Co-ops Got the Exemption — Why Not CICs?

Over the last three years, Industrial and Provident Societies used a simple marketing exemption to launch over 100 community share offers and raise £16 million. Not from City institutions — from ordinary people in their communities. Local residents buying shares in local enterprises that serve local needs.

That’s the community shares movement, and it’s been a genuine success story. It’s proof that when you remove unnecessary regulatory barriers, ordinary people will invest in the businesses that matter to them.

Now here’s the uncomfortable question. Why can’t CICs do the same thing?

The answer has nothing to do with the merits of CICs versus co-ops. It’s a technical quirk of the Financial Services and Markets Act 2000. The IPS exemption in the Financial Promotion Order was written to cover co-operative societies, and CICs — which didn’t exist when the order was drafted — weren’t included. It’s not deliberate discrimination. It’s regulatory inertia.

But the effect is discrimination, whether it’s deliberate or not. The Community Shares Unit, funded by the government to promote community share issues, explicitly advises against using the CIC structure. They only support co-operative shares. So if a community group is choosing a legal form for a new enterprise, the message is clear: choose a co-op if you want to raise community capital. Choose a CIC if you want to be on your own.

This matters because CICs and co-ops serve different needs. Co-ops are member-owned, which is great for certain kinds of enterprise. But not every community project lends itself to a membership structure. Some need the broader flexibility of a CIC — the ability to work with multiple stakeholder groups, to access a wider range of funding sources, and to operate in sectors where the co-op model doesn’t fit naturally.

The proposal we’ve put to Lord Stevenson and the Treasury is dead simple. Extend the existing IPS exemption to CICs. Same limits: £200,000 aggregate over three years, £20,000 per individual investor. Same safeguards. Same reporting requirements. Just extend the coverage to include Community Interest Companies.

The cost to the exchequer is zero. The risk is minimal — the limits are low enough that bad actors can’t do serious damage, and the CIC Regulator already has powers to intervene if something goes wrong. The benefit is a new channel for community investment that could unlock millions of pounds for local enterprise.

The IPS community shares market raises about £5 million a year. If CICs got the same exemption, there’s no reason we couldn’t match that — and potentially exceed it, given the broader range of activities that CICs engage in. That’s real money flowing into real communities, creating real jobs and real services.

The briefing note is written. The case is made. Now we need the Treasury to pick it up and run with it.