The British Columbia government is the first province to adopt legislative changes that allow for the creation of hybrid corporations in order to encourage investment in social capital.
The regulations allow the creation of a new corporate structure (so-called community contribution companies (CCCs)) that are designed to bridge the gap between for-profit businesses and non-profit enterprises. The rules, which have now received government approval, are slated to take effect on July 29.
Based on a similar model adopted in the UK, CCCs will be able to accept equity investments, issue shares, and pay shareholder dividends, which are things that non-profits are not currently allowed to do. However, CCC shareholder dividends are limited to 40% of annual profits, leaving the majority of their profits to be used for the company’s designated community purposes. Companies structured this way will be required to publish an annual ‘community contribution report’ that details of their social spending, community activities and dividend payments.
Additionally, when a CCC is dissolved, it would be subject to an ‘asset lock’ to limit the distribution of assets to shareholders to a maximum of 40%. The remaining 60% would be distributed to charitable organizations and/or other asset-locked entities.
“I applaud these amendments that will create a new hybrid type of company in B.C. that combines the traditional benefits of a corporation with a social purpose. This step keeps British Columbia at the front of the pack when it comes to demonstrating leadership in the area of social innovation and social entrepreneurship,” said minister of social development, Moira Stilwell.