On May 14, 2012, Bill 23, Finance Statutes Amendment Act, 2012, was passed into law in British Columbia. Once in force, Bill 23 will amend the Business Corporations Act (British Columbia) to allow for a new hybrid legal structure for social enterprise, called Community Contribution Companies ("C3s"). Bill 23 is expected to come into force in late 2013.
C3s respond to an emerging demand for socially focused investment options. C3s are hybrids because they combine the flexibility and ability of a traditional for-profit business to attract capital with the social benefit purposes of a traditional not-for-profit entity. C3s will be able to carry on business for the purpose of both earning profits for shareholders and pursuing a social purpose for the community. Some of the differences between C3s and traditional for-profit companies are as follows:
1. Community Purpose. C3s must have one or more community purposes which are beneficial to society at large or a segment of society that is broader than the group of persons who are related to the C3.
2. Restrictions on Ability to Distribute Profits. C3s will have restrictions on their ability to distribute profits to shareholders. Restrictions on dividends and other forms of investor returns will be set out by Regulation.
In addition, C3s will be subject to an "asset lock" on dissolution to restrict capital distributions to shareholders.
3. Public Accountability. C3s will be subject to a greater degree of public accountability. Each C3 must produce financial statements and an annual community contribution report must be prepared and posted on a publicly accessible website of the C3.
Further detail surrounding C3s will be set out in the Regulations.
This hybrid business structure was pioneered in the United Kingdom in 2005 through the introduction of Community Interest Corporations. The United States followed by introducing a similar type of company called Low-Profit Limited Liability Companies. British Columbia is the first province in Canada to introduce a legal structure for social enterprise and is to be applauded for leading the government policy momentum in Canada for these kinds of social enterprises.
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