Every Contract a CIC Needs in the UK (2026)

Last updated: February 2025

Legal Requirements for a CIC

Community Interest Companies are regulated under the Companies (Audit, Investigations and Community Enterprise) Act 2004 and overseen by the CIC Regulator. CICs must pass a community interest test, include an asset lock in their articles, file an annual CIC34 community interest report, and comply with the dividend cap (currently 35% of distributable profits). CICs are also subject to the Companies Act 2006 for general company law matters. Unlike charities, CICs can pay directors and distribute limited dividends.

Essential Contracts

CIC Articles of Association

Must include the mandatory asset lock provisions and community interest statement as prescribed by the CIC Regulations 2005

Director's Service Agreement

CIC directors can be paid, unlike most charity trustees — a service agreement documents remuneration that must be justifiable and reported in the CIC34

Service Delivery Contract

Defines the community benefit services delivered, essential for demonstrating community interest in the annual CIC34 report

Employment Contracts

Standard employment law applies — written terms required from day one under the Employment Rights Act 1996

Recommended Contracts

Social Investment Agreement

Documents terms for community shares or social investment, subject to the CIC dividend cap and performance-related interest cap

Community Benefit Agreement

Formalises commitments to the community, providing evidence for CIC34 reporting and demonstrating ongoing community interest

Collaboration Agreement

Documents partnerships with other CICs, charities, or public bodies for joint service delivery

Common Legal Risks for a CIC

  • CIC Regulator intervention if the community interest test is no longer met
  • Breaching the dividend cap resulting in regulatory action and potential striking off
  • Asset lock violations through disguised distributions or undervalue transactions
  • Failure to file CIC34 report leading to potential strike-off from Companies House
  • Director remuneration challenged as excessive by the CIC Regulator

Industry-Specific Notes

CICs offer a middle ground between charities and standard companies. They cannot claim charitable tax exemptions but have more flexibility in operations and can pay directors. CICs limited by shares can issue community shares and pay dividends up to the cap. CICs limited by guarantee operate more like charities but without Charity Commission oversight.

FAQ

What is the CIC asset lock and how does it work?

The asset lock prevents CIC assets from being transferred for less than full market value to anyone other than another asset-locked body (another CIC, charity, or prescribed body). It is a statutory requirement under the CIC Regulations 2005 and must be included in the articles of association. The asset lock applies on dissolution too — residual assets must go to another asset-locked body, not to members or shareholders.

Can CIC directors pay themselves a salary?

Yes, unlike most charity trustees, CIC directors can receive payment for their services. However, the remuneration must be reasonable and justifiable, and must be reported in the annual CIC34 community interest report. The CIC Regulator can investigate if director pay appears excessive relative to the company's size and community benefit delivered. A director's service agreement should document the remuneration clearly.

What is the CIC dividend cap and how does it affect contracts?

CICs limited by shares can pay dividends, but these are capped at 35% of distributable profits per year. The aggregate dividend cap per share is also limited. This must be reflected in any shareholder agreements and investment contracts. Social investors should be made aware of these caps before investing. The performance-related interest cap also limits returns on loans to CICs.

Related Business Types

Social Enterprise

Charity

Limited Company

All the contracts a cic needs

AccountsOS generates UK-compliant contracts tailored to your business. From £10/month.

Get Started Free

This is guidance, not legal advice. Consult a solicitor for complex matters.

View all business types