Equity Plus supports the response made by the Department for Business Information and Skills (BIS) to the consultation on the dividend and interest caps for Community Interest Companies (CICs). Daniel Brewer, an Equity Plus Director, says: “To date CICs have honoured the ‘social’ ethos in the Social Enterprise movement; from now on they will honour the entrepreneurial spirit as well.” The new caps are not only more generous but are significantly simplified which to date have been the two big barriers to investors engaging with CICs. 

CICs were introduced in 2005 and by 30^th September 2009, 1/3 of the 2,349 registered CICs were limited by shares with the potential of accessing equity finance. Equity Plus has long contended that the limitations placed on interest and dividend caps have restricted the availability of equity finance to support the growth of social enterprise. To date there have been caps of 5% over base for dividends and 4% over base for interest charges.

Equity Plus has actively lobbied the Cabinet office and the CIC Regulator to have these artificially low caps changed, and submitted a response to the consultation document. Daniel Brewer, who is also a Director of Resonance, contributed to the debate through the Regulator’s Technical Panel. We are delighted to see that the Regulator intends to change these caps and also remove the reference to the Bank of England base rate. The Regulator has reported that:

“The share dividend cap shall be 20 percent of the paid up value of a share in a relevant company” and in addition “The interest cap shall be 10 percent of the average amount of a community interest company’s debt, or sum outstanding under a debenture issued by it, during the 12 month period immediately preceding the date on which the interest on that debt or debenture becomes due.”

Equity Plus Limited is an investment broker and investment readiness advisor, focused on the Social Enterprise and Social Business Sector, which runs the Social Enterprise Angel Network. The company is a joint venture between Celarben Ventures Limited, a corporate finance specialist; Community Innovation (UK) Limited, a social enterprise consultancy; and Resonance Limited a social finance intermediary focused on property.

From January 2007 to June 2008 Equity Plus carried out action research as part of a Social Investment pilot contract with the Office of the Third Sector reviewing access to finance for Social Enterprises and particularly looking at the potential for equity investment from angels being generated for the sector. The conclusion of this work was a report that was so conclusive as to the needs of the sector that the joint venture partners agreed to continue the development of the business and grow the Social Enterprise Angel Network in order to increase the number of deals financed.

Equity Plus and its joint venture owners have introduced 45 investors to 18 deals in the last two and half years. The value of these introductions has been over £7m with £1.4m of cash changing hands to date.

For more information on Equity Plus and values led investing contact Daniel Brewer on 0845 527 9204 / 07956 557485 or Chris Carr on 0845 527 9227 / 07836 669555.