Why Your CIC Can't Raise £50,000 Without Spending £50,000 First

FSMA regulation community-shares investment compliance-cost

Here’s a number that should make you angry. The cost of a fully authorised share issue for a small CIC is between £20,000 and £50,000. Most CICs are trying to raise between £10,000 and £100,000. Do the maths.

This isn’t a problem that affects big social enterprises with balance sheets and professional advisors. They can absorb those costs. It’s a problem that kills the small, community-rooted projects — the village hall takeover, the community transport scheme, the local renewable energy co-op — that should be the heart of the CIC movement.

The Root Cause

The root cause is the Financial Services and Markets Act 2000. FSMA sets out the legal and regulatory requirements for offering securities to the public. The requirements are reasonable for a company trying to raise millions from the general public. They’re absurd for a community group trying to raise £30,000 from local residents who already know and trust them.

Community share issues have been the classic example. Industrial and Provident Societies used an exemption in the FSMA 2000 Financial Promotion Order to launch over 100 community share offers, raising £16 million. The exemption works. It’s proportionate. It doesn’t open the door to abuse because the amounts are small and the investors are local.

But CICs have historically been excluded from the simplest routes.

The Fix That Exists But Isn’t Used

Article 52 of the Financial Promotion Order (the Common Interest Exemption) has been on the statute book for years. It permits communications about investments to an “identified group of persons who might reasonably be regarded as having an existing and common interest” in the company’s affairs and the use of its proceeds.

It has been almost entirely unused by CICs — not because it doesn’t work, but because:

  • The legal profession has advised against it (risk aversion is the product)
  • The FCA has never confirmed its scope
  • No one has built the infrastructure to make it accessible

CII changes that. The Common Interest Exemption, properly read and properly implemented, allows any CIC with a defined mission and a list of supporters to raise investment compliantly — without the £50,000 legal bill.

The Ceilings

  • Equity (CIC shares): £5m total consideration per rolling 12 months under POATR 2024 (Schedule 1)
  • Debt (CIC loan notes, charity bonds): Same ceilings
  • Promotion: Unlimited within the common interest group under Art 52
  • Per-offer investor limit: ≤150 persons per offer

These ceilings are more than adequate for the vast majority of community investment. The sweet spot for the CII model is £25,000–£5m per raise, with the Common Interest Bond Express (capped, performance-contingent loans up to £25,000) covering the smallest raises — exactly the range that the conventional system can’t serve.

The CII Solution

Instead of paying a solicitor £10,000 to navigate FSMA compliance, CII provides:

  1. CII Verification (£1,500 initial / £500 annual) — verification that your CIC and offer structure are compliant
  2. Compliance pack generation (£500 per raise) — Art 52 documents, director statements, investor FAQ
  3. Closed group portal (£200 setup + £50/month) — investor communications, compliance logging
  4. Threshold monitoring (£300/year) — automated rolling 12-month tracking against the ceilings

Total for a typical raise: £2,200–£2,700. That makes a £30,000 community raise viable. It makes a £25,000 Common Interest Bond Express raise possible for the first time.

The barrier isn’t the law. It’s the cost of accessing the law. CII removes that cost.

← Back to articles