What is a SCIC? What is the difference between a SCIC and a traditional cooperative? What are the advantages of forming a SCIC rather than a nonprofit organization under the 1901 Law?

SCIC stands for Société Coopérative d’Intérêt Collectif. It is a type of cooperative corporation organized as a LLC, SAS or SA,with variable capital. A Scic SARL or SAS consists of 3 to 100 partners.

SCICs have three main characteristics:

• the multi-company membership, In other words, SCICs must have at least three different types of members: producers, beneficiaries, and other types of members (see below),
• operation in accordance with the cooperative rules (1 person = 1 vote),
• one disinterested management (reinvestment of a large portion of the profits back into the business).

SCICs are therefore unique in that they bring together partners with seemingly conflicting interests, but who choose to gather in a collective interest that transcends them.

Origin and Purpose of the SCIC.

The SCIc legal status was established in 2001 following a discussion by the network of Scop on companies in social purpose but whose business is conducted in the commercial sector. The SCIc legal status was created to facilitate the structuring of service offerings that require collaboration among various private and/or public partners for their implementation and management.

SCICs are characterized by’public interest and’social value :

• These concepts differ from those of «general interest» or «public benefit,» which are terms reserved for the public sphere,
• They also differ from the concept of the «interests of the members» alone, which characterizes the traditional cooperatives (Scop).

SCICs are involved in an outward-looking project, that is, in the interest of parties other than its members alone: the interests of the region, its residents, local small and medium-sized businesses, etc.

Difference between a SCIC and an association under the 1901 Law.

The SCIc legal status may resemble that of an association in terms of its purpose, but it differs from an association under the 1901 Law in terms of how it operates:

• A SCIC always takes the form of a commercial company (LLC, SAS or SA), and is subject to corporate income tax,
• A SCIC has a for-profit (even if the public interest takes precedence),
• The members of the Scic may share a portion of the profits,
• In the event of dissolution, the members of the SCIC may reclaim their contributions and divide among themselves any severance pay,
• The salaried director of a SCIC cannot make a decision without the approval of the other employee-partners, whereas, in practice, the director (and/or president) of the association holds a great deal of power.

Characteristics of the SCIC.

• A SCIC can operate in any industry, but its public interest must be justified by a project by region or sector,and thus the presence of partners from different backgrounds,
• Articles of Incorporation describe the cooperative project and the corporate purpose of the SCIC,
• Annual Management Reports must trace any changes in governance, relationships, and the involvement of different types of partners in decision-making,
• The capital is variable: It may be amended at any time without any registration requirements. The amount of capital is determined at the owner’s discretion based on needs. The capital of a Scic SA may not be less than €18,500.
• The Liability of Partners is limited to their capital contributions.
• The company's surplus is distributed as follows:
  • 57,50 % of the net income are allocated to non-distributable reserves,
  • the balance may be partially distributed to shareholders (after deducting any government or nonprofit grants, with the amount equivalent to such grants to be allocated to non-distributable reserves),
• The SCIC is subject to the’corporate income tax, at the VAT and at the CFE, just like a traditional company,
• The only tax benefit: Amounts allocated to undivided reserves are deducted from the corporate income tax base,
• It is possible to recruit in CAE-CUI.

The members of the Scic.

A SCIC must consist of three types of members:

• producers goods or services (employees, executives),
• beneficiaries the goods and services offered by the cooperative (customers, suppliers, residents, etc.),
• and other types of partners, individuals or legal entities governed by private or public law that contribute to the cooperative’s activities (for example: companies, associations, artisans, volunteers, farmers, local governments, etc.), up to a limit of 25% of capital.

Governance of the SCIC.

• A SCIC has one or more executives, who may be selected from among the members or from outside the SCIC,
• Each partner has the same authority than others at shareholders’ meetings, in accordance with the principle «one partner = one vote,»,
• The articles of incorporation may provide for voting groups at shareholders' meetings. At least three voting groups must then be established,
• The articles of incorporation may also specify a quorum to validate the resolutions of general meetings (based on the number of members present or represented),
• Status of the officer(s):
  • If the executive had an employment contract with the SCIC prior to his or her election, he or she remains employee,
  • If the executive is compensated solely for serving in that capacity, he or she is deemed employee but does not pay unemployment insurance premiums.

The Advantages and Disadvantages of a SCIC.

The SCIc legal status offers the following advantages:

• Partners treated on a strictly equal footing.
• The liability of the partners is limited to their capital contributions.
• Public entities are permitted to hold equity interests.
• The opportunity to become an executive while retaining employee status.
• Any company or association may be converted into a Scic without changing its legal status.
• The fact that its reserves cannot be divided protects the SCIC from a majority takeover by outside investors and thus guarantees its independence and long-term viability.

On the other hand, the main disadvantages of the SCIC are the engineering required for assembly, formal requirements, and production lead times.

An example of a situation in which establishing a SCIC may be justified.

For example, establishing a SCIC might be a good idea when opening a bakery to revitalize a rural village. The stakeholders could include: the baker couple, the town hall, the village residents, and a village association.

More generally, SCICs can be found in (almost) all industries.