The face of philanthropy is changing. The model is changing from a traditional donation model (i.e. here is some money to further your good work) to a more business like model where real working partnerships are formed between the non-profit or charity and the philanthropist.
The success of the social enterprise movement has created dynamic new possibilities for all parties. With the recent changes to the BC Business Corporation Act (July 29th, 2013) there is a new corporate structure called ‘The Community Contribution Corporation’ (C3) where a social enterprise can, for the first time, include equity investors to raise capital. There is an dividend lock set at 40% – basically no more than 40% of the profit can be distributed to shareholders – the bulk of the profits from a C3 have to be used for community purposes.
The BC Securities Commission has recently approved crowd funding for start-ups.
The new rules will allow startups based in those six provinces to raise up to $250,000 through an individual equity crowdfunding offering. Companies will be allowed to conduct a maximum of two offerings a year and raise up to $500,000 in total.
Although using crowd sourcing can be complicated it is definitely an additional tool for the social enterprise sector. What has been missing has been a clear legal and tax framework for social enterprises and as important there was no real way to bring in equity investment except through more traditional philanthropic means – i.e. gifts, grants and/or donations.
The playing field has been somewhat leveled and the opportunities for the SE sector to fund their growth due to these changes will fuel innovation and sustainable community economic development for decades to come. Finally having proper legal structures and new tools for ‘patient capital investments’ for the sector is a welcome development.