Section 32 - Memorandum and articles
215.Like other companies, CICs will have a "constitution" set out in a memorandum and articles of association. Section 32 sets out requirements relating to the memorandum and articles of CICs.
216.Subsection (3) provides for regulations to set out provisions which must be included in the constitution of each CIC, and provisions which cannot be included in the constitution. Subject to such regulations and the requirements of company law, a CIC is free to include any other provisions it wishes in its memorandum and articles. However, if a CIC’s constitution contains any provision which is inconsistent with regulations made under this clause, that provision will have no effect (subsection (5)). Subsection (4) expands on this by indicating particular provisions which regulations may require CICs to include in their constitution:
provisions about the transfer and distribution of assets (subsection (4)(a) and (b)). These will establish the ‘asset lock’ on distributions to members in each CIC’s constitution (see also the note on section 30), and will also set out the terms on which CICs may transfer assets to third parties. CICs will not be allowed to transfer assets to other bodies or individuals for less than the value of the asset, except in pursuit of their community interest aims. However, where a CIC wishes to transfer assets to another organisation with community interest aims and an asset lock (i.e. a CIC or charity), regulations will allow it to do so, subject to certain safeguards; and
provisions intended to limit the ability of investors to control a CIC with a view to maximising the return on their investment, at the expense of the CIC’s community interest purposes (subsection (4)(c) to (f)).
217.Regulations may also restrict a CIC’s ability to amend its objects as stated in its memorandum (subsection (6)). It is intended that a CIC will need to seek the Regulator’s approval if it wishes to change its objects. This is so that the Regulator can ensure that:
the altered objects are consistent with the requirement that CICs carry on activities in the community interest, and
the CIC has made reasonable efforts to notify those affected by its activities (its "stakeholders") of the proposed change.
