Article

A New Opportunity for Socially-Minded Entrepreneurs in BC

On July 29, 2013, BC will introduce a new for-profit corporate model for businesses – a Community Contribution Company, or C3.

C3s offer BC entrepreneurs an option to incorporate their business with a defined social goal, along with the commitment that the majority (at least 60%) of profits will be redirected into the social purpose of the company. These businesses are not charities, and will not be tax exempt. As a for-profit business model, a C3 will at the same time allow for the sale of shares to investors who want to support the social mission and receive a portion of up to 40% of the profits.

If the C3 is sold, the new owners are obligated to the same social values and directives for profit distribution. If dissolved, an asset lock to ensures that at least 60% of the business’ value will go social purposes, with the remaining value to be distributed to investors.

A Unique Opportunity in BC

The C3 is the first of its kind in Canada. This hybrid approach is based on other international models in the UK (Community Interest Companies / CIC) and in the US (LC3, Limited Profit Corporations and Benefit Corporations).

As the number of consumers concerned with corporate social responsibility continues to increase, the C3 structure offers a clear marketing advantage. This type of business makes a public statement through its choice of incorporation model about its commitment to achieve a “blended value” of both financial and social ROI. As a result, customers can rest assured that their purchases will result in socially beneficial outcomes. C3s will have obvious appeal for socially-conscious investors as well, and should help stimulate investment in BC’s social enterprise sector.

The C3 Model in Practice

As an example, a business may want to employ people with disabilities as core staff. The additional human resource expenses may not be attractive within the constraints of a traditional, profit-maximizing business model. If incorporated as a social enterprise (a business owned by a non-profit), the company wouldn’t have access to equity investors to raise needed capital. However, as a C3 the business can do both – target its desired employment group and absorb any related costs, while also sell shares to like-minded investors.

In another instance, the C3 model may be beneficial to small businesses in rural communities when existing owners want to retire or sell the business. While modest profits may not be sufficient to attract outside investors, these businesses – such as local movie theatres, grocery stores, and recycling centres – often provide significant value to communities. If purchased by residents in the community, the business could be reincorporated as a C3 and continue to deliver important services to the local community.

For More Information

Visit the Ministry of Finance website for more details as they emerge, or view the official announcement from the BC government for additional information.