Should my CIC be ‘limited by shares’ or ‘limited by guarantee’?

Registering as a company will protect you from financial risk. This means that if the company were to fail, you would only be liable for the amount you own in shares or the amount ‘guaranteed’. Make sure you make the right decision about whether your CIC will be limited by shares or by guarantee because you can’t change it once the company is incorporated.

 Requirements Shares Guarantee
Selling goods and/or services
Be seen as absolutely “not for profit”
Provide services free at the point of delivery
Have weighted voting powers based on number of shares held
Pay a reasonable dividend to shareholders/investors
Obtaining contributions from funding bodies
Pay reasonable salaries to the directors working in the company
Control the company on a strict “one person one vote” basis.

Register as a CIC ‘limited by shares’ if your CIC is more like a business. The owners will each hold shares, just as they would in a normal profit-making business. They can each have any number of shares, thereby defining the degree of control or ownership that each of them holds. Each shareholder has as many votes as they have shares. They may also receive dividends.

Register as a CIC ‘limited by guarantee’ if your CIC looks more like a charity. The directors will also be called trustees and will each commit to a cash guarantee to be paid if the company were to fail. The guarantee is normally set at just £10 each. Each trustee has one vote. Decisions by the committee of trustees/directors are made on a one-person-one-vote basis. No dividend can be paid. This format is more acceptable to most funding bodies.

Register a CIC
Convert my company to a CIC

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