The British Columbia legislature is in the process of making significant changes to the BC Business Corporations Act that, if adopted, will provide a new corporate vehicle for social enterprise operations. This bulletin focuses on the most notable proposed changes.
The Business Corporations Act (“BCA”)
On March 5, 2012, the Minister of Finance introduced Bill 23, the Finance Statutes Amendment Act, 2012 (“Bill 23”) for a first reading.
Bill 23 proposes changes to the BCA, which, if adopted, will create a new hybrid company structure designed for social enterprise, called the Community Contribution Company (“C3”), which combines socially beneficial purposes with a restricted ability to distribute profits to shareholders. The C3 is the first hybrid structure in Canada specifically designed for social enterprise.
C3s will be structured to combine benefits to the community and limited investor returns within the context of a traditional for-profit company. They will have the ability to attract capital while simultaneously ensuring that community benefit takes precedence. C3s will not be tax exempt.
C3s have three main differentiating features from traditional for-profit corporations under the BCA:
1. C3s will be obliged to devote a portion of their profits to community purposes, which are determined at the time of incorporation.
2. C3s will have restrictions on their ability to distribute profits. Dividends and other forms of investor returns will be restricted in a manner to be set by Regulation. C3s will also be subject to an “asset lock” if the company is dissolved, such that distributions of capital to investors will be restricted.
3. C3s will be subject to greater public accountability. Each C3 will be required to publish an annual report detailing its community benefit spending. In addition, any member of the public will be able to request access to a copy of a C3’s financial statements.
The C3 structure responds to an emerging demand for socially focused investment options and can help foster social enterprise investments.