Community interest companies (CICs) will be over-burdened by red tape, one of the original proponents of the new structure has warned.

Under the structure - contained in the Companies (Audit, Investigations, and Community Enterprise) Act 2004 which received Royal assent last month - CICs will have a standard company form, but with the addition of an 'asset lock' ensuring that assets and profits are used for the community interest rather than personal gain. They will be available from July 2005.


The Department of Trade & Industry hopes CICs will prove attractive to social entrepreneurs who do not want the burden of running a charity.


But Stephen Lloyd, partner at London firm Bates Wells & Braithwaite, who with barrister Roger Warren-Evans came up with the concept, said: 'The government is hedging the idea around with such bureaucracy that I fear they are going to kill it off.'


He warned that restrictions on the interest that could be paid on bonds issued by CICs or on the return on redeemable preference shares would also limit their appeal.


Mr Lloyd added that the original idea was for CICs to be equally applicable to large organisations as to those with small-scale activities.