.

(5)

The name under which any community interest company is registered under this section as a registered society shall not include any of the following words, expressions or abbreviations—

(a)

“company”,

(b)

“community interest company” or (with or without full stops) the abbreviation “cic”,

(c)

“cwmni buddiant cymunedol” or (with or without full stops) the abbreviation “cbc”,

(d)

“community interest public limited company” or (with or without full stops) the abbreviation “community interest plc”, or

(e)

“cwmni buddiant cymunedol cyhoeddus cyfyngedig” or (with or without full stops) the abbreviation “cwmni buddiant cymunedol ccc”.

(6)

Subject to the next following subsection, upon the conversion of a community interest company into a registered society under this section, the registration of the company under the Companies Acts shall become void and shall be cancelled by the registrar of companies.

(7)

The registration of a community interest company as a registered society shall not affect any right or claim for the time being subsisting against the company or any penalty for the time being incurred by the company; and—

(a)

for the purpose of enforcing any such right, penalty or claim the company may be sued and proceeded against in the same manner as if it had not been registered as a society;

(b)

any such right or claim and the liability to any such penalty shall have priority as against the property of the registered society over all other rights or claims against or liabilities of the society.

(8)

In this section—

  • “the 2004 Act” means the Companies (Audit, Investigations and Community Enterprise) Act 2004;

  • “the Official Property Holder” has the meaning given in section 29 of the 2004 Act; and

  • “the Regulator” has the meaning given in section 27 of the 2004 Act.”,

(b)

section 62 of the 1969 Northern Ireland Act—

“Conversion of company into registered society

62.
(1)

A company registered under the Companies Act 2006 which is a community interest company may, by special resolution, determine to convert itself into a registered society which has a restriction on use of assets in accordance with the provisions of the Community Benefit Societies (Restriction on Use of Assets) Regulations (Northern Ireland) 2006; and for this purpose, in any case where the nominal value of the company’s shares held by any member other than a registered society exceeds the maximum for the time being permitted by section 6(1), the resolution may provide for the conversion of the shares representing that excess into a transferable loan stock bearing such rate of interest as may be fixed, and repayable on such conditions only as are determined by the resolution.

(2)

Any such resolution as aforesaid shall be accompanied by a copy of the rules of the society therein referred to and shall appoint three persons, being members of the company, who, together with a director, shall sign the rules and who may either—

(a)

be authorised to accept any alterations made by the registrar therein without further consulting the company; or

(b)

be required to lay any such alterations before the company in general meeting for acceptance as the resolution may direct.

(2A)

The following documents shall be sent to the registrar of companies—

(a)

a copy of the resolution;

(b)

a copy of the rules of the society therein referred to; and

(c)

a statement by the registrar that, in its opinion, if those rules take effect, the company will become a registered society which has a restriction on use of assets in accordance with the provisions of the Community Benefit Societies (Restriction on Use of Assets) Regulations (Northern Ireland) 2006,

and, on receiving them, the registrar of companies must forward each of the documents to the Regulator.

(2B)

The Regulator must decide whether the company is eligible to cease being a community interest company.

(2C)

The company is eligible to cease being a community interest company if none of the following applies—

(a)

the Regulator has under section 43 of the 2004 Act appointed an auditor to audit the company’s annual accounts and the audit has not been completed,

(b)

civil proceedings instituted by the Regulator in the name of the company under section 44 of the 2004 Act have not been determined or discontinued,

(c)

a director of the company holds office by virtue of an order under section 45 of the 2004 Act,

(d)

a director of the company is suspended under section 46(3) of the 2004 Act,

(e)

there is a manager in respect of the property and affairs of the company appointed under section 47 of the 2004 Act,

(f)

the Official Property Holder holds property as trustee for the company,

(g)

an order under section 48(2) or (3) of the 2004 Act is in force in relation to the company,

(h)

a petition has been presented for the company to be wound up.

(2D)

The Regulator must give notice of the decision to the company.

(2E)

The registrar shall register the community interest company as a registered society under this Act if the following conditions are met—

(a)

a copy of the resolution aforesaid and a copy of the rules aforesaid is delivered to the registrar;

(b)

a copy of the decision of the Regulator that the company is eligible to cease being a community interest company is delivered to the registrar;

(c)

the company has a restriction on use of assets in accordance with the provisions of the Community Benefit Societies (Restriction on Use of Assets) Regulations (Northern Ireland) 2006.

(3)

The registrar, upon the registration of the society under this Act, shall give to it, in addition to an acknowledgment of registration under section 2(3), a certificate that the rules of the society referred to in the resolution have been registered.

(4)

A copy of any such resolution as aforesaid together with a copy of the notice of the decision issued by the Regulator and the certificate issued as aforesaid by the registrar shall be sent to the registrar of companies and, upon his registering the copy of the resolution and the certificate (but not the notice of the decision issued by the Regulator), the conversion shall take effect and the property of the company shall vest in the society without any conveyance or assignment.

(5)

The name under which any community interest company is registered under this section as a registered society shall not include any of the following words, expressions or abbreviations—

(a)

“company”,

(b)

“community interest company” or (with or without full stops) the abbreviation “cic”,

(c)

“cwmni buddiant cymunedol” or (with or without full stops) the abbreviation “cbc”,

(d)

“community interest public limited company” or (with or without full stops) the abbreviation “community interest plc”, or

(e)

“cwmni buddiant cymunedol cyhoeddus cyfyngedig” or (with or without full stops) the abbreviation “cwmni buddiant cymunedol ccc”.

(6)

Subject to subsection (7), upon the conversion of a community interest company into a registered society under this section, the registration of the company under the Companies Act 2006 shall become void and the registrar of companies shall thereupon strike the name of the company off the register.

(7)

The registration of a community interest company as a registered society shall not affect any right or claim for the time being subsisting against the company or any penalty for the time being incurred by the company; and—

(a)

for the purpose of enforcing any such right, penalty or claim the company may be sued and proceeded against in the same manner as if it had not been registered as a society;

(b)

any such right or claim and the liability to any such penalty shall have priority as against the property of the registered society over all other rights or claims against or liabilities of the society.

(8)

In this section—

  • “the 2004 Act” means the Companies (Audit, Investigations and Community Enterprise) Act 2004;

  • “the Official Property Holder” has the meaning given in section 29 of the 2004 Act; and

  • “the Regulator” has the meaning given in section 27 of the 2004 Act.”.

7Company without share capitalF1

A community interest company which is a company limited by guarantee without a share capital must include in its articles the provisions prescribed by Schedule 1, but if the company is a community interest company immediately prior to 1st October 2009 it may continue to comply with Schedule 1, as Schedule 1 read immediately prior to that date.

8Company with share capitalF1

A community interest company which is a company limited by shares or a company limited by guarantee with a share capital must include in its articles either—

(a)

the provisions prescribed by Schedule 2; or

(b)

the provisions prescribed by Schedule 3,

but if the company is a community interest company immediately prior to 1st October 2009 it may continue to comply with Schedule 2 or Schedule 3 (as the case may be), as Schedule 2 or Schedule 3 read immediately prior to that date.

9Alternative provisionsI1

(1)

For paragraph 1(4)(a) of the provisions prescribed by Schedule 1, 2 or 3 a community interest company may substitute—

  • ““charitable body” means F1a charity or an equivalent body established outside the United Kingdom;”

(2)

If a community interest company makes the substitution permitted by paragraph (1), it must also for every reference to “asset-locked body” in paragraph 1(2) of the provisions prescribed by Schedule 1, 2 or 3 substitute a reference to “charitable body”.

10Declaration of dividendsI1

A relevant company must not include in its F1... articles any provision which purports to permit a dividend to be declared otherwise than by an ordinary or special resolution of its members.

11Prescribed formation documentsI1

(1)

For the purposes of section 36 of the 2004 Act, the prescribed formation documents are—

(a)

a community interest statement F1authenticated by each person who is to be a first director of the company; and

(b)

a declaration that the company, when formed, will not be an excluded company.

(2)

The declaration referred to in paragraph (1)(b) must be in a form approved by the Regulator and must be made by each person who is to be a first director of the company.

12Prescribed conversion documentsI1

(1)

For the purposes of section 37 of the 2004 Act, the prescribed conversion documents are—

(a)

a community interest statement F1authenticated by each person who is a director of the company;

(b)

a declaration that the company is not an excluded company; and

F2(c)

either—

(i)

a declaration that the company is not a charity, F3...

(ii)

in the case of a company that is an English charity, a declaration that the Charity Commissioners have given the company the written consent required by section 39 of the 2004 Act F4, or,

F5(iii)

in the case of a company that is a Scottish charity, a declaration that the Scottish Charity Regulator, and, where applicable, the Charity Commission, has given the company the written consent required by section 40 of the 2004 Act.

(2)

The declarations referred to in sub-paragraphs (b) and (c) of paragraph (1) must be in a form approved by the Regulator and must be made by each person who is a director of the company.

13Requirement for Regulator’s approvalI1

An alteration of the F1articles of a community interest company with respect to the statement of the company’s objects does not have effect except in so far as it is approved by the Regulator.

14Documents to be delivered to registrar of companiesI1

(1)

If F1notice under section 31(2)(a) of the 2006 Act (notice of amendment of articles so as to add, remove or alter a statement of the company’s objects) is given to the registrar of companies, the company must also deliver—

(a)

a community interest statement; and

(b)

a statement, in a form approved by the Regulator, of the steps that have been taken to bring the proposed alteration to the notice of persons affected by the company’s activities.

(2)

The community interest statement and the statement under paragraph (1)(b) must be F2authenticated by each person who is a director of the company.

15Decisions etcI1

(1)

On receiving F1notice under section 31(2)(a) of the 2006 Act, the community interest statement delivered under regulation 14(1)(a) and the statement delivered under regulation 14(1)(b), the registrar of companies must—

(a)

forward a copy of each of the documents to the Regulator; and

(b)

retain the documents pending the Regulator’s decision.

(2)

The Regulator must decide whether to approve the proposed alteration of the F2articles of the community interest company with respect to the statement of the company’s objects.

(3)

The Regulator may approve the proposed alteration if he considers that—

(a)

the statement of the company’s objects as altered by the special resolution will comply with the requirements imposed by and by virtue of section 32 of the 2004 Act;

(b)

the company will satisfy the community interest test; and

(c)

the company has taken reasonable steps to bring the proposed alteration to the notice of persons affected by its activities.

(4)

In considering whether the company will satisfy the community interest test, the Regulator shall have regard to—

(a)

the statement of the company’s objects as altered by the special resolution;

(b)

the community interest statement; and

(c)

any other relevant considerations.

(5)

The Regulator must give notice of the decision to the registrar (but the registrar is not required to record it).

(6)

The registrar shall not—

F3(a)

register the notice under section 31(2)(a) of the 2006 Act;

(b)

register any copy of the amended articles delivered pursuant to section 26(1) of that Act; or

(c)

cause notice of that alteration to be published pursuant to F4section 1077 of the Companies Act 2006 (public notice by registrar of receipt of documents),

unless and until the Regulator has given notice of a decision to approve the proposed alteration.

(7)

If the Regulator gives notice of a decision to approve the proposed alteration, the registrar shall also—

(a)

record the community interest statement; and

(b)

record the statement delivered under regulation 14(1)(b).

(8)

If the Regulator decides not to approve the proposed alteration of the memorandum of the community interest company with respect to the statement of the company’s objects, the company may appeal to the Appeal Officer against the decision.

16ExemptionsI1

Regulations 13 to 15 do not apply where a community interest company is to cease being a community interest company by becoming a charity F1... and the special resolution to alter the F2articles of the company with respect to the statement of its objects is forwarded to the registrar of companies in accordance with section 54 of the 2004 Act.

17Declaration of dividendsI1

(1)

A relevant company may declare a dividend to its members only —

(a)

to the extent that its F1... articles permit it to do so;

(b)

if an ordinary or special resolution of the company’s members has approved the declaration of the dividend; and

F2(c)

if the declaration of the dividend does not cause the total amount of all the dividends declared on shares in the relevant company for the financial year for which it is declared to exceed the maximum aggregate dividend for that financial year.

(2)

Paragraph (1)(c) does not apply to a dividend if, or to the extent that, it is an exempt dividend.

(3)

A dividend declared on a share in a relevant company is an exempt dividend if one of the conditions specified in paragraph (4) and one of the conditions specified in paragraph (5) is satisfied in respect of it.

(4)

The conditions specified in this paragraph are—

(a)

that the dividend is declared on a share which is held by an asset-locked body (but this condition is not satisfied in respect of a share which the directors recommending the dividend are aware is being held on trust for a person who is not an asset-locked body);

(b)

that the dividend is declared on a share which is held on behalf of an asset-locked body (or is believed by the directors recommending the dividend to be so held).

(5)

The conditions specified in this paragraph are—

(a)

that the Regulator has consented to the declaration of the dividend;

(b)

that the asset-locked body by or on behalf of which the share on which the dividend is declared is held (or on behalf of which the directors declaring the dividend believe that it is held) is named in the memorandum or articles of the company as a possible recipient of the assets of the company.

(6)

If a relevant company has made the substitutions prescribed in regulation 9(2), references to “asset-locked body” in this article shall have effect as if there were substituted for them references to “charitable body”, with the meaning prescribed in regulation 9(1).

18Maximum dividend per shareF1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19Maximum aggregate dividendI1

The maximum aggregate dividend for a financial year of a relevant company is declared when the total amount of all dividends declared on its shares for that year, less the amount of any exempt dividends, equals (when expressed as a percentage of the relevant company’s distributable profits) the aggregate dividend cap which had effect in relation to that company on the first day of the financial year in respect of which the dividends are declared.

20Carrying forward of unused dividend capacity from previous financial yearsF1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21The interest capI1

(1)

This regulation applies to debentures issued by, and debts of, a community interest company in respect of which—

(a)

a performance-related rate of interest is payable; and

(b)

the agreement to pay interest at a performance-related rate was entered into by the company on or after the date on which it became a community interest company.

(2)

In connection with debentures and debts of the kind specified in paragraph (1), a community interest company shall not be liable to pay, and shall not pay, interest at a higher rate than the applicable interest cap.

(3)

The applicable interest cap is the interest cap which had effect at the time that the agreement to pay interest at a performance-related rate was made.

(4)

Where the expression of the interest cap includes reference to a rate or figure determined by any person other than the company, the Regulator or the Secretary of State F1(in Northern Ireland, the Department of Enterprise, Trade and Investment for Northern Ireland), the interest payable on any debt or debenture to which the interest cap applies shall be calculated by reference to that rate or figure as it had effect at the beginning of the first day of the financial year in which the interest became due.

(5)

Nothing in paragraph (2) shall be taken as releasing a community interest company from liability to pay, or as preventing a community interest company from paying—

(a)

interest which accrued before the company became a community interest company; or

(b)

arrears of interest which if it had been paid at the time it became due would not have breached paragraph (2).

22Initial level and subsequent variation of dividend cap and interest capF5I1

(1)

Subject to paragraph (3)—

F1(a)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)

the aggregate dividend cap shall be 35 per cent of a relevant company’s distributable profits; and

(c)

the interest cap shall be that percentage of the average amount of a community interest company’s debt, or the sum outstanding under a debenture issued by it, during the 12 month period immediately preceding the date on which the interest on that debt or debenture becomes due (determined in accordance with Schedule 4) which is 4 percentage points higher than the Bank of England’s base lending rate.

(2)

For the purposes of paragraph (1), the Bank of England’s base lending rate is the base lending rate most recently set by the Monetary Policy Committee of the Bank of England in connection with its responsibilities under Part II of the Bank of England Act 1998.

(3)

The Regulator may from time to time, with the approval of the Secretary of State, set a new F2... aggregate dividend cap, or interest cap.

(4)

A new cap set under paragraph (3)—

(a)

shall not take effect from a date less than three months after it is published; and

(b)

subject to paragraphs F3(6) and (7), may result in a change to both the level of any cap and the way in which it is expressed.

F4(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)

The aggregate dividend cap must be expressed as a percentage of distributable profits.

(7)

The interest cap must be expressed as a percentage of the average amount of a debt, or the sum outstanding under a debenture, during the 12 month period immediately preceding the date on which the interest on that debt or debenture becomes due (determined in accordance with Schedule 4).

(8)

The Secretary of State may from time to time require the Regulator to review any cap set under this regulation.

23Distribution of assets on a winding upI1

(1)

This regulation applies where—

(a)

a community interest company is wound up under the Insolvency Act 1986f1 F1or the Insolvency (Northern Ireland) Order 1989; and

(b)

some property of the company (the “residual assets”) remains after satisfaction of the company’s liabilities.

(2)

Subject to paragraph (3), the residual assets shall be distributed to those members of the community interest company (if any) who are entitled to share in any distribution of assets on the winding up of the company according to their rights and interests in the company.

(3)

No member shall receive under paragraph (2) an amount which exceeds the paid up value of the shares which he holds in the company.

(4)

If any residual assets remain after any distribution to members under paragraph (2) (the “remaining residual assets”), they shall be distributed in accordance with paragraphs (5) and (6).

(5)

If the F2... articles of the company specify an asset-locked body to which any remaining residual assets of the company should be distributed, then, unless either of the conditions specified in sub-paragraphs (b) and (c) of paragraph (6) is satisfied, the remaining residual assets shall be distributed to that asset-locked body in such proportions or amounts as the Regulator shall direct.

(6)

If—

(a)

the F3... articles of the company do not specify an asset-locked body to which any remaining residual assets of the company should be distributed;

(b)

the Regulator is aware that the asset-locked body to which the F4... articles of the company specify that the remaining residual assets of the company should be distributed is itself in the process of being wound up; or

(c)

the Regulator—

(i)

has received representations from a member or director of the company stating, with reasons, that the asset-locked body to which the ... articles of the company specify that the remaining residual assets of the company should be distributed is not an appropriate recipient of the company’s remaining residual assets; and

(ii)

has agreed with those representations,

then the remaining residual assets shall be distributed to such asset-locked bodies, and in such proportions or amounts, as the Regulator shall direct.

(7)

In considering any direction to be made under this regulation, the Regulator must—

(a)

consult the directors and members of the company, to the extent that he considers it practicable and appropriate to do so; and

(b)

have regard to the desirability of distributing assets in accordance with any relevant provisions of the company’s F5... articles.

(8)

The Regulator must give notice of any direction under this regulation to the company and the liquidator.

(9)

This regulation has effect notwithstanding anything in the Insolvency Act 1986 F6or the Insolvency (Northern Ireland) Order 1989.

(10)

This regulation has effect subject to the provisions of the Housing Act 1996f2 F7, Part 2 of the Housing and Regeneration Act 2008 and the Housing (Scotland) Act 2001f3.

(11)

Any member or director of the company may appeal to the Appeal Officer against a direction of the Regulator made under this regulation.

24Redemption and purchase of sharesI1

A relevant company may not distribute assets to its members by way of the redemption or purchase of the company’s own shares, unless the amount to be paid by the company in respect of any such share does not exceed the paid up value of the share.

25Reduction of share capitalI1

A relevant company may not distribute assets to its members by way of a reduction of the company’s share capital unless—

(a)

the reduction is made by extinguishing or reducing the liability of any of the members on any of the company’s shares in respect of share capital not paid up; or

(b)

the amount to be paid by the company to members in paying off paid up share capital does not exceed the paid up value of their respective shares.

26GeneralI1

(1)

Every community interest company report shall contain—

(a)

a fair and accurate description of the manner in which the company’s activities during the financial year have benefited the community;

(b)

a description of the steps, if any, which the company has taken during the financial year to consult persons affected by the company’s activities, and the outcome of any such consultation; and

F1(c)

directors’ remuneration information.

F2(c)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(1A)

In paragraph (1)(c) “directors’ remuneration information” means—

(a)

in the case of a company to which the Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 apply, the information specified in Schedule 4A to these Regulations;

(b)

in the case of a company to which the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 apply, the information specified in Schedule 5 to those Regulations, save that the information specified in Part 2 of that Schedule need only be given in the case of a company which is not a quoted company.

(2)

If, during a financial year, a community interest company has transferred any of its assets other than for full consideration—

(a)

to any asset-locked body (other than by way of an exempt dividend); or

(b)

for the benefit of the community other than by way of transfer to an asset-locked body,

its community interest report for that financial year shall specify the amount, or contain a fair estimate of the value, of such transfer.

F4(3)

If—

(a)

a community interest company has provided the information required by paragraph (1)(c) in its copy of the annual accounts for the year delivered to the registrar of companies under section 441 of the 2006 Act; and

(b)

its community interest company report contains a statement that details of the remuneration of the directors of the company during the financial year may be found in the notes to the annual accounts of the company,

the community interest report need not contain the information required by paragraph (1)(c).

(4)

Paragraphs (1)(c) and (3) have effect for financial years ending on or after 1st October 2009.

F5(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27Information about dividendsF1

(1)

This regulation applies to the community interest company report of any community interest company which has declared, or whose directors propose to declare, a dividend for the financial year to which the report relates.

(2)

The report must state the amount of any dividend declared, or proposed to be declared, by the company on each of its shares for the financial year to which the report relates.

(3)

The report must also explain how the declaration or proposed declaration of any dividend declared, or proposed to be declared, by the company in respect of the financial year to which the report relates complies, or will comply, with regulations 17 and 19.

(4)

The explanation provided under paragraph (3) must include details of—

(a)

in the case of an exempt dividend, why it is an exempt dividend; and

(b)

in the case of any other dividend, the maximum aggregate dividend

and how each of these has been determined.

28Information about debts or debentures on which a performance-related rate is payableI1

(1)

Where a community interest company has at any time during the financial year a debt outstanding, or a debenture in issue, to which regulation 21 applies, its community interest company report must state—

(a)

the rate of interest payable on that debt or debenture as calculated over a 12 month period ending with the most recent date on which interest became payable in respect of that debt or debenture during the financial year; and

(b)

the applicable interest cap applying to that debt or debenture,

and how each of these has been determined.

(2)

Where the company has at any time during the financial year a debt outstanding, or a debenture in issue, to which regulation 21 does not apply, but on which a performance-related rate is payable, its community interest company report must state—

(a)

the rate of interest payable on that debt or debenture as calculated over a 12 month period ending with the most recent date on which interest became payable in respect of that debt or debenture during the financial year; and

(b)

why regulation 21 does not apply to that debt or debenture.

29Application of provisions relating to directors' reportF1

The following provisions of the 2006 Act apply to the community interest company report as they apply to the directors' report—

  • section 419 (approval and signing);

  • sections 423 to 425, 430 to 433 and 436 (publication);

  • sections 437 and 438 (public companies: laying before general meeting);

  • F2...

  • section 454 (voluntary revision).

29ADelivery of community interest company report to the registrar of companiesF1

(1)

The directors of a community interest company must deliver to the registrar of companies for each financial year a copy of the community interest company report.

(2)

For these purposes, sections 441 to 443, 445(1) and (5), 446(1) and (3), 447(1) and (3) and 451 to 453 of the 2006 Act apply to a community interest company report as they apply to a directors’ report.

(3)

Sections 444(1) and (6) and 444A(1) and (3) apply to a community interest company report as they apply to a directors’ report with the following modifications—

(a)

section 444(1) has effect as if the directors of a community interest company subject to the small companies regime must deliver a copy of the community interest company report for each financial year to the registrar; and

(b)

section 444A(1) has effect as if the directors of a community interest company which is entitled to the small companies exemption in relation to the directors’ report for a financial year must deliver a copy of the community interest company report for that year to the registrar.

30RemunerationI1

(1)

The Regulator is authorised to determine the amount of a manager’s remuneration.

(2)

The remuneration of a manager shall be payable out of the income of the community interest company in respect of which the manager was appointed.

(3)

The Regulator is authorised to disallow any amount of remuneration of a manager if—

(a)

the time specified in the notice referred to in regulation 32(2) has expired; and

(b)

the Regulator—

(i)

has considered such representations, if any, as are duly made in response to such a notice; and

(ii)

is satisfied that the manager has failed in such manner as is set out in sub-paragraph (a)(i) or (ii) of regulation 32(1) and specified in such a notice.

31SecurityI1

The Regulator is authorised to require the manager to give security to him for the due discharge of the manager’s functions within such time and in such form as the Regulator may specify.

32Failure and removalI1

(1)

Where—

(a)

it appears to the Regulator that a manager has failed—

(i)

to give security within such time or in such form as the Regulator has specified; or

(ii)

satisfactorily to discharge any function imposed on the manager by or by virtue of the order by which the manager was appointed or by regulation 33; and

(b)

the Regulator wishes to consider exercising his powers under regulation 30(3) or paragraph (3) of this regulation,

the Regulator shall give the manager, whether in person or by post, a written notice complying with paragraph (2).

(2)

A notice given to a manager under paragraph (1) shall inform the manager of—

(a)

any failure under paragraph (1)(a) in respect of which the notice is issued;

(b)

the Regulator’s power under regulation 30(3) to authorise the disallowance of any amount of remuneration if satisfied as to any such failure;

(c)

the Regulator’s power under paragraph (3) to remove the manager if satisfied as to any such failure; and

(d)

the manager’s right to make representations to the Regulator in respect of any such alleged failure within such reasonable time as is specified in the notice.

(3)

The Regulator may remove a manager (whether or not he also exercises the power conferred by regulation 30(3)) if—

(a)

the time specified in the notice referred to in paragraph (2) has expired; and

(b)

the Regulator—

(i)

has considered such representations, if any, as are duly made in response to such a notice; and

(ii)

is satisfied that the manager has failed in such manner as is set out in paragraph (1)(a)(i) or (ii) and specified in such notice.

33ReportsI1

The manager must make such reports to the Regulator as the Regulator may from time to time require on such matters and in such form as the Regulator specifies.

34Modifications and amendmentsI1

F1(1)

The registrar of companies shall not cause to be published in the Gazette notice pursuant to section 1077 of the Companies Act 2006 of the receipt of documents under section 37C(3) or 54C(4) of the 2004 Act unless the registrar records those documents pursuant to section 38A(1)(b) or 55A(1)(b) of the 2004 Act.

(2)

In section 715A of the 1985 Actf1 (interpretation), after subsection (2) insert—

“(3)

References in this Part to the Companies Acts include Part 2 of the Companies (Audit, Investigations and Community Enterprise) Act 2004.”

F2(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35DocumentsI1

(1)

The registrar of companies shall, on receiving any notice under section 109(1) of the Insolvency Act 1986f1 F1or Article 95 of the Insolvency (Northern Ireland) Order 1989 (notice by liquidator of his appointment) in relation to a community interest company, provide a copy of that notice to the Regulator.

(2)

The registrar of companies shall, on receiving any copy of a winding-up order forwarded under section 130(1) of the Insolvency Act 1986f2 F2or Article 110 of the Insolvency (Northern Ireland) Order 1989 (consequences of a winding-up order) in relation to a community interest company, provide the Regulator with a copy of that winding-up order.

36Fees payable by a community interest companyI1

The fees set out in the second column of Schedule 5—

(a)

shall be the fees payable in connection with the Regulator’s functions in relation to the matters set out in the first column of that Schedule;

(b)

shall be payable as stated in the third column of that Schedule; and

(c)

shall be paid to the registrar of companies.

37Time limitsI1

(1)

Unless paragraph (2) applies, an appeal to the Appeal Officer must be made by sending a notice of appeal to the Regulator so that it is received within two months of the date upon which the appellant was given reasons for the disputed order or decision in accordance with section 61(5) of the 2004 Act.

(2)

When an appeal is brought against a direction of the Regulator made under regulation 23, it must be made by sending a notice of appeal to the Regulator so that it is received within three weeks of the date upon which notice of the disputed direction was given to the community interest company in accordance with regulation 23(8).

(3)

On receiving the notice of appeal, the Regulator must—

(a)

send an acknowledgement of its receipt to the appellant together with a copy of any statement made under paragraph (4); and

(b)

forward the notice of appeal to the Appeal Officer endorsed with the date of receipt.

(4)

Where paragraph (2) applies, the Regulator must forward with the notice of appeal a statement—

(a)

of the date upon which notice of the disputed direction or decision was given to the community interest company in accordance with regulation 23(8); or

(b)

that no such notice was given.

38Notice of appealI1

(1)

The notice of appeal must state—

(a)

the name and address of the appellant; and

(b)

an address for service in F1the United Kingdom.

(2)

Unless regulation 37(2) applies, the notice of appeal must—

(a)

specify as precisely as the appellant is able the date or dates on which the appellant was given reasons by the Regulator for the disputed order or decision; or

(b)

include a statement that no such reasons were given.

(3)

The notice of appeal must contain—

(a)

a statement of the grounds for the appeal;

(b)

details of the disputed order, decision or direction;

(c)

a succinct presentation of the arguments supporting each of the grounds of appeal; and

(d)

a schedule listing all the documents annexed to the notice of appeal.

(4)

There shall be annexed to the notice of appeal—

(a)

in the case of a disputed order or decision, a copy of any reasons given by the Regulator under section 61(5) of the 2004 Act; and

(b)

as far as practicable a copy of every document on which the appellant relies.

(5)

The notice of appeal must be F2authenticated and dated by the appellant, or on his behalf by his duly authorised officer or his legal representative.

39Appeal procedure etcI1

(1)

The Regulator may make a written response to the notice of appeal.

(2)

Any such written response must be sent to the Appeal Officer so that it is received by him within two weeks of the date on which the Regulator received the notice of appeal or such further time as the Appeal Officer may allow.

(3)

The Appeal Officer must send a copy of the written response to the appellant.

(4)

The Appeal Officer may give the appellant and the Regulator the opportunity to make further written or oral representations.

(5)

The Appeal Officer may specify the time and manner in which such further representations are to be made.

(6)

The Appeal Officer may—

(a)

make enquiries of any person;

(b)

receive representations from any person;

(c)

hold any meeting or hearing; and

(d)

subject to these Regulations, follow such practice and procedure,

as he thinks fit, having regard to the just, expeditious and economical conduct of the appeal.

(7)

The Appeal Officer may specify the time and place at which any meeting or hearing is to be held.

40Determination of appealI1

In determining an appeal, the Appeal Officer shall have regard to all matters that appear to him to be relevant.

41Dismissal of appealI1

(1)

The Appeal Officer may dismiss an appeal at any stage if he considers that—

(a)

the notice of appeal discloses no valid ground of appeal;

(b)

the notice of appeal fails to comply with the requirements of regulation 38; or

(c)

the appellant is not entitled to bring the appeal.

(2)

The Appeal Officer must dismiss an appeal if he considers that the appeal was not brought within the time limits imposed by regulation 37 unless he is satisfied that the circumstances are exceptional.

(3)

The Appeal Officer may dismiss an appeal at any stage at the request of the appellant.

42ReasonsI1

(1)

The Appeal Officer must give reasons for a decision to—

(a)

dismiss an appeal;

(b)

allow an appeal; or

(c)

remit a case to the Regulator.

(2)

The reasons must be given to the Regulator and to the person bringing the appeal.

(3)

The Appeal Officer must make such arrangements for the publication of the decisions listed in paragraph (1) and his reasons for them as he considers appropriate.

Signature

Alun Michael

Minister for Industry and the Regions

Department of Trade and Industry

30th June 2005

1I1

(1)

The company shall not transfer any of its assets other than for full consideration.

(2)

Provided the conditions in sub-paragraph (3) are satisfied, sub-paragraph (1) shall not apply to—

(a)

the transfer of assets to any specified asset-locked body, or (with the consent of the Regulator) to any other asset-locked body; and

(b)

the transfer of assets made for the benefit of the community other than by way of a transfer of assets to an asset-locked body.

(3)

The conditions are that the transfer of assets must comply with any restrictions on the transfer of assets for less than full consideration which may be set out elsewhere in the memorandum or articles of the company.

(4)

In this paragraph—

(a)

“asset-locked body” means—

(i)

a community interest company, F1a charity, or a F2permitted society; or

(ii)

a body established outside the United Kingdom that is equivalent to F3either of those;

(b)

“community” is to be construed in accordance with section 35(5) of the Companies (Audit, Investigations and Community Enterprise) Act 2004;

F4(ba)

“permitted society” means a registered society which has a restriction on the use of its assets in accordance with regulation 4 of the Community Benefit Societies (Restriction on Use of Assets) Regulations 2006 or regulation 4 of the Community Benefit Societies (Restriction on Use of Assets) Regulations (Northern Ireland) 2006;

(bb)

“registered society” means—

(i)

a registered society within the meaning given by section 1(1) of the Co-operative and Community Benefit Societies Act 2014; or

(ii)

a society registered or deemed to be registered under the Industrial and Provident Societies Act (Northern Ireland) 1969;

F5(c)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)

“the Regulator” means the Regulator of Community Interest Companies;

F6(e)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f)

“specified” means specified in the memorandum or articles of association of the company for the purposes of this paragraph; and

(g)

“transfer” includes every description of disposition, payment, release or distribution, and the creation or extinction of an estate or interest in, or a right over, any property.

2I1

(1)

The subscribers to the memorandum are the first members of the company.

(2)

Such other persons as are admitted to membership in accordance with the articles shall be members of the company.

(3)

No person shall be admitted a member of the company unless he is approved by the directors.

(4)

Every person who wishes to become a member shall deliver to the company an application for membership in such form (and containing such information) as the directors require and executed by him.

(5)

Membership is not transferable to anyone else.

(6)

Membership is terminated if:

(a)

the member dies or ceases to exist; or

(b)

otherwise in accordance with the articles.

3I1

(1)

A person who is not a member of the company shall not have any right to vote at a general meeting of the company; but this is without prejudice to any right to vote on a resolution affecting the rights attached to a class of the company’s debentures.

F1(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4I1

(1)

Questions arising at a meeting of directors shall be decided by a majority of votes F1....

F2(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

Except as provided by sub-paragraphs (1) and (2) in all proceedings of directors each director must not have more than one vote.

1I1

(1)

The company shall not transfer any of its assets other than for full consideration.

(2)

Provided the conditions in sub-paragraph (3) are satisfied, sub-paragraph (1) shall not apply to—

(a)

the transfer of assets to any specified asset-locked body, or (with the consent of the Regulator) to any other asset-locked body; and

(b)

the transfer of assets made for the benefit of the community other than by way of a transfer of assets to an asset-locked body.

(3)

The conditions are that the transfer of assets must comply with any restrictions on the transfer of assets for less than full consideration which may be set out elsewhere in the memorandum or articles of the company.

(4)

In this paragraph—

(a)

“asset-locked body” means—

(i)

a community interest company F1a charity, or a F2permitted society; or

(ii)

a body established outside F3the United Kingdom that is equivalent to either of those;

(b)

“community” is to be construed in accordance with section 35(5) of the Companies (Audit, Investigations and Community Enterprise) Act 2004;

F4(ba)

“permitted society” means a registered society which has a restriction on the use of its assets in accordance with regulation 4 of the Community Benefit Societies (Restriction on Use of Assets) Regulations 2006 or regulation 4 of the Community Benefit Societies (Restriction on Use of Assets) Regulations (Northern Ireland) 2006;

(bb)

“registered society” means—

(i)

a registered society within the meaning given by section 1(1) of the Co-operative and Community Benefit Societies Act 2014; or

(ii)

a society registered or deemed to be registered under the Industrial and Provident Societies Act (Northern Ireland) 1969;

F5(c)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)

“the Regulator” means the Regulator of Community Interest Companies;

F6(e)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f)

“specified” means specified in the memorandum or articles of association of the company for the purposes of this paragraph; and

(g)

“transfer” includes every description of disposition, payment, release or distribution, and the creation or extinction of an estate or interest in, or a right over, any property.

2I1

(1)

The directors may refuse to register the transfer of a share to a person of whom they do not approve.

(2)

They may also refuse to register the transfer unless it is lodged at the registered office of the company or at such other place as the directors may appoint and is accompanied by such evidence as the directors may reasonably require to show the right of the transferor to make the transfer, and by such other information as they may reasonably require.

(3)

If the directors refuse to register such a transfer, they shall within two months after the date on which the transfer was lodged with the company send to the transferee notice of the refusal.

(4)

The provisions of this paragraph apply in addition to any restrictions on the transfer of a share which may be set out elsewhere in the memorandum or articles of the company.

3I1

(1)

A person who is not a member of the company shall not have any right to vote at a general meeting of the company; but this is without prejudice to any right to vote on a resolution affecting the rights attached to a class of the company’s debentures.

F1(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4I1

(1)

Questions arising at a meeting of directors shall be decided by a majority of votes F1....

F2(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

Except as provided by sub-paragraphs (1) and (2) in all proceedings of directors each director must not have more than one vote.

1I1

(1)

The company shall not transfer any of its assets other than for full consideration.

(2)

Provided the conditions in sub-paragraph (3) are satisfied, sub-paragraph (1) shall not apply to—

(a)

the transfer of assets to any specified asset-locked body, or (with the consent of the Regulator) to any other asset-locked body;

(b)

the transfer of assets made for the benefit of the community other than by way of a transfer of assets to an asset-locked body;

(c)

the payment of dividends in respect of shares in the company;

(d)

the distribution of assets on a winding up;

(e)

payments on the redemption or purchase of the company’s own shares;

(f)

payments on the reduction of share capital; and

(g)

the extinguishing or reduction of the liability of members in respect of share capital not paid up on the reduction of share capital.

(3)

The conditions are that the transfer of assets—

(a)

must comply with any restrictions on the transfer of assets for less than full consideration which may be set out elsewhere in the memorandum or articles of the company; and

(b)

must not exceed any limits imposed by, or by virtue of, Part 2 of the Companies (Audit, Investigations and Community Enterprise) Act 2004.

(4)

In this paragraph—

(a)

“asset-locked body” means—

(i)

a community interest company F1a charity, or a F2permitted society; or

(ii)

a body established outside F3the United Kingdom that is equivalent to either of those;

(b)

“community” is to be construed in accordance with section 35(5) of the Companies (Audit, Investigations and Community Enterprise) Act 2004;

F4(ba)

“permitted society” means a registered society which has a restriction on the use of its assets in accordance with regulation 4 of the Community Benefit Societies (Restriction on Use of Assets) Regulations 2006 or regulation 4 of the Community Benefit Societies (Restriction on Use of Assets) Regulations (Northern Ireland) 2006;

(bb)

“registered society” means—

(i)

a registered society within the meaning given by section 1(1) of the Co-operative and Community Benefit Societies Act 2014; or

(ii)

a society registered or deemed to be registered under the Industrial and Provident Societies Act (Northern Ireland) 1969;

F5(c)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)

“the Regulator” means the Regulator of Community Interest Companies;

F6(e)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f)

“specified” means specified in the memorandum or articles of association of the company for the purposes of this paragraph; and

(g)

“transfer” includes every description of disposition, payment, release or distribution, and the creation or extinction of an estate or interest in, or a right over, any property.

2I1

(1)

The directors may refuse to register the transfer of a share to a person of whom they do not approve.

(2)

They may also refuse to register the transfer unless it is lodged at the registered office of the company or at such other place as the directors may appoint and is accompanied by such evidence as the directors may reasonably require to show the right of the transferor to make the transfer, and by such other information as they may reasonably require.

(3)

If the directors refuse to register such a transfer, they shall within two months after the date on which the transfer was lodged with the company send to the transferee notice of the refusal.

(4)

The provisions of this paragraph apply in addition to any restrictions on the transfer of a share which may be set out elsewhere in the memorandum or articles of the company.

3I1

(1)

A person who is not a member of the company shall not have any right to vote at a general meeting of the company; but this is without prejudice to any right to vote on a resolution affecting the rights attached to a class of the company’s debentures.

F1(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4I1

(1)

Questions arising at a meeting of directors shall be decided by a majority of votes F1....

F2(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

Except as provided by sub-paragraphs (1) and (2) in all proceedings of directors each director must not have more than one vote.

1I1

(1)

The average amount of a debt or sum outstanding under a debenture during any 12 month period is the amount which satisfies the calculation set out in sub-paragraph (2).

(2)

The calculation referred to in sub-paragraph (1) is A divided by B where:

  • A is the aggregate of the amount of the debt or the sum outstanding under the debenture as at the end of each day during the 12 month period; and

  • B is the number of days during that 12 month period.

(3)

For the purposes of A in sub-paragraph (2) there shall be excluded any sums which represent interest which has accrued on that debt or debenture within that 12 month period.

(4)

For the purposes of A in sub-paragraph (2) where the debt or debenture did not exist at the end of any day during the 12 month period, the amount of the debt or the sum outstanding under the debenture as at the end of that day shall be treated as being zero for the purposes of the calculation in A.

2I1

Where the amount of the debt or the sum outstanding under the debenture is not known as at the end of any particular date, the directors of the community interest company may, for the purposes of the calculation referred to in paragraph 1, substitute for the debt or the sum outstanding under the debenture such amount or sum as they estimate to be the amount of the debt or the sum outstanding under the debenture as at the end of that particular date.

1Total amount of directors’ remuneration etc.F1

(1)

There must be shown the overall total of the following amounts—

(a)

the amount of remuneration paid to or receivable by directors in respect of qualifying services,

(b)

the amount of money paid to or receivable by directors, and the net value of assets (other than money, share options or shares) received or receivable by directors, under long term incentive schemes in respect of qualifying services, and

(c)

the value of any company contributions—

(i)

paid, or treated as paid, to a pension scheme in respect of directors’ qualifying services, and

(ii)

by reference to which the rate or amount of any money purchase benefits that may become payable will be calculated.

(2)

There must be shown the number of directors (if any) to whom retirement benefits are accruing in respect of qualifying services—

(a)

under money purchase schemes, and

(b)

under defined benefit schemes.

2Payments for loss of officeF1

(1)

There must be shown the aggregate amount of any payments for loss of office.

(2)

“Payment for loss of office” has the same meaning as in section 215 of the 2006 Act.

3Sums paid to third parties in respect of directors’ servicesF1

(1)

There must be shown the aggregate amount of any consideration paid to or receivable by third parties for making available the services of any person—

(a)

as a director of the company, or

(b)

while director of the company—

(i)

as director of any of its subsidiary undertakings, or

(ii)

otherwise in connection with the management of the affairs of the company or any of its subsidiary undertakings.

(2)

In sub-paragraph (1)—

(a)

the reference to consideration includes benefits otherwise than in cash, and

(b)

in relation to such consideration the reference to its amount is to the estimated money value of the benefit.

The nature of any such consideration must be disclosed.

(3)

For the purposes of this paragraph a “third party” means a person other than—

(a)

the director, a person connected with the director, or body corporate controlled by the director, or

(b)

the company or any of its subsidiary undertakings.

4General nature of obligationsF1

(1)

This Schedule requires information to be given only so far as it is contained in the company’s books and papers or the company has the right to obtain it from the persons concerned.

(2)

For the purposes of this Schedule information is treated as shown if it is capable of being readily ascertained from other information which is shown.

5Provisions as to amounts to be shownF1

(1)

The following provisions apply with respect to the amounts to be shown under this Schedule.

(2)

The amount in each case includes all relevant sums, whether paid by or receivable from the company, any of the company’s subsidiary undertakings or any other person.

(3)

References to amounts paid to or receivable by a person include amounts paid to or receivable by a person connected with that person or a body corporate controlled by the person (but not so as to require an amount to be counted twice).

(4)

Except as otherwise provided, the amounts to be shown for any financial year are—

(a)

the sums receivable in respect of that year (whenever paid), or

(b)

in the case of sums not receivable in respect of a period, the sums paid during that year.

(5)

Sums paid by way of expenses allowance that are charged to United Kingdom income tax after the end of the relevant financial year must be shown in a note to the first accounts in which it is practicable to show them and must be distinguished from the amounts to be shown apart from this provision.

(6)

Where it is necessary to do so for the purpose of making any distinction required in complying with this Schedule, the directors may apportion payments between the matters in respect of which they have been paid or are receivable in such manner as they think appropriate.

6Exclusion of sums liable to be accounted for to company etc.F1

(1)

The amounts to be shown under this Schedule do not include any sums that are to be accounted for—

(a)

to the company or any of its subsidiary undertakings, or

(b)

by virtue of sections 219 and 222(3) of the 2006 Act (payments in connection with share transfers: duty to account), to persons who sold their shares as a result of the offer made.

(2)

Where—

(a)

any such sums are not shown in a note to the accounts for the relevant financial year on the ground that the person receiving them is liable to account for them, and

(b)

the liability is afterwards wholly or partly released or is not enforced within a period of two years,

those sums, to the extent to which the liability is released or not enforced, must be shown in a note to the first accounts in which it is practicable to show them and must be distinguished from the amounts to be shown apart from this provision.

7Meaning of “remuneration”F1

(1)

In this Schedule “remuneration” of a director includes—

(a)

salary, fees and bonuses, sums paid by way of expenses allowance (so far as they are chargeable to United Kingdom income tax), and

(b)

subject to sub-paragraph (2), the estimated money value of any other benefits received by the director otherwise than in cash.

(2)

The expression “remuneration” does not include—

(a)

the value of any share options granted to a director or the amount of any gains made on the exercise of any such options,

(b)

any company contributions paid, or treated as paid, in respect of the director under any pension scheme or any benefits to which the director is entitled under any such scheme, or

(c)

any money or other assets paid to or received or receivable by the director under any long term incentive scheme.

8Meaning of “long term incentive scheme”F1

(1)

In this Schedule “long term incentive scheme” means an agreement or arrangement—

(a)

under which money or other assets may become receivable by a director, and

(b)

which includes one or more qualifying conditions with respect to service or performance which cannot be fulfilled within a single financial year.

(2)

For this purpose the following must be disregarded—

(a)

bonuses the amount of which falls to be determined by reference to service or performance within a single financial year,

(b)

compensation for loss of office, payments for breach of contract and other termination payments, and

(c)

retirement benefits.

9Meaning of “shares” and “share option” and related expressionsF1

In this Schedule—

(a)

“shares” means shares (whether allotted or not) in the company, or any undertaking which is a group undertaking in relation to the company, and includes a share warrant as defined by section 779(1) of the 2006 Act, and

(b)

“share option” means a right to acquire shares.

10Meaning of “pension scheme” and related expressionsF1

(1)

In this Schedule—

  • “pension scheme” means a retirement benefits scheme within the meaning given by section 150(1) of the Finance Act 2004 which is—

    1. (a)

      one in which the company participates, or

    2. (b)

      one to which the company paid a contribution during the financial year, and

  • “retirement benefits” means relevant benefits within the meaning given by section 393B of the Income Tax (Earnings and Pensions) Act 2003 read as if subsection (2) were omitted.

(2)

In this Schedule, “company contributions”, in relation to a pension scheme and a director, means any payments (including insurance premiums) made, or treated as made, to the scheme in respect of the director by a person other than the director.

(3)

In this Schedule, in relation to a director—

  • “defined benefits” means retirement benefits payable under a pension scheme that are not money purchase benefits,

  • “defined benefit scheme” means a pension scheme that is not a money purchase scheme,

  • “money purchase benefits” means retirement benefits payable under a pension scheme the rate or amount of which is calculated by reference to payments made, or treated as made, by the director or by any other person in respect of the director and which are not average salary benefits, and

  • “money purchase scheme” means a pension scheme under which all of the benefits that may become payable to or in respect of the director are money purchase benefits.

(4)

Where a pension scheme provides for any benefits that may become payable to or in respect of any director to be whichever are the greater of—

(a)

money purchase benefits as determined by or under the scheme, and

(b)

defined benefits as so determined,

the company may assume for the purposes of this paragraph that those benefits will be money purchase benefits, or defined benefits, according to whichever appears more likely at the end of the financial year.

(5)

For the purpose of determining whether a pension scheme is a money purchase or defined benefit scheme, any death in service benefits provided for by the scheme are to be disregarded.

11References to subsidiary undertakingsF1

(1)

Any reference in this Schedule to a subsidiary undertaking of the company, in relation to a person who is or was, while a director of the company, a director also, by virtue of the company’s nomination (direct or indirect) of any other undertaking, includes that undertaking, whether or not it is or was in fact a subsidiary undertaking of the company.

(2)

Any reference to a subsidiary undertaking of the company—

(a)

for the purposes of paragraph 1 (remuneration etc.) is to an undertaking which is a subsidiary undertaking at the time the services were rendered, and

(b)

for the purposes of paragraph 2 (compensation for loss of office) is to a subsidiary undertaking immediately before the loss of office as director.

12Other minor definitionsF1

(1)

In this Schedule—

  • “net value”, in relation to any assets received or receivable by a director, means value after deducting any money paid or other value given by the director in respect of those assets;

  • “qualifying services”, in relation to any person, means the person’s services as a director of the company, and that person’s services while director of the company—

    1. (a)

      as director of any of its subsidiary undertakings, or

    2. (b)

      otherwise in connection with the management of the affairs of the company or any of its subsidiary undertakings.

(2)

For the purposes of this Schedule, remuneration paid or receivable or share options granted in respect of a person’s accepting office as a director are treated as emoluments paid or receivable or share options granted in respect of the person’s services as a director.

Schedule 5FEES PAYABLE TO THE REGISTRAR OF COMPANIESF1

Matter in relation to which fee is payableAmount of feeWhen payable
Decision under section 36A(1) of the 2004 Act as to whether a company is eligible to be formed as a community interest company£15.00On delivery to the registrar under section 9 of the 2006 Act, section 36 of the 2004 Act and regulation 11 of the documents constituting an application to form a community interest company
Decision under section 38(1) of the 2004 Act as to whether a company is eligible to become a community interest company£15.00On delivery to the registrar under section 30 of the 2006 Act, section 37 of the 2004 Act and regulation 12 of the documents constituting an application to the registrar to become a community interest company
Consideration of a community interest company report forwarded by the registrar under section 34(4) of the 2004 Act£15.00On delivery of the report to the registrar

Explanatory note

(This note is not part of the Regulations)

Part 2 of the Companies (Audit, Investigations and Community Enterprise) Act 2004 (the “Act”) makes provision for a new type of company to be known as a community interest company. The Act confers on the Secretary of State powers to make regulations in respect of various aspects of the conduct of community interest companies' affairs and their supervision by the Regulator of Community Interest Companies (the “Regulator”).

Part 1 of the Regulations (regulations 1 and 2) states that the Regulations shall come into force on 1 July 2005 and makes provision for the interpretation of certain terms used in the Regulations.

Under the Act, a company which is to become, or be formed as, a community interest company must satisfy the “community interest test” and must not be an “excluded company”. A company satisfies the community interest test if a reasonable person might consider that its activities are being carried on for the benefit of the community, and “community” for these purposes includes a section of the community. In this context, Part 2 of the Regulations (regulations 3 to 6) provides:

  • that certain activities are prescribed as not being activities which a reasonable person might consider are activities carried on for the benefit of the community (regulations 3 and 4);

  • what may constitute a section of the community (regulation 5); and

  • that certain companies are excluded companies (regulation 6).

Part 3 of the Regulations (regulations 7 to 10) specifies (largely by reference to Schedules 1 to 3: see below) certain provisions which must, and certain provisions which must not, be included in the memorandum and articles of a community interest company.

Part 4 of the Regulations (regulations 11 and 12) specifies documents which must be sent to the registrar of companies on an application to form as, or become, a community interest company.

Part 5 of the Regulations (regulations 13 to 16) makes provision about the procedures which must be followed if the statement of objects in a community interest company’s memorandum is to be altered.

The Act provides that community interest companies may only distribute assets to their members if regulations permit them to do so, and that regulations may impose limits on the payment of interest on debentures issued by, and debts of, community interest companies. Part 6 of the Regulations (regulations 17 to 25) sets out:

  • the limits to which community interest companies are subject when they declare dividends, or pay interest on debts or debentures at a “performance-related rate”, and how such limits may subsequently be changed by the Regulator with the Secretary of State’s approval (regulations 17 to 22); and

  • the conditions on which assets may be distributed to members and others on the winding up of a community interest company, the redemption or purchase by a community interest company of its own shares, or a reduction in a community interest company’s share capital (regulations 23 to 25).

The Act obliges the directors of a community interest company to prepare a “community interest company report” in respect of each financial year. Part 7 of the Regulations (regulations 26 to 29) prescribes the information which must be contained in community interest company reports and provides that certain provisions of the Companies Act 1985 relating to the directors' report which directors of companies are obliged to prepare under that Act shall also apply to the community interest company report.

Among the supervisory powers the Regulator may exercise in certain circumstances under the Act is the power to appoint a manager in respect of the property and affairs of a community interest company. Part 8 of the Regulations (regulations 30 to 33) makes provision for various aspects of the appointment of such managers, including their remuneration and removal from office.

Part 9 of the Regulations (regulations 34 and 35) makes provision in respect of the handling of various statutory documents relating to community interest companies by the registrar of companies.

Part 10 of the Regulations (regulation 36) provides for community interest companies to pay fees in respect of specified matters.

The Act provides that certain decisions taken and orders made by the Regulator may be the subject of appeals to the Appeal Officer for Community Interest Companies (the “Appeal Officer”). Part 11 of the Regulations (regulations 37 to 42) outlines the procedures to be followed when an appeal is brought before Appeal Officer.

Schedule 1 sets out provisions which must be included in the memorandum or articles of a community interest company which is a company limited by guarantee without a share capital.

Schedule 2 sets out provisions which must be included in the memorandum or articles of a community interest company which is either a company limited by guarantee with a share capital or a company limited by shares, if it is not to be permitted to distribute assets to any of its members (except where assets are transferred for full consideration or to the extent that any of its members are “asset-locked bodies”).

Schedule 3 sets out provisions which must be included in the memorandum or articles of a community interest company which is a company limited by shares or a company limited by guarantee with a share capital, if it is to be permitted to distribute assets to its members (whether or not they are “asset-locked bodies”), for example by declaring a dividend on some or all of its shares.

Schedule 4 sets out the method for calculating interest on debts or debentures on which a “performance-related rate” of interest is to be paid.

Schedule 5 sets out the fees payable under regulation 36.

The effects that this instrument will have on the costs of business were taken into account in preparing the regulatory impact assessment on the Act. Copies of the regulatory impact assessments, and of a more detailed guidance note on these Regulations prepared by the Department of Trade and Industry, are available from the Department of Trade and Industry’s Response Centre, 1 Victoria Street, London SW1H 0ET (e-mail [email protected], telephone 020 7215 5000) or from its website (). Copies have also been placed in the libraries of both Houses of Parliament.