What Is the CIC Asset Lock?
Last updated: January 2026
Quick Answer
The asset lock is a legal rule that prevents CIC assets being extracted for private gain. Assets must stay within the CIC or transfer to another asset-locked body — they can't be distributed to shareholders or members.
What the Asset Lock Actually Means
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.
In practical terms, the asset lock means:
- Assets can't 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 (for CICs limited by shares) are capped at 20% of paid-up share value per year
- Interest on loans from members/shareholders is capped at a reasonable rate
Key point
The asset lock is permanent. Once your company becomes a CIC, you can't remove the asset lock — it stays in place for the life of the company.
Why the Asset Lock Exists
The asset lock exists to give the public confidence that CICs are genuine social enterprises, not just standard companies with a social-sounding name.
Without the asset lock:
- • 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 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's the legal mechanism that backs up your community commitment with binding restrictions.
What's Covered by the Asset Lock
All assets owned by the CIC are covered:
| Asset Type | Examples |
|---|---|
| Cash & investments | Bank balances, reserves, shares in other companies |
| Property | Buildings, land, leasehold interests |
| Equipment | Vehicles, computers, tools, machinery |
| Intellectual property | Trademarks, copyrights, patents, software |
| Other assets | Stock, debtors, goodwill |
What the Asset Lock Doesn't Prevent
The asset lock often confuses people into thinking CICs can't pay anyone anything. That's 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 — Pay capped dividends (max 20% of paid-up share value per year)
Important
The key test is "full value". You can pay people — you just can't give them assets for less than they're worth. A salary is payment for work. An expense claim is reimbursement. Neither violates the asset lock.
What Happens When a CIC Closes?
If your CIC is wound up or dissolved, the asset lock determines where remaining assets go:
- First, all debts and liabilities are paid off
- Shareholders get back their original share value (no more)
- Any remaining assets transfer to another "asset-locked body"
An asset-locked body is:
- • Another CIC
- • A charity
- • A community benefit society with an asset lock
- • A body specified in your articles as receiving assets on dissolution
Your articles of association should specify which asset-locked body will receive residual assets. If not specified, the CIC Regulator will direct where they go.
Asset Lock vs Charity Restrictions
People often compare the CIC asset lock to charity restrictions. Here's how they differ:
| Aspect | CIC Asset Lock | Charity Restrictions |
|---|---|---|
| Director pay | Allowed (reasonable amounts) | Generally not allowed (exceptions exist) |
| Dividends | Allowed (capped at 20%) | Not possible — no shareholders |
| Asset disposal | Allowed at market value | More restrictions, especially for "permanent endowment" |
| On closure | To another asset-locked body | To another charity with similar purposes |
| Flexibility | More flexible | More restricted |
The CIC asset lock provides community protection while allowing more commercial flexibility than charity rules. For a detailed comparison, see our CIC vs Charity guide.
Common Questions
Can I remove the asset lock?
No. Once a company becomes a CIC, the asset lock is permanent. A CIC can convert to a charity (keeping asset protection) but cannot convert to an ordinary company.
Can I sell my CIC?
You can transfer shares or control, but the asset lock remains. The buyer gets a CIC with all its restrictions — they can't strip assets out.
What if I want to pay myself a salary?
That's fine. Paying yourself a reasonable salary for genuine work doesn't breach the asset lock. See our CIC Directors guide for more on director pay.
Who enforces the asset lock?
The CIC Regulator monitors CICs and can investigate potential breaches. In serious cases, they can apply to wind up the company or remove directors.
Key Takeaway
The asset lock ensures your CIC genuinely serves the community — it's not a barrier to running a sustainable social enterprise. You can still pay salaries, sell services, and even pay modest dividends. The restriction is on extracting value without giving full value in return.
Ready to set up your CIC?
CIC Tools helps you set up a CIC properly, with articles that include the required asset lock provisions.