Community Interest Companies 'a dog's ear of a structure', says social investor

The Community Interest Company structure, used by businesses with a social or environmental focus, puts off investors from backing social enterprises.

That's the claim of Stephen Rockman, founder of Merism Capital.

Speaking at the Good Deals conference in London, the entrepreneur, whose company invests between £50,000 and £150,000 in social enterprises in return for equity, said the Community Interest Company (CIC) system is flawed.

Set up by the last government, CICS are limited companies, with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage. 

Under the conditions of the structure, only 35% of distributable profits can be allocated as dividends to investors.

Questioned about whether he funds CICs, Rockman said: "That's a simple answer; we don't do CICs. It's a dog's ear of a structure."

Rockman was joined in a panel debate by two social entrepreneurs who have secured private investment as a CIC. One however admitted the structure does cause problems. "Yes, we have experienced the CIC nightmare," said Amra Dautovic, managing director of MyTime, a charitable trust which works with local councils on leisure activities.

Continuing his comments about the social finance sector, Rockman said his fund is considered by many as "somewhere between heretics and sorcerers".

Claiming that his company is the only one of its kind in the UK, Rockman said: "There is so much guff in the social investment sector. Many criticise due diligence for instance but it isn't about mistrust; it's about building trust."