Companies in British Columbia can now register to operate under an innovative new corporate structure that aims to combine profit making and social impact — creating a new impact investment opportunity in the province.
The B.C. Ministry of Finance announced Monday that provincial regulations are now in effect that allow firms to register to become a Community Contribution Company (CCC or C3), which represents a new business model that aims to bridge the gap between for-profit businesses and non-profit enterprises. The first of its kind in Canada, this new hybrid business model is intended to help meet an emerging demand for socially-focused investment options.
Finance says that C3 status signals that a company has a legal obligation to conduct business for social purposes and not purely for private gain. “This obligation will help attract capital not currently accessible to the social enterprise sector by appealing to philanthropic investors who still expect some financial return,” it says.
Based on a model first introduced in the UK in 2005, C3s are subject to an ‘asset lock’; there is a strict cap on dividends that can be paid out to shareholders; and, the bulk of its profits must go toward the company’s community purposes, or be retained or transferred to a qualified entity, such as a charity. Additionally, they must have three directors and are required to publish an annual report.
The regulations were developed in consultation with members of the B.C. Social Innovation Council, and followed public consultations that were held in 2010, which supported the idea of a new business model like the C3.
There are two main ways to form a C3: a newly incorporated company can elect from the outset to operate as a C3; or, a pre-existing company con convert to C3 status, which requires unanimous consent from existing shareholders.
“This new model will unlock new ways to generate meaningful, local employment in B.C. and generate economic wealth for our province by encouraging private investment in B.C.’s social enterprise sector,” said BC’s Finance minister, Michael de Jong. “I’m excited to see the positive impacts the C3 model will have on B.C. businesses and communities.”
“The countdown is on for the launch of the first legal structure designed explicitly for social enterprise. As a hotbed of social enterprise activity, B.C. is an apt province to roll out such an option,” added Stacey Corriveau, executive director for B.C. Centre for Social Enterprise. “We expect the C3 model will be attractive to charities operating unrelated businesses and traditional corporations wishing to entrench goals beyond that of maximizing shareholder profits.”