WEBVTT 00:00:00.760 --> 00:00:03.220 Imagine you have this genuinely brilliant idea. 00:00:03.319 --> 00:00:05.200 You want to start a business that actually changes 00:00:05.200 --> 00:00:07.280 the world. Right. Like maybe you want to clean 00:00:07.280 --> 00:00:09.419 up local rivers or you want to provide affordable 00:00:09.419 --> 00:00:12.019 tech education to your neighborhood. But there's 00:00:12.019 --> 00:00:14.339 a pretty massive catch. You also need to pay 00:00:14.339 --> 00:00:16.780 your rent. Yeah, the classic problem. Exactly. 00:00:17.000 --> 00:00:19.100 And you want to stay in control of your own vision. 00:00:19.219 --> 00:00:22.269 You know, how do you actually do that? For a 00:00:22.269 --> 00:00:24.269 long time, it really felt like you only had two 00:00:24.269 --> 00:00:26.789 choices. You either become a traditional, completely 00:00:26.789 --> 00:00:29.170 profit -driven corporation where the bottom line 00:00:29.170 --> 00:00:32.109 is king. Or you set up a volunteer -run charity, 00:00:32.310 --> 00:00:34.250 give up your ownership, and basically just hope 00:00:34.250 --> 00:00:37.630 you can scrape by on donations. Right. But what 00:00:37.630 --> 00:00:41.329 if there was a third way, a structure that sits 00:00:41.329 --> 00:00:43.369 right in the middle? I mean, it is the ultimate 00:00:43.369 --> 00:00:45.609 dilemma for anyone trying to navigate the modern 00:00:45.609 --> 00:00:47.710 economy while holding on to a social mission. 00:00:47.789 --> 00:00:50.049 Finding a framework that allows you to generate 00:00:50.049 --> 00:00:52.350 revenue and scale like an aggressive business, 00:00:52.630 --> 00:00:55.270 but legally guarantees that your underlying mission 00:00:55.270 --> 00:00:57.530 will always come first, regardless of who is 00:00:57.530 --> 00:00:59.670 actually sitting on the board. We are exploring 00:00:59.670 --> 00:01:02.210 a fascinating solution to that exact dilemma 00:01:02.210 --> 00:01:05.030 today. We're looking into the concepts of the 00:01:05.030 --> 00:01:07.890 community interest company. Our source for this 00:01:07.890 --> 00:01:10.030 deep dive is a really comprehensive Wikipedia 00:01:10.030 --> 00:01:13.150 article on the subject, and our mission is to 00:01:13.150 --> 00:01:16.010 decode this unique business structure. We're 00:01:16.010 --> 00:01:18.150 going to figure out exactly how it bridges that 00:01:18.150 --> 00:01:21.629 massive gap between profit and public good and 00:01:21.629 --> 00:01:24.329 extract the key insights for you, especially 00:01:24.329 --> 00:01:26.170 if you're curious about the future of social 00:01:26.170 --> 00:01:28.989 enterprise. It's a game changer, really. It totally 00:01:28.989 --> 00:01:31.370 is. Okay, let's unpack this, starting with the 00:01:31.370 --> 00:01:35.680 basics. First of all, the acronym is CIC. And 00:01:35.680 --> 00:01:37.640 the source points out a fun detail right at the 00:01:37.640 --> 00:01:41.140 top. It's officially pronounced C -I -C, but 00:01:41.140 --> 00:01:43.519 colloquially, people in the know just call it 00:01:43.519 --> 00:01:45.840 a KIC. And KIC is honestly a fitting nickname, 00:01:46.060 --> 00:01:48.120 considering the structure was entirely designed 00:01:48.120 --> 00:01:50.120 to disrupt the status quo of how we think about 00:01:50.120 --> 00:01:52.640 corporate wealth. To understand why it was created, 00:01:52.760 --> 00:01:54.700 we really have to look at the historical context 00:01:54.700 --> 00:01:56.939 in the United Kingdom. Right, because this is 00:01:56.939 --> 00:02:00.459 a UK -specific legal framework. Exactly. Before 00:02:00.459 --> 00:02:03.079 2005, if you wanted to start a business with 00:02:03.079 --> 00:02:06.060 a social purpose in the UK, you faced a massive 00:02:06.060 --> 00:02:09.000 structural roadblock. The legal system was entirely 00:02:09.000 --> 00:02:12.460 binary. Limited companies that didn't have charitable 00:02:12.460 --> 00:02:16.139 status had absolutely no simple, legally binding 00:02:16.139 --> 00:02:18.860 way to lock their assets in place for the public 00:02:18.860 --> 00:02:20.960 benefit. Meaning, like, if you started a regular 00:02:20.960 --> 00:02:23.800 company to build affordable housing, there was 00:02:23.800 --> 00:02:26.539 nothing legally stopping a future board of directors 00:02:26.539 --> 00:02:29.770 from pivoting a decade later. Selling off those 00:02:29.770 --> 00:02:32.250 houses to the highest bidder at market rate and 00:02:32.250 --> 00:02:34.389 just distributing the cash to shareholders. Right. 00:02:34.469 --> 00:02:36.689 Unless you went through the massive bureaucratic 00:02:36.689 --> 00:02:38.990 hurdle of applying for full charitable status. 00:02:39.289 --> 00:02:41.430 Which is exhausting. It was the exact problem 00:02:41.430 --> 00:02:43.729 founders were hitting their heads against. The 00:02:43.729 --> 00:02:46.009 UK was actually lagging behind other countries 00:02:46.009 --> 00:02:48.189 that already had legal forms for not -for -profit 00:02:48.189 --> 00:02:50.810 social enterprises. The real breakthrough came 00:02:50.810 --> 00:02:53.469 around 2001. Yeah, the source mentions this specific 00:02:53.469 --> 00:02:56.689 proposal in 2001 by Paul Corrigan, Jane Steele, 00:02:56.770 --> 00:02:59.219 and Greg Parston. essentially looked across the 00:02:59.219 --> 00:03:01.139 pond at the American public benefit corporation 00:03:01.139 --> 00:03:04.360 model. They realized the UK was missing a crucial 00:03:04.360 --> 00:03:07.419 middle gear in its economic engine. They recognized 00:03:07.419 --> 00:03:10.240 that relying solely on charities to solve societal 00:03:10.240 --> 00:03:13.659 problems just wasn't enough. The economy needed 00:03:13.659 --> 00:03:15.699 a vehicle that allowed for commercial flexibility 00:03:15.699 --> 00:03:18.659 but prevented mission drift. And according to 00:03:18.659 --> 00:03:21.069 the source... Stephen Lloyd, who was a prominent 00:03:21.069 --> 00:03:23.629 lawyer, is largely credited with taking that 00:03:23.629 --> 00:03:26.110 conceptual framework and doing the heavy lifting 00:03:26.110 --> 00:03:29.210 to establish it as an actual legal company form. 00:03:29.430 --> 00:03:32.569 He really championed it. He did. His work culminated 00:03:32.569 --> 00:03:35.110 in the UK government officially introducing the 00:03:35.110 --> 00:03:39.129 CIC under the Companies Act 2004. And they went 00:03:39.129 --> 00:03:41.750 live in 2005. And the demand for that middle 00:03:41.750 --> 00:03:44.650 gear was immediate. The proof of concept is pretty 00:03:44.650 --> 00:03:47.419 staggering when you look at the numbers. In just 00:03:47.419 --> 00:03:49.639 the first 10 years of this status being available, 00:03:49.860 --> 00:03:52.520 around 10 ,000 of these companies were registered. 00:03:52.759 --> 00:03:55.599 10 ,000 in a decade. Yeah. That tells you founders 00:03:55.599 --> 00:03:57.659 were practically begging for this kind of structure. 00:03:58.120 --> 00:04:00.460 They wanted the operational agility of a standard 00:04:00.460 --> 00:04:02.719 private company, but they desperately needed 00:04:02.719 --> 00:04:04.800 a structural guarantee that their life's work 00:04:04.800 --> 00:04:06.400 wouldn't just be hollowed out for shareholder 00:04:06.400 --> 00:04:08.520 profit down the line. What's fascinating here 00:04:08.520 --> 00:04:11.379 is how CICs are completely rethinking the economy. 00:04:12.139 --> 00:04:14.620 They operate in almost every sector you can imagine, 00:04:14.819 --> 00:04:17.620 tackling a massive range of social and environmental 00:04:17.620 --> 00:04:20.540 issues. Right. They're using traditional, highly 00:04:20.540 --> 00:04:23.620 competitive business methods, marketing, sales, 00:04:24.100 --> 00:04:26.879 offering competitive salaries. But the ultimate 00:04:26.879 --> 00:04:31.120 end goal is achieving a public good. It is a 00:04:31.120 --> 00:04:33.519 distinct role that helps build an economy that 00:04:33.519 --> 00:04:37.300 is socially inclusive rather than purely extractive. 00:04:37.660 --> 00:04:39.279 There has to be a screening process, though, 00:04:39.339 --> 00:04:41.420 like a founder can't just slap the word kick 00:04:41.420 --> 00:04:43.920 on their shiny new tech startup and claim they're 00:04:43.920 --> 00:04:46.759 saving the world just for the good PR. Far from 00:04:46.759 --> 00:04:48.720 it. There are strict rules to this game. You 00:04:48.720 --> 00:04:50.980 have to pass what the legislation calls the community 00:04:50.980 --> 00:04:54.399 interest test. The regulatory body has to review 00:04:54.399 --> 00:04:56.680 your application and be satisfied that, and this 00:04:56.680 --> 00:04:59.220 is the specific legal phrasing, a reasonable 00:04:59.220 --> 00:05:01.500 person might consider that its activities are 00:05:01.500 --> 00:05:03.439 being carried on for the benefit of the community 00:05:03.439 --> 00:05:05.639 or at least a section of the community. Ah, the 00:05:05.639 --> 00:05:08.079 famous reasonable person of British law. The 00:05:08.079 --> 00:05:10.480 very same. The mythical citizen who never speeds. 00:05:11.199 --> 00:05:13.879 always reads the terms and conditions, and now 00:05:13.879 --> 00:05:16.660 apparently judges community business applications. 00:05:17.740 --> 00:05:20.360 I assume that standard gives the regulators some 00:05:20.360 --> 00:05:23.160 breathing room to evaluate nuances, but there 00:05:23.160 --> 00:05:25.879 must be hard lines you cannot cross. Let's test 00:05:25.879 --> 00:05:27.819 the boundaries. Let's do it. Say I want to start 00:05:27.819 --> 00:05:30.759 a CIC to lobby the government for better solar 00:05:30.759 --> 00:05:33.540 panel subsidies. Fighting climate change is a 00:05:33.540 --> 00:05:36.050 public good. Does that pass? It fails immediately. 00:05:36.470 --> 00:05:38.990 Wow, okay. There are absolute deal breakers written 00:05:38.990 --> 00:05:41.410 into the law, and that is the first one. Your 00:05:41.410 --> 00:05:43.709 company cannot be primarily focused on political 00:05:43.709 --> 00:05:46.089 activity. You absolutely cannot be a political 00:05:46.089 --> 00:05:48.410 party, a political campaigning organization, 00:05:48.810 --> 00:05:52.610 or a subsidiary of a political party. So no partisan 00:05:52.610 --> 00:05:54.750 stuff at all? None. The structure is designed 00:05:54.750 --> 00:05:57.389 for direct community benefit, not for funding 00:05:57.389 --> 00:05:59.790 partisan lobbying efforts. Okay, what if I create 00:05:59.790 --> 00:06:02.660 a state -of -the -art community tech hub? Offering 00:06:02.660 --> 00:06:05.319 free coding classes and mentorship, but I restrict 00:06:05.319 --> 00:06:07.819 access so it's only available to the residents 00:06:07.819 --> 00:06:10.439 of my ultra -exclusive gated neighborhood. Fails 00:06:10.439 --> 00:06:12.819 again. Figured. The second deal breaker is that 00:06:12.819 --> 00:06:15.480 you cannot be set up to serve an unduly restrictive 00:06:15.480 --> 00:06:18.620 group. The benefit has to be genuinely accessible 00:06:18.620 --> 00:06:21.000 to the public or a meaningful section of it. 00:06:21.120 --> 00:06:24.139 You can't operate as a private club for a privileged 00:06:24.139 --> 00:06:26.540 few under the guise of community interest. Makes 00:06:26.540 --> 00:06:29.879 sense. Third, you cannot be a registered charity. 00:06:30.399 --> 00:06:33.319 They are distinct legal entities with very different 00:06:33.319 --> 00:06:34.980 rules, which we should definitely unpack shortly. 00:06:35.319 --> 00:06:37.740 And finally, it goes without saying, you cannot 00:06:37.740 --> 00:06:40.519 carry out unlawful activities. Here's where it 00:06:40.519 --> 00:06:44.079 gets really interesting, because passing that 00:06:44.079 --> 00:06:46.339 initial test is just the price of admission. 00:06:46.639 --> 00:06:50.100 The true secret sauce of the CIC, the mechanism 00:06:50.100 --> 00:06:52.220 that actually makes this whole structure work 00:06:52.220 --> 00:06:54.759 and prevents it from devolving into a standard 00:06:54.759 --> 00:06:58.079 profit -maximizing corporation, is a legal mechanism 00:06:58.079 --> 00:07:00.759 called the asset lock. The asset lock is the 00:07:00.759 --> 00:07:02.980 defining feature. It refers to a set of very 00:07:02.980 --> 00:07:06.100 specific, non -negotiable legal provisions written 00:07:06.100 --> 00:07:08.319 directly into the company's articles of association. 00:07:08.600 --> 00:07:10.819 Right. This ensures that the assets of the company 00:07:10.819 --> 00:07:13.019 are applied strictly for the benefit of the community, 00:07:13.180 --> 00:07:16.459 permanently. The precise terms are locked down 00:07:16.459 --> 00:07:18.980 in legislation, so a rogue board of directors 00:07:18.980 --> 00:07:21.720 cannot simply vote to remove it later. Let's 00:07:21.720 --> 00:07:24.060 build a multi -stage case study to see how this 00:07:24.060 --> 00:07:26.279 actually plays out for someone listening. Let's 00:07:26.279 --> 00:07:29.480 say I set up a CIC called the Learner Hub. We 00:07:29.480 --> 00:07:31.759 buy a commercial building and turn it into a 00:07:31.759 --> 00:07:34.019 vibrant community center offering affordable 00:07:34.019 --> 00:07:37.360 tech education. Over five years, the neighborhood 00:07:37.360 --> 00:07:40.579 gentrifies. Our building's property value triples. 00:07:40.720 --> 00:07:43.779 A great problem to have. Right. But if this were 00:07:43.779 --> 00:07:46.339 a regular business, I might be tempted to sell 00:07:46.339 --> 00:07:48.920 the building, move the hub to a cheaper basement 00:07:48.920 --> 00:07:51.920 across town, and pocket that massive real estate 00:07:51.920 --> 00:07:54.980 profit. How does the asset lock actually stop 00:07:54.980 --> 00:07:57.660 me? it stops you by dictating exactly what can 00:07:57.660 --> 00:08:00.139 happen to company assets. The law states that 00:08:00.139 --> 00:08:02.120 assets not applied directly to the community 00:08:02.120 --> 00:08:04.819 benefit can only be exchanged for full value. 00:08:04.959 --> 00:08:06.459 Meaning I have to sell it for what it's actually 00:08:06.459 --> 00:08:09.420 worth. Exactly. So you can sell the building, 00:08:09.560 --> 00:08:12.680 but every single penny of that tripled property 00:08:12.680 --> 00:08:16.019 value must stay inside the CIC's bank account 00:08:16.019 --> 00:08:18.620 to be used for the mission. You cannot siphon 00:08:18.620 --> 00:08:20.600 the profit out into your personal bank account 00:08:20.600 --> 00:08:23.160 to buy luxury sports cars. Okay, but what if 00:08:23.160 --> 00:08:25.379 I want to shut it down or move the money? If 00:08:25.379 --> 00:08:26.980 you want to move the assets out of the company 00:08:26.980 --> 00:08:29.120 entirely, they can only be transferred to another 00:08:29.120 --> 00:08:32.000 asset lock body like a charity or another CIC. 00:08:32.279 --> 00:08:34.940 But a CIC is still a business and businesses 00:08:34.940 --> 00:08:38.200 need capital to grow. If I want to expand the 00:08:38.200 --> 00:08:41.139 Lerner Hub to 10 new cities, I need to attract 00:08:41.139 --> 00:08:44.080 serious investors. Why would an angel investor 00:08:44.080 --> 00:08:47.179 give me a million dollars if the asset lock prevents 00:08:47.179 --> 00:08:49.379 them from ever getting a massive return on that 00:08:49.379 --> 00:08:51.500 investment? This is where the brilliant balance 00:08:51.500 --> 00:08:54.129 of the CIC model comes in. There are exceptions 00:08:54.129 --> 00:08:56.090 to the lock specifically designed to attract 00:08:56.090 --> 00:08:58.710 investment. The rules allow the company to return 00:08:58.710 --> 00:09:01.090 paid up capital to its members. So investors 00:09:01.090 --> 00:09:02.789 can at least get their initial money back. Yes. 00:09:03.190 --> 00:09:05.409 Furthermore, you can pay dividends to shareholders 00:09:05.409 --> 00:09:08.350 and interest to investors. But, and this is the 00:09:08.350 --> 00:09:11.129 crucial part, these payments are subject to strict... 00:09:11.370 --> 00:09:14.450 legally defined caps. So I can offer an investor 00:09:14.450 --> 00:09:17.409 a reasonable capped percentage return on their 00:09:17.409 --> 00:09:20.029 money, rewarding them for taking a risk on my 00:09:20.029 --> 00:09:22.710 social enterprise, but I can never offer them 00:09:22.710 --> 00:09:25.649 the kind of uncapped exponential growth that 00:09:25.649 --> 00:09:28.330 creates billionaires. Precisely the point. The 00:09:28.330 --> 00:09:30.549 wealth generated by the community's engagement 00:09:30.549 --> 00:09:33.190 with the business stays primarily within the 00:09:33.190 --> 00:09:36.129 community. You are offering investors a sustainable, 00:09:36.230 --> 00:09:39.250 ethical return rather than an extractive one. 00:09:39.429 --> 00:09:41.149 And what happens if the business this just straight 00:09:41.149 --> 00:09:44.029 up fails. This philosophy holds true even if 00:09:44.029 --> 00:09:46.570 it fails. If the learner hub goes bankrupt and 00:09:46.570 --> 00:09:48.909 you have to wind up the company, any surplus 00:09:48.909 --> 00:09:51.210 assets left over after paying off your debts 00:09:51.210 --> 00:09:53.529 cannot be distributed to the founders or shareholders. 00:09:53.909 --> 00:09:55.950 They go to another asset locked body. Exactly. 00:09:56.190 --> 00:09:58.830 They must be transferred to a pre -specified 00:09:58.830 --> 00:10:00.669 asset locked body, which you usually have to 00:10:00.669 --> 00:10:02.629 write into your founding documents from day one. 00:10:02.769 --> 00:10:04.970 It is essentially a quarantine zone for community 00:10:04.970 --> 00:10:08.990 wealth. Which brings us to a massive structural 00:10:08.990 --> 00:10:11.980 question. If I'm a founder listening to this 00:10:11.980 --> 00:10:14.240 and I'm willing to lock up my assets and cap 00:10:14.240 --> 00:10:16.799 my investor returns, why not just start a traditional 00:10:16.799 --> 00:10:20.559 charity? Like, why voluntarily choose to be a 00:10:20.559 --> 00:10:22.759 company? It comes down to a complex tradeoff 00:10:22.759 --> 00:10:25.940 involving taxes, regulation, and most importantly, 00:10:26.039 --> 00:10:29.159 the power dynamic of the founder. Let's start 00:10:29.159 --> 00:10:32.580 with the financial reality. A CIC is by definition 00:10:32.580 --> 00:10:36.840 ipso facto not a charity. Right. Even if every 00:10:36.840 --> 00:10:39.440 single thing the Learner Hub does meets the requirements 00:10:39.440 --> 00:10:43.320 for charitable status. As a CIC you do not get 00:10:43.320 --> 00:10:45.940 the highly favorable tax exemptions that charities 00:10:45.940 --> 00:10:48.720 enjoy. You are liable for standard corporation 00:10:48.720 --> 00:10:51.940 tax on your profits just like any regular profit 00:10:51.940 --> 00:10:54.419 making company. You are telling me I should voluntarily 00:10:54.419 --> 00:10:57.200 sign up a community focused organization to pay. 00:10:57.419 --> 00:11:00.039 standard corporate tax. That sounds like terrible 00:11:00.039 --> 00:11:02.279 financial advice on the surface. It does until 00:11:02.279 --> 00:11:05.080 you weigh it against the regulatory burden. Charities 00:11:05.080 --> 00:11:06.700 are heavily regulated by the Charity Commission. 00:11:06.940 --> 00:11:09.759 They face intense scrutiny, massive bureaucratic 00:11:09.759 --> 00:11:12.259 hoops, and rigid restrictions on how they can 00:11:12.259 --> 00:11:14.340 operate commercially. They move very slowly. 00:11:14.559 --> 00:11:17.779 Exactly. CICs, on the other hand, enjoy what 00:11:17.779 --> 00:11:20.059 the source explicitly describes as light touch 00:11:20.059 --> 00:11:23.159 regulation. You are trading tax exemptions for 00:11:23.159 --> 00:11:25.440 the operational freedom and agility of a private 00:11:25.440 --> 00:11:28.440 business. You can identify market problems, pivot 00:11:28.440 --> 00:11:31.019 your services and adapt to circumstances quickly 00:11:31.019 --> 00:11:33.480 without needing approval from a slow moving charity 00:11:33.480 --> 00:11:35.779 board. Let me push back on that light touch concept, 00:11:35.860 --> 00:11:37.899 though. Doesn't a light touch from regulators 00:11:37.899 --> 00:11:40.860 just open the door for greenwashing? What stops 00:11:40.860 --> 00:11:43.460 a regular corporation from setting up a CIC, 00:11:43.720 --> 00:11:45.960 doing the bare minimum for the community and 00:11:45.960 --> 00:11:49.039 using the status purely as a marketing gimmick? 00:11:49.320 --> 00:11:51.320 That is a completely valid concern, and it's 00:11:51.320 --> 00:11:53.500 mitigated by strict transparency laws, which 00:11:53.500 --> 00:11:55.279 we'll touch on when we discuss annual reporting 00:11:55.279 --> 00:11:58.379 in a minute. But the main reason founders choose 00:11:58.379 --> 00:12:00.899 the CIC route, the reason they are willing to 00:12:00.899 --> 00:12:03.379 pay corporation tax, is what the source calls 00:12:03.379 --> 00:12:05.559 the perspective of the philanthropic entrepreneur. 00:12:06.059 --> 00:12:09.220 It is about control and pay. Walk me through 00:12:09.220 --> 00:12:11.120 the power dynamic, because this seems to be the 00:12:11.120 --> 00:12:13.200 core dilemma for anyone trying to start a social 00:12:13.200 --> 00:12:15.500 movement. If you start a traditional charity 00:12:15.500 --> 00:12:17.580 and you want to dedicate your life to it, you 00:12:17.580 --> 00:12:20.240 naturally need to be paid a salary to survive. 00:12:20.840 --> 00:12:23.539 In the charity sector, the rules around founder 00:12:23.539 --> 00:12:26.940 compensation are incredibly strict. Board members 00:12:26.940 --> 00:12:29.679 can usually only be paid if the charity's constitution 00:12:29.679 --> 00:12:33.039 explicitly allows it, and it must be proven to 00:12:33.039 --> 00:12:35.059 be strictly in the best interest of the charity. 00:12:35.500 --> 00:12:38.080 In practice, this means a founder who needs to 00:12:38.080 --> 00:12:41.139 draw a salary almost always has to step off the 00:12:41.139 --> 00:12:43.460 board and surrender strategic control of their 00:12:43.460 --> 00:12:46.460 own organization to a volunteer board of trustees. 00:12:46.980 --> 00:12:49.980 Which means the person who conceptualized the 00:12:49.980 --> 00:12:52.740 mission, took all the early risks, and built 00:12:52.740 --> 00:12:55.639 the foundation can legally be fired from their 00:12:55.639 --> 00:12:58.059 own life's work by a group of volunteers who 00:12:58.059 --> 00:13:00.220 meet once a month. Exactly. For an entrepreneur, 00:13:00.379 --> 00:13:02.379 that level of vulnerability is often a complete 00:13:02.379 --> 00:13:04.879 non -starter. It is a massive deterrent. That 00:13:04.879 --> 00:13:07.960 limitation does not apply to CICs. In a community 00:13:07.960 --> 00:13:09.759 interest company, you can sit on the board of 00:13:09.759 --> 00:13:12.220 directors, retain total strategic control over 00:13:12.220 --> 00:13:14.600 the direction of the company, and be paid a fair 00:13:14.600 --> 00:13:17.860 market rate salary for your executive work. You 00:13:17.860 --> 00:13:19.460 do not have to choose between your livelihood 00:13:19.460 --> 00:13:22.070 and your leadership. That completely rewrites 00:13:22.070 --> 00:13:24.429 the incentive structure for solving social problems. 00:13:24.529 --> 00:13:27.269 You can attract top -tier executive talent to 00:13:27.269 --> 00:13:29.750 community projects because you can actually offer 00:13:29.750 --> 00:13:32.789 them a stable career path and strategic authority. 00:13:33.169 --> 00:13:36.009 And the source mentioned some fascinating crossovers 00:13:36.009 --> 00:13:39.710 between charities and CICs. A charity can legally 00:13:39.710 --> 00:13:42.909 convert to a CIC, though it loses its tax advantages. 00:13:43.230 --> 00:13:45.450 But there's another crossover that feels like 00:13:45.450 --> 00:13:48.629 a hidden superpower in the economy. A charity 00:13:48.629 --> 00:13:52.710 can legally own a CIC as a subsidiary. Yes, and 00:13:52.710 --> 00:13:55.210 this is where the economic mechanics become truly 00:13:55.210 --> 00:13:58.409 brilliant. We discussed earlier that CICs have 00:13:58.409 --> 00:14:00.610 strict caps on the dividends they can pay out 00:14:00.610 --> 00:14:02.690 to shareholders. Right, to stop runaway profits. 00:14:02.929 --> 00:14:05.509 However, there is a major exception. If the shareholder 00:14:05.509 --> 00:14:08.419 of the CIC is a registered charity, those dividend 00:14:08.419 --> 00:14:11.399 caps disappear. There are no restrictions on 00:14:11.399 --> 00:14:13.559 the distributions to that specific shareholder. 00:14:13.799 --> 00:14:15.500 Wait, let me make sure I understand the mechanics 00:14:15.500 --> 00:14:17.559 of this because it sounds like a massive loophole. 00:14:17.679 --> 00:14:20.399 Go for it. If I run a global charity providing 00:14:20.399 --> 00:14:23.559 clean water, my charity can set up a completely 00:14:23.559 --> 00:14:27.679 separate tech company registered as a CIC. That 00:14:27.679 --> 00:14:29.779 tech company can operate aggressively in the 00:14:29.779 --> 00:14:33.179 free market, generating massive profits. And 00:14:33.179 --> 00:14:35.740 because the parent owner is a charity, the CIC 00:14:35.740 --> 00:14:39.500 can funnel 100 % of those profits straight back 00:14:39.500 --> 00:14:41.929 up to the charity. without hitting any dividend 00:14:41.929 --> 00:14:44.809 caps. You understand it perfectly. That is incredible. 00:14:45.029 --> 00:14:47.289 If we connect this to the bigger picture, you 00:14:47.289 --> 00:14:49.649 can see how this empowers philanthropic organizations. 00:14:50.289 --> 00:14:52.549 They don't have to rely solely on the exhausting 00:14:52.549 --> 00:14:55.169 cycle of asking for public donations. They can 00:14:55.169 --> 00:14:57.370 build profitable businesses, compete in the free 00:14:57.370 --> 00:14:59.929 market, and use those exception -free profits 00:14:59.929 --> 00:15:03.429 as a highly predictable, massive economic engine 00:15:03.429 --> 00:15:06.970 to fund their core charitable missions. So the 00:15:06.970 --> 00:15:09.450 philosophy is sound. The economic engine is incredibly 00:15:09.450 --> 00:15:11.769 powerful. but what does this actually look like 00:15:11.769 --> 00:15:13.570 on the ground? If someone listening wants to 00:15:13.570 --> 00:15:14.950 build one of these, let's look at the blueprint. 00:15:15.110 --> 00:15:17.850 What's the paperwork? The setup process is surprisingly 00:15:17.850 --> 00:15:20.789 accessible. It's deliberately designed not to 00:15:20.789 --> 00:15:23.129 require a fleet of expensive corporate lawyers. 00:15:23.870 --> 00:15:26.470 First, the company must be formed as a limited 00:15:26.470 --> 00:15:29.230 company. It can be either limited by shares or 00:15:29.230 --> 00:15:31.990 limited by guarantee. To briefly translate that, 00:15:32.070 --> 00:15:35.090 for anyone outside the legal world limited simply 00:15:35.090 --> 00:15:37.269 means your personal bank account is protected. 00:15:38.240 --> 00:15:40.940 If your CIC takes out a loan and goes bankrupt, 00:15:41.259 --> 00:15:43.620 the creditors can only go after the company's 00:15:43.620 --> 00:15:46.899 assets, not your personal savings or your house. 00:15:47.200 --> 00:15:51.240 You cannot set up a CIC as an informal, unincorporated 00:15:51.240 --> 00:15:53.759 group of friends. It must be a formal corporate 00:15:53.759 --> 00:15:56.940 entity. Exactly. Once you decide on the structure, 00:15:57.100 --> 00:15:59.350 the paperwork is straightforward. You register 00:15:59.350 --> 00:16:01.470 by filing the standard documents required for 00:16:01.470 --> 00:16:04.610 any limited company, which is Form IN001, along 00:16:04.610 --> 00:16:06.570 with your memorandum and articles of association, 00:16:06.870 --> 00:16:10.509 plus one crucial edition form, CIC 36. And that's 00:16:10.509 --> 00:16:11.970 where you outline your community credentials, 00:16:12.090 --> 00:16:14.669 right? Right. This document, signed by all directors, 00:16:14.830 --> 00:16:16.970 is your argument to the regulator. It is where 00:16:16.970 --> 00:16:18.809 you explain your mission and prove you meet the 00:16:18.809 --> 00:16:20.570 reasonable person test for community benefit 00:16:20.570 --> 00:16:23.470 we discussed earlier. And instead of a massive, 00:16:23.549 --> 00:16:26.730 expensive legal hurdle... The cost of registering 00:16:26.730 --> 00:16:29.590 this is astonishingly low. I mean, the source 00:16:29.590 --> 00:16:32.370 notes that the fee is 35 pounds for paper filing 00:16:32.370 --> 00:16:36.190 or just 27 pounds online. A digital process they 00:16:36.190 --> 00:16:39.399 introduced back on March 11th, 2019. You can 00:16:39.399 --> 00:16:41.399 legally establish a socially locked enterprise 00:16:41.399 --> 00:16:43.860 for the cost of a decent lunch. It's remarkably 00:16:43.860 --> 00:16:46.279 cheap. And if you already run an existing standard 00:16:46.279 --> 00:16:48.279 company and want to lock in your social mission, 00:16:48.519 --> 00:16:52.179 you can convert it to a CIC using form CIC 37, 00:16:52.559 --> 00:16:54.580 passing some resolutions, updating your articles, 00:16:54.659 --> 00:16:56.480 and proving you aren't a charity trying to bypass 00:16:56.480 --> 00:16:58.879 regulations. But getting the status is only day 00:16:58.879 --> 00:17:00.970 one. You mentioned the risk of greenwashing earlier. 00:17:01.210 --> 00:17:03.610 This is how the system prevents it. Every single 00:17:03.610 --> 00:17:06.170 year, alongside your standard financial accounts, 00:17:06.269 --> 00:17:09.390 you are legally required to file form CIC 34, 00:17:09.710 --> 00:17:11.630 the community interest company report. Right. 00:17:11.710 --> 00:17:13.910 You cannot just coast on your initial application. 00:17:14.250 --> 00:17:17.009 You have to actively prove your social impact. 00:17:17.289 --> 00:17:19.809 You must provide concrete evidence of the public 00:17:19.809 --> 00:17:22.210 benefit you have delivered over the past 12 months 00:17:22.210 --> 00:17:25.470 to companies' house. So if your CIC claimed it 00:17:25.470 --> 00:17:27.130 was going to provide affordable tech education, 00:17:27.430 --> 00:17:29.740 you have to show the regulation. exactly how 00:17:29.740 --> 00:17:31.720 many classes you ran, how many students attended, 00:17:31.980 --> 00:17:35.000 and what the actual outcomes were. And crucially, 00:17:35.079 --> 00:17:38.539 the source notes that this annual report transparently 00:17:38.539 --> 00:17:41.480 details the director's remuneration. That transparency 00:17:41.480 --> 00:17:44.839 is key. The public and the regulator can see 00:17:44.839 --> 00:17:46.799 exactly what the leadership is paying themselves. 00:17:47.420 --> 00:17:50.160 If a founder is claiming to run a community -focused 00:17:50.160 --> 00:17:53.099 business but is drawing an exorbitant, unjustifiable 00:17:53.099 --> 00:17:55.920 salary, while the community benefit is minimal, 00:17:56.180 --> 00:17:59.539 the regulator will absolutely see it. And overseeing 00:17:59.539 --> 00:18:02.480 this entire ecosystem is the regulator of community 00:18:02.480 --> 00:18:04.900 interest companies, an independent office created 00:18:04.900 --> 00:18:06.960 by the government. The current regulator mentioned 00:18:06.960 --> 00:18:09.200 in the source is Louise Smith, who was appointed 00:18:09.200 --> 00:18:12.240 in September 2020. Their mandate is to ensure 00:18:12.240 --> 00:18:15.019 compliance, review those annual reports, and 00:18:15.019 --> 00:18:17.180 investigate complaints, all while maintaining 00:18:17.180 --> 00:18:19.299 that light -touch philosophy so that businesses 00:18:19.299 --> 00:18:21.200 can actually operate freely. It's a delicate 00:18:21.200 --> 00:18:23.640 balancing act, but it works. So what does this 00:18:23.640 --> 00:18:26.579 all mean? We have gone from the realization of 00:18:26.579 --> 00:18:29.359 a missing middle gear in 2001 through the strict 00:18:29.359 --> 00:18:32.299 rules of the asset lock to the power dynamics 00:18:32.299 --> 00:18:35.779 of founder control. How should we synthesize 00:18:35.779 --> 00:18:38.390 this for the listener? Whether you are preparing 00:18:38.390 --> 00:18:41.289 to launch a startup yourself, advising a friend 00:18:41.289 --> 00:18:43.829 who is, or you are simply a learner trying to 00:18:43.829 --> 00:18:46.809 understand alternative economic models, the CIC 00:18:46.809 --> 00:18:49.970 represents a profound shift in how we conceptualize 00:18:49.970 --> 00:18:52.890 capitalism. For generations, we were sold a false 00:18:52.890 --> 00:18:55.660 dichotomy. We were told that profit and social 00:18:55.660 --> 00:18:57.960 purpose were mutually exclusive, that you either 00:18:57.960 --> 00:19:00.740 made money or you did good. Right. The community 00:19:00.740 --> 00:19:03.000 interest company proves that is a failure of 00:19:03.000 --> 00:19:05.559 imagination. It provides a highly effective, 00:19:05.779 --> 00:19:07.759 legally robust tool that proves you can have 00:19:07.759 --> 00:19:10.799 the agility, the aggressive scaling and the operational 00:19:10.799 --> 00:19:13.420 control of a private business while permanently 00:19:13.420 --> 00:19:15.819 locking your mission and your assets to the benefit 00:19:15.819 --> 00:19:17.950 of humanity. That's incredibly empowering. It 00:19:17.950 --> 00:19:20.309 really is. This raises an important question, 00:19:20.369 --> 00:19:22.430 though, something that goes far beyond just setting 00:19:22.430 --> 00:19:25.130 up a local community center. We explored how 00:19:25.130 --> 00:19:28.150 a traditional charity can legally own a CIC as 00:19:28.150 --> 00:19:31.329 a subsidiary, allowing for uncapped distribution 00:19:31.329 --> 00:19:34.470 of profits up to the parent organization. Imagine 00:19:34.470 --> 00:19:36.910 a future where the world's largest, most well 00:19:36.910 --> 00:19:39.609 -funded charities, the Red Cross, Amnesty International, 00:19:39.970 --> 00:19:42.910 Global Environmental Funds, stop relying primarily 00:19:42.910 --> 00:19:46.029 on telethons and donor fatigue. Imagine they 00:19:46.029 --> 00:19:48.019 secretly power their global missions through 00:19:48.019 --> 00:19:51.240 vast, highly competitive networks of profit -generating, 00:19:51.240 --> 00:19:54.839 asset -locked CIC subsidiaries operating in every 00:19:54.839 --> 00:19:58.019 single sector of the economy. From consumer software 00:19:58.019 --> 00:20:00.460 to agriculture to commercial real estate, could 00:20:00.460 --> 00:20:02.559 the traditional, purely for -profit corporation 00:20:02.559 --> 00:20:04.980 eventually be outcompeted in the free market 00:20:04.980 --> 00:20:07.299 by businesses that are legally locked to serve 00:20:07.299 --> 00:20:09.380 the public good? That is a wild thought to end 00:20:09.380 --> 00:20:11.839 on. An absolute army of socially locked businesses 00:20:11.839 --> 00:20:15.279 quietly taking over the global economy, out -competing 00:20:15.279 --> 00:20:18.079 traditional corporations, and funneling the profits 00:20:18.079 --> 00:20:20.099 into public infrastructure and social missions. 00:20:20.759 --> 00:20:23.000 Thank you for joining us on this deep dive. I 00:20:23.000 --> 00:20:24.700 hope this gave you a new mental model for how 00:20:24.700 --> 00:20:26.420 business can actually be structured to change 00:20:26.420 --> 00:20:28.720 things without forcing founders to take a vow 00:20:28.720 --> 00:20:31.519 of poverty. Keep looking closely at the corporate 00:20:31.519 --> 00:20:34.279 structures around you, keep exploring new ideas, 00:20:34.460 --> 00:20:37.380 and most importantly, keep questioning the world 00:20:37.380 --> 00:20:37.980 around you.