The world's fastest growing legal model for social enterprise | Law

The world's fastest growing legal model for social enterprise

On May 10, 2017, The Centre for Law, Markets and Regulation, with the support of Alan Greig and the Legal Models Working Group on Social Enterprise, hosted a lively discussion in the boardroom on the Community Interest Company (CIC), a legal model for social enterprise created by the UK in 2005. Chaired by Professor Bronwen Morgan, the 20 or so attendees included law firms (large and small), business advisors, social investors, public policy makers (from the Department of Social Services at the Federal level and the Victorian State Department of Economic Development at state level ) and academics, all gathered to hear Phil Horrell, the recently retired Deputy Commissioner of the CIC regulatory agency in the UK. There are 13,162 CICs now registered and active in the UK, with new registrations being between 250 and 300 per month.

The meeting gave considerable insight into a range of practical issues relating to Community Interest Companies. Examples of CICs include NAViGO, a health and social care provider employing 20,000 people, and Bristol Together, construction company that employs ex-offenders and build community housing and private housing. CICs are first and foremost a company and register with Companies House, the UK equivalent of ASIC, although they must use or modify CIC-specific Model Rules. The legal form of the CIC is flexible, and can create companies either limited by guarantee (popular for not-for-profits) or limited by shares with either capped or uncapped dividend payments to shareholders. Even where CICs issue shares, they must still ‘lock their assets’. This mandatory dimension of CICs means that companies cannot use assets for purposes outside the purpose of the organisation, a feature that has been particularly successful in creating large health and social care CICs as public service ‘spin-outs’. CICs also lodge a community interest report annually with the CIC Office. These reports are made publicly available at no cost.

The desirability or possibility of legislating for new hybrid legal models for social enterprise is a topic of considerable interest in Australia at the moment, which has salience for several current debates about public policy in relation to crowd-sourced equity funding, social impact investment, the future of environmental policy and the relationship between philanthropy and business as debated by the Prime Minister’s Community Business Partnership.  Learning from the UK experience will provide valuable insight for Australian developments in the near to medium term.