A social enterprise is an organizat

A social enterprise is an organization or venture that achieves its primary social or environmental
mission using business methods. The social needs addressed by social enterprises and the
business models they use are as diverse as human ingenuity. Social enterprises build a more just,
sustainable world by applying market-based strategies to today's social problems.
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I prefer the term “community enterprise,” and use it interchangeably here with “social enterprise”.
A. The UK Innovation
In 2005, new legislation and regulations were adopted in the United Kingdom that enable the creation of a
new type of company called Community Interest Companies, or “CICs”. By March 31
st
, 2010,
approximately 3,500 CICs had been established in the UK
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to advance a wide range of community
enterprises.
They have these fundamental features:
1. CICs are established to trade (goods or services) for the community good. To qualify for CIC status,
the company must submit to the CIC Regulator a “community interest statement” that includes:
a. certification that it has been formed to serve the community rather than to make private profits;
b. a declaration that it will not engage in political activity;
c. a description of its activities and how they will benefit the community; and
d. a description of how surpluses will be used.
Subsequent annual reports are required, in order to confirm that the CIC continues to meet the
community interest requirement. These reports are available for public review, ensuring a high level of
transparency.
2. CICs may issue shares in order to raise capital. But unlike a traditional business corporation, the
dividends that can be paid by CICs on these shares are controlled by a cap on returns set by the
Regulator. Likewise, caps apply to interest paid out.
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3. CICs are subject to an “asset lock”, which means that the assets must be permanently retained by the
CICs for community benefit, or transferred to another CIC subject to an asset lock, or to a charity.
4. CICs are subject to fewer regulations than charities, and may be established for purposes that do not
meet the legal test of charity. But CICs do not enjoy the same favourable tax treatment that charities
receive. They are taxed in the same manner as other businesses.
In my view, the most attractive feature of the CIC is that it encourages the combination of private
investment capital with activities that benefit community. In Canada and elsewhere, limited access to risk
and patient capital is a primary obstacle to social enterprise projects, such as community economic
development or environmental initiatives. CICs have the legal capacity, like business corporations, to
raise funds in exchange for shares. This enables the investment of private wealth in community projects –
a very powerful combination that has not yet been adequately tapped in Canada.