Lesson 5 of 10
Asset lock, explained simply
Learning objectives
- Understand what the asset lock prevents
- Know what you can still pay yourself and your team
- See where the assets go on dissolution
- Spot common asset-lock mistakes
What it prevents
The asset lock prevents owners from extracting the value of the company. Profits and assets can't be sold or distributed to private individuals beyond the regulated caps. On wind-up, everything goes to another asset-locked body (another CIC, a charity, or a community benefit society).
What you can still do
Pay yourself a market salary as a director / employee. Pay a capped dividend to non-asset-locked shareholders (subject to limits set by the Regulator). Pay normal supplier and contractor invoices. Reinvest profit into more programmes, equipment, hiring, premises.
You are not condemned to working for free — you are condemned to not cashing the company out.
Common mistakes
Treating director loans as a back-door dividend (they aren't). Selling major assets to a connected party at undervalue (a clear breach). Forgetting that the asset lock survives dissolution — you can't 'unwind' a CIC into your personal pension.
Founder insight — Derrick Twum
The founders who thrive under the asset lock treat their salary professionally and stop confusing 'the company doing well' with 'me getting rich'. Different game, played seriously.
Key takeaway
Asset lock = no cashing out the company. You can still pay yourself fairly and reinvest aggressively.
Reflection questions
- 1What salary would you draw as a director?
- 2Where would surplus go each year?
- 3Have you mistaken any director loans for dividends in the past?
- 4Which asset-locked body would you nominate on dissolution?
Action task
List your planned director salary, your reinvestment plan, and your nominated asset-locked successor body.
Worksheet
Work through these prompts. Answers save to this device.
Answers are saved to this device only. Cloud sync coming soon.
Related MEM tools
- Business Planner