The asset lock is the legal restriction that keeps a community interest company's assets and profits for the benefit of the community. They cannot be passed to members or anyone else for less than full market value, except to another asset-locked body.
What it prevents
Every CIC has an asset lock written into its articles. The company’s assets, including any profits it makes, must be used for its community purpose. They can only leave the company:
- for full market value, so the company keeps the worth of what it gave up;
- by transfer to another asset-locked body, named in the articles or approved by the Regulator;
- in some other way that benefits the community.
A CIC limited by shares can pay dividends to investors, but only within the dividend cap.
If the company closes
When a CIC is wound up, anything left after its debts are paid goes to an asset-locked body, not to the members.
Reporting
Any asset transferred for less than full value during the year has to be disclosed in Part 4 of the CIC34 report.
Read more: Community Interest Companies: the CT600 and the CIC34 report.