Social enterprises have, until now, dwelled in a legal no man’s land between business and non-profits. This is slowly changing around the world as regulators catch up with the reality of an emerging type of enterprise that pursues both profit and purpose in an integrated way.
On March 5th 2012, the province on British Columbia in Canada, introduced changes to the Business Corporations Act to allow for a new hybrid type of company – the Community Contribution Company:
“Community contribution companies would be structured to combine both benefits to the community and limited investor returns within the context of a traditional for-profit company. They would be incorporated with the flexibility and certainty of regular companies, but under legislation that ensures they primarily benefit the community. These companies would allow an alternative business model not currently available through a regular business, whose primary focus is making money for shareholders or a non-profit society.
These companies would be subject to a higher degree of accountability than an ordinary company and required to publish an annual report detailing their social spending.” (BC Ministry of Finance bulletin)
This Canadian innovation follows the launch of new legal models in other regions of the world. For example:
- Community Interest Corporations (CICs): Introduced in the UK in 2005, allows for-profit companies to pursue a social mandate without fear of lawsuits from shareholders.
- Low-profit Limited Liability Companies (L3Cs): a rather confining new form of company with mainly a social good purpose introduced in the United States .
- Flexible-purpose Corporations: Similarly to CICs, this proposed new legal form introduced in California would allow companies to pursue activities not necessarily focused on maximizing shareholder value.
- B Corporations: several American states are adopting B Corp legislation. Vermont, Maryland and New Jersey have already enacted the new legislation. It allows corporations to pursue profit and purpose. It also imposes minimum levels of transparency and accountability- both financial and social.
Kudos to the province of British Columbia for the introduction of this new legislation. Hopefully it will entice other provinces to follow suit!