2.6.2 Converting a community interest company into a society
Section 6A of the Community Interest Company Regulations 2005 allows a community interest company (CIC) to convert into a society, but only in the form of a community benefit society that has a restriction on the use of its assets in accordance with the Community Benefit Societies (Restriction on Use of Assets) Regulations 2006 or the associated regulations in Northern Ireland (see Section 2.4). A CIC cannot convert into a co-operative society.
In order to convert, a special resolution must be passed by a three-quarters majority vote in favour. A copy of this special resolution must be submitted to the Registrar of Companies, who will forward them to the CIC Regulator. The special resolution must be accompanied by a copy of the rules of the new society and a statement by an authorised member of the company confirming that, in their opinion, when the new rules take effect, the company will become a community benefit society with the required restriction on the use of assets.
The CIC Regulator must decide whether the company is eligible to cease being a CIC. The company is eligible if, under the Companies (Audit, Investigations and Community Enterprise) Act 2004, it is not under investigation by an auditor, director or manager appointed by the CIC regulator; it is not currently subject to civil proceedings instigated by the CIC Regulator; none of its property is held by the Official Property Holder as a trustee for the company; and it is not subject to any petition to be wound up as a company.
The CIC Regulator must give notice of its decision to the company. If the CIC Regulator states that the company is eligible to cease being a CIC, this notice must be sent to the Financial Conduct Authority (FCA), together with a copy of the special resolution to convert, and the rules of the society containing the restriction on the use of assets. Finally, a certificate issued by the FCA confirming that the society has been registered, together with a copy of the decision by the CIC Regulator, must be submitted to the Registrar of Companies for the conversion to take effect.
If the CIC is a company limited by shares, it should adopt the same approach to share capital as any other private limited company by shares (see Section 2.6.1).
It is not possible to directly convert a CIC into a charitable community benefit society, because of the restrictions imposed by the CIC regulations on the type of asset lock that must be adopted by the community benefit society. Instead, a CIC would first have to apply to the relevant charity regulator to convert the CIC into a charitable company, and then apply to the FCA to convert to a charitable community benefit society, again with the consent of the relevant charity regulator.
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