The Canada Business Corporations Act Review - Incorporating Socially Responsible Enterprises

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Industry Canada has launched a 90-day consultation on the Canada Business Corporations Act (CBCA). Importantly, one of the items under consideration is the incorporation of hybrid enterprises, titled Socially Responsible Enterprises (SREs), which are broadly defined as entities who use a “commercial business model to encourage social change.”

The CBCA provides the legal and regulatory framework for corporations in Canada. This includes the basic rules for corporate governance – from executive compensation to communication with shareholders. This consultation follows a statutory review held in June 2010, where Tim Draimin of the Social Innovation Generation spoke to amending the CBCA regulations to facilitate the incorporation of enterprises that include both for-profit and non-profit goals.

Canada’s non-profit sector (comprising of over 161,000 organizations, with revenues in excess of $100 billion and over 1.5 million people employed) are in an era of decreasing revenues in both donations and government grants. Many organizations have developed profit-making business ventures that simultaneously provide revenue and pursue the organization’s goals, and establishing the regulatory framework for private investment would open the door for innovation.

Precedent for this type of incorporation is available domestically and internationally, including British Columbia (Community Contribution Companies), Nova Scotia (Community Interest Companies Act), the United States (Low-profit Limited Liability corporations), and the United Kingdom (Community Interest Companies).

The consultations, among other things, will seek to decide on amending the CBCA regulations to allow SRE incorporation, or creating a separate regulator.

Submissions are being accepted until March 11, 2014.

Resources

Government of Canada’s Press Release: “Minister Moore launches Consultation to Strengthen Canada’s Corporate Governance” - https://www.canada.ca/en/news.html

Consultation on the Canada Business Corporations Act full contents - http://www.ic.gc.ca/eic/site/cilp-pdci.nsf/eng/h_cl00867.html

Consultation on the Canada Business Corporations Act Incorporation Structure for Socially Responsible Enterprises - http://www.ic.gc.ca/eic/site/cilp-pdci.nsf/eng/h_cl00867.html#p3.5

Statutory Review of the Canada Business Corporations Act - http://www.ourcommons.ca/DocumentViewer/en/40-3/INDU/report-4