The Nova Scotia Legislative Assembly has recently passed the Community Interest Companies Act. This Act allows for a new category of share capital company known as a “Community Interest Company” or“CIC”. Earlier this year, British Columbia passed similar legislation which created a new category of share capital company known as a “Community Contribution Company” or“CCC”. This legislation was discussed in our April 2012 newsletter.
Community interest companies are incorporated under the Companies Act in Nova Scotia and then apply to be designated as community interest company. An existing company may apply for designation as a community interest company by having the all members of the company, including non-voting members, approve a resolution to amend the company’s governing documents to comply with the requirements for a community interest company.
To be designated as a CIC, the company must have a community purpose. A community purpose is defined in the Act as a purpose beneficial to society at large, or to a segment of society that is broader than the group of persons related to the community interest company. Examples of such community purposes are the provision of health, social, environmental, cultural or educational services.
The name of the company must end in the words "Community Interest Company" or " société d’intérêt communautaire" or the abbreviation "C.I.C.", "CIC", "S.I.C." or "SIC".
A community interest company can only declare dividends in accordance with the regulations and the Companies Act. The company is also restricted from giving away assets for less than fair market value, unless the recipient of the assets is a registered charity, a society under the Societies Act (Nova Scotia) or a non-profit association under the Cooperative Associations Act (Nova Scotia). The company must produce annually a community interest report for shareholders and the Registrar of Community Interest Companies.
While this is a new form of corporation, this legislation does not change the Income Tax Act rules. Thus, the corporation will still need to comply with the rules necessary to be a non-profit organization (NPO) or will pay tax as a for-profit corporation.
The Nova Scotia Act received Royal Assent on December 6 2012. Neither the Nova Scotia legislation nor the British Columbia legislation are in force yet as we are awaiting Regulations for the new Acts.