What Is the CIC Asset Lock?

The asset lock is one of the defining features of a Community Interest Company. It ensures that resources built up in the CIC stay dedicated to the community purpose, not extracted for private benefit.

The Regulator's guidance allows a CIC to transfer its assets out in only four situations:

• for full market value, so the CIC gets what the asset is worth
• to an asset-locked body named in your articles
• to another asset-locked body, with the Regulator's consent
• for the benefit of the community the CIC serves

In practical terms that means:

• Assets cannot be sold to directors, members or shareholders for less than market value
• If the CIC closes, remaining assets go to another asset-locked body, not to individuals
• Dividends (CICs limited by shares only) are capped at 35% of distributable profits in aggregate
• Performance-related interest on loans is capped at 20%

The asset lock exists to give the public confidence that CICs are genuine social enterprises, not standard companies with a social-sounding name.

Without it:

• Founders could build up value using grants and donations, then sell assets to themselves cheaply
• A CIC could accept public funding, then wind up and distribute the cash to shareholders
• The “community interest” would be unenforceable, just marketing

The asset lock is what makes a CIC more than a normal limited company. It is the legal mechanism that backs up your community commitment with binding restrictions, and it is the main reason grant funders and councils trust the structure.

All assets owned by the CIC are covered:

The asset lock often makes people think a CIC cannot pay anyone anything. That is not true. The asset lock allows:

• Salaries: pay directors and staff reasonable market-rate salaries
• Expenses: reimburse legitimate business expenses
• Services: pay for services at market rate, including from directors
• Asset sales: sell assets to anyone at full market value
• Dividends: a CIC limited by shares can pay dividends up to the 35% aggregate cap. See Can a CIC make profit?

If your CIC is wound up or dissolved, the asset lock determines where the remaining assets go:

1. All debts and liabilities are paid
2. In a CIC limited by shares, members can get back the amount paid up on their shares, and no more
3. Anything left transfers to another asset-locked body

An asset-locked body is:

• Another CIC
• A charity, or a Charitable Incorporated Organisation (CIO)
• A registered society with a statutory asset lock, such as a community benefit society
• An equivalent body established outside the UK

Your articles can name a specific asset-locked body to receive the residual assets. If they do, the transfer can go ahead without further consent once the debts are cleared. If they do not, the CIC applies to the Regulator for consent to the transfer (form CIC53), and the Regulator decides.

People often compare the CIC asset lock to charity restrictions. Here is how they differ:

The CIC asset lock protects the community while allowing more commercial flexibility than charity rules. For a detailed comparison, see our CIC vs Charity guide.