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Community building on the coasts: BC and Nova Scotia introduce new social venture legislation

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They may be Canada’s two coastal bookends, but two provinces, Nova Scotia and British Columbia, have recently taken almost identical measures to increase the power and reach of social venture organizations in each region.

On December 4, 2012, Nova Scotia took a social leap forward with legislation enacted to create a new category of share capital company aimed at helping its population.

Nova Scotia’s Bill 153, aka the Community Interest Companies Act, will allow for new social mechanisms – or CIC’s (pronounced “kicks”) as their being called – of community change.

Earlier in 2012, the British Columbia legislature passed a similar law contained in its Bill 23 – Finance Statues Amendment Act, wherein a Community Contribution Company (CCC) designation now exists for organizations interested in doing good while watching their profits and bottom lines.

So what do these bills actually do or mean?

London calling

According to Nova Scotia-based charities and nonprofit lawyer Richard Bridge, the two similar laws could have a tremendous impact on the way capital is distributed to those in need in each province. And each legislature took its cues from London.

“The NS legislation is based on the UK Community Interest Company example,” he told CharityVillage. “They have been successful as a new legal vehicle for social or community enterprise in the UK. You can find the full details of how it works and examples of CICs on the website operated by the UK CIC regulator. Similarly, there have been new structural options developed in the US to fill gaps in the legal infrastructure there.

Bridge said it’s his belief the legislation was adopted to help complete the province’s legal infrastructure for social enterprise and to bring it up to date, since it has not kept pace with the evolution of social enterprise.

“The Nova Scotia Societies Act, for example, does not allow business activities by societies incorporated here, even if they are ancillary to the charitable or nonprofit activities of the society – unlike the BC Society Act or the new Ontario Not-for-profit [Corporations Act] (ONCA) legislation,” he said. “The new NS legal structure provides a new choice for social or community entrepreneurs. It is a hybrid structure that combines attributes of the business corporation, the ability to issue shares and to engage in business activity, with commitments to community benefit – a community purposes requirement, caps on returns for investors and an asset lock to keep the assets of the CIC in the public benefit realm.”

This new Act, Bridge said, recognizes the importance of community enterprise and will “encourage it.” It will also likely attract capital via equity investment and loans to help support an “essential and dynamic” field.

“It will be attractive for people to invest in projects that benefit their communities directly and to receive a return if the projects are successful with confidence the assets that are built will remain community assets, and not be converted to purely private benefit.”

Over to you, BC

In Vancouver, David LePage, program manager of Enterprising Nonprofits [ENP], has similar feelings about his province’s new CCC (or 3C) designation. Though, as with the CICs in Nova Scotia, details about the mechanisms and precise rules on how the companies can and will run, are, at time of writing, still being worked out.

“Currently, the legislation’s regulations and registration processes are being completed,” he said. “The expectation is that by late spring the option for [organizations] to incorporate in BC as a for-profit business with a specific and in perpetuity social purpose” will come into play.

ENP was one of the main sector advisors on the legislation as it went through the BC Ministry of Finance’s drafting and consultation process. LePage clarified that of import in the new law is the idea that an “in perpetuity social purpose” be maintained when it comes to a CCC benefitting the community.

What that means is that as long as the company exists, regardless of who owns it, it will be required to continue to provide a benefit to the community; though what percentages of profit will be redistributed to social need is still being worked out.

For dividend and asset distribution regulations on any CCC, though this again is still being hammered out, LePage said there would be one of either/or a “limitation, cap or floor.”

“But it’s difficult to speculate beyond that,” he said. “What we do know is that [a CCC] will be a for-profit whose distribution of dividends and assets will need to be reflected in the social purpose. For CICs in the UK, they use a cap. There’s been some discussion [in BC] of instead of a cap, why not just a percentage.”

My heart, and social investment, will go on

However, LePage qualifies that while this is a much-needed piece of law, it is but one tool in a greater societal rebuild.

“This is not a silver bullet. It’s one more piece, in what, in some situations will be a good corporate choice when someone is doing planning about whether to have a blended value business,” he said. For CCCs some founders might decide to go into it as a co-op, or nonprofit or strict for-profit. Other times, a sole proprietor may choose to go CCC, according to LePage.

“Other times, a CCC will be able to provide a big corporation tool that will support the blended value business objectives of a group,” he said. “It might be a way for First Nations development corporations to partner with private sector developers, yet ensure there will be a social value in perpetuity.”

What some people may not know is that prior to this legislation, anyone in BC could form a CCC. One could set up a for-profit business with a designated social purpose and run it successfully splitting the dividends beneficially between staff and social cause.

“But today, if we sold it, the new owners would not have to follow the company's bylaws. They could change them. Under the 3C, it takes this business and maintains it in perpetuity. New ownership cannot change the social values or financial distribution requirements” of assets, he said.

And if new owners decide to dissolve the 3C? LePage answers: “There will be asset distribution limitations.”

The result is that anyone incorporating a CCC gets the peace of mind of knowing that their initial investment in that company’s social purpose will go on indefinitely.

Ready to “CIC” it?

What do you think? If the option was available in your jurisdiction, would a 3C or CIC be something you would consider moving your organization towards?

 

Andy Levy-Ajzenkopf is president of WordLaunch professional writing services in Toronto. He can be reached at andy@wordlaunch.com.

Photos (from top) via iStockphoto. All photos used with permission.

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