The government of British Columbia is proposing legislation to, among other things, facilitate the creation of social enterprise companies, which would be for-profit businesses that also aim to do good.
Amendments to the province’s corporate legislation proposed Monday would allow for a new hybrid type of company – the community contribution company – which, it says, would combine socially beneficial purposes with a restricted ability to distribute profits to shareholders. The government indicates that this new type of hybrid corporation “responds to an emerging demand for socially focused investment options and can help foster social enterprise investments”.
For example, earlier this year, Royal Bank announced the launch of a new $10 million capital fund to help finance projects by organizations and entrepreneurs tackling social and environmental challenges. In particular, it’s targeting projects promoting environmental sustainability and water resource management, and providing employment opportunities for youth and new Canadians.
B.C. says that its new “community contribution companies” 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,” it notes.
These new sorts of companies would also be subject to a higher degree of accountability than an ordinary company and they’d be required to publish an annual report detailing their social spending, it adds. Restrictions on corporate reorganizations would ensure that payout restrictions cannot be circumvented. And, when they are dissolved, these companies would be subject to an ‘asset lock’ — capping dividends on the company shares to ensure that profits are either retained by the company or directed to the community benefit.
Subject to passage of the legislation, the government says it will work in the coming months to develop the regulations necessary to implement the legislation.
The proposed new legislation will also amend the province’s Financial Institutions Act and Pensions Benefits Standards Act to streamline processes, enhance accountability and ensure consistency between the Financial Institutions Commission and other commissions. It will also clarify the authority of the auditor general, and amend various aspect of corporate legislation.