Social enterprise, not–for-profits, and charities in British Columbia now have a unique opportunity to raise funds and govern operations not yet available elsewhere in Canada. Beginning July 29, 2013, Community Contribution Companies (C3s) can be incorporated in British Columbia.
Using a C3, social enterprises, or not-for-profits and charities exploring a social enterprise model, will be able to:
- raise equity financing;
- borrow against capital assets at potentially more favourable rates; and
- benefit from individuals, corporations and foundations wishing to invest in such enterprises.
Aimed primarily at social enterprise, C3s are “hybrid” corporations the most interesting feature of which is the requirement that a social purpose be irrevocably included in the entity’s constating documents. There are other key differences between a C3 and a business corporation:
- a C3 must annually publish a Community Contribution Report containing certain items including the total amount of dividends declared on all classes of shares, the identity of shareholders receiving dividends and a list of the most highly remunerated persons (remuneration exceeding $75,000);
- if a C3 dissolves, 60% of its assets on dissolution must go to another entity under a similar “asset lock”, such as another C3, or to a registered charity;
- the C3 cannot pay an annual dividend greater than 40% of the profit of the organization however this restriction does not apply to shareholders who are registered charities and other “qualified donees” as defined in the Income Tax Act (Canada).
It is important to note that C3s are taxable.
We anticipate that C3s will be the vehicle of choice for registered charities and not-for-profits wishing to conduct a social enterprise that cannot be conducted within their existing structures and maintain their tax exemption. Local governments may also wish to consider C3s for the structuring of certain projects. Individuals and groups initiating social enterprise should certainly consider the C3 as the potential vehicle for their venture.