Social entrepreneurs are welcoming proposed provincial legislation that would create the community contribution company (CCC).
The structure would allow socially focused enterprises to raise capital, turn a profit and pay out investor returns while furthering their corporate social mission.
The community contribution company bill was introduced in the legislature earlier this month and is awaiting second reading.
Stacey Corriveau, executive director of the BC Centre for Social Enterprise, said the non-profit sector has been pushing for this kind of new structure, which she said responds to a structural gap the sector has been facing.
She said that as the stagnant economy has dried up grants and donations, the sector has been flexing its entrepreneurial muscles to generate revenue – and then finding itself falling on the wrong side of tax laws for turning a profit.
�My own estimate – and I�ve heard this throughout the sector – is that approximately 75% of non-profits without charitable status are offside [of Canada Revenue Agency rules],� she said.
�The structures need to catch up with the current ways that non-profits and charities have to do business.�
Corriveau said the new structure will send a message to the non-profit sector that enterprising solutions are �encouraged and legitimate.�
She added that the new structure also opens the door to equity investment in the non-profit sector, which was previously prohibited.
However, while the province is touting CCCs as an answer to investor demand for socially focused investment options, the jury�s still out as to how well the structure fits that bill.
Andy Broderick, Vancity�s vice-president of community investment, said the CCC fills a gap for a corporate structure with a fiduciary responsibility to do more than just profit. Without that structure, he said, socially focused enterprises can face shareholder liability issues when they target more than one bottom line.
However, Broderick questioned what investor appetite will be for the structure, given caps the province has placed on investor payout.
CCCs will be limited in how much profit they can distribute to shareholders. To help ensure that a CCC�s assets fund its social mission – and not line investors� pockets – those assets would be frozen if it were to be dissolved.
�Some benefit corporations can make a lot of money – it doesn�t mean they�re not hitting social and environmental metrics,� Broderick said. �But in this case, it won�t be possible for the investors to reap large benefits because there�s caps.�
While Broderick emphasized that Vancity is supports any new tools being created for the social enterprise sector, he said he�s not convinced the payout restrictions are necessary.
�But you�ve got to start somewhere, and if it makes it comfortable for the province to move into this area, I think it�s good.�
Broderick added that the test will be to gauge market interest in CCCs.
�We�ll see how [the restrictions] perform over time,� he said. �And my guess is, if it�s too restrictive and it doesn�t work, people will speak up and you�ll see additional change.���
