On May 14, 2012, in response to demand for social enterprise investment options, amendments to the British Columbia Business Corporations Act (the “Act“) received Royal Assent that will see the introduction of a new entity, the Community Contribution Company (“C3“), once such provisions are in force. These C3s are a hybrid between a non-profit organization and a for-profit business and are based on Community Interest Corporations in England, and other similar entities in the United States.
These C3s will have a business model but their primary purpose will be to provide some community and social benefit. In order to qualify, the purpose must be beneficial to society at large or a segment of society that is broader than those related to the C3. However, as the Act and other legislation are currently drafted, C3s will not be tax exempt like a non-profit organization or charity.
C3s will be restricted in their ability to distribute profits to their shareholders and will be required to devote a portion to their community purposes. There will be restrictions on the payment of dividends and on the distribution of assets, whether on dissolution or otherwise. On dissolution, the C3 will be subject to an asset lock and a prescribed percentage of the company’s assets will go to a qualified entity to ensure the continuation of social benefits. There will also be restrictions on corporate restructuring such as redemptions, repurchases of shares, reductions in capital, amalgamations and continuations.
C3s will also be subject to a high level of accountability. Each C3 will be required to annually produce a Community Contribution Report, which will set out a description of how the company benefited society that year, the details of any transfers or distribution of assets and the purposes of such transfers, the amounts of any dividends declared, and any corporate restructuring that occurred. This report will be made available to the C3’s shareholders and on the C3’s public website (if it has one). Further, any member of the public will be entitled to receive a copy of a C3’s financial statements.
Many of the specifics related to the governance of and restrictions on C3s will be included in the regulations. At this time, none of the regulations have been released; however, the Ministry of Finance has said that it will be working on such regulations in the coming months.
If you are interested in incorporating a C3, please call us to further discuss your options.