Government to allow community interest companies to pay more to investors

Stephen Lloyd of the law firm Bates Wells Braithwaite welcomes the proposed changes, which follow a consultation

Stephen Lloyd
Stephen Lloyd

Plans to loosen caps on the amount community interest companies can pay investors were published by the Department for Business, Innovation and Skills yesterday.

In a summary of responses to a consultation on CIC dividend caps, which ran from June to September this year, Sara Burgess, the CIC regulator, said in the document published by BIS that she would remove any cap on the value of share dividends, which was previously linked to the initial value paid for the share.

She also said she plans to raise the cap on performance-related interest from 10 per cent to 20 per cent. An overall 35 per cent limit on how much of a CIC’s profits can be distributed will remain.

The consultation into CIC dividends was conducted alongside another consultation into a social investment tax relief. The introduction of SITR prompted the government to seek ways to make investment in CICs more attractive.

Stephen Lloyd, the partner at the law firm Bates Wells Braithwaite who proposed the creation of the CIC legal form, said he thought the changes were sensible."I think the government and the CIC regulator are to be praised for consulting, for listening, and for making changes," he said.

"A CIC needs to be both social and an enterprise. The current restrictions were too focused on the social mission and not enough on making it a successful enterprise. To be a successful enterprise you have to be able to get access to finance."

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