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Community Interest Companies – New Opportunities for Social Enterprise in Nova Scotia

August 2016

Nova Scotia is leading Canada in a community-oriented enterprise movement. As of June 15, 2016, Nova Scotia businesses are able to seek a “Community Interest Company” (CIC) designation under the Community Interest Companies Act. This designation opens new doors for businesses, particularly social enterprises, to operate under a model that favors social economy over profit. [1] Nova Scotia joins British Columbia as the only Canadian provinces to legislate community interest companies. Their respective legislation follows the United Kingdom, who first introduced the concept over a decade ago.

This designation will be available to both new and existing corporations in Nova Scotia. Once designated, a CIC will retain the structure of any other company. One key difference, however, will lie in its purpose: in order to qualify, a CIC must declare a community purpose and submit a plan to carry out activities in support of that purpose.[2]

While companies are traditionally driven by share-value maximization and profit, profit and assets generated by a CIC will instead serve various health, social, environmental, cultural, and community interests. To provide some examples, this designation might appeal to organizations such as farmer’s markets, community-owned farms, businesses run by charitable organizations, or businesses employing a marginalized or disenfranchised group.[3]

A CIC will also differ from the traditional corporation through a limitation on the declaration of dividends.[4] This restriction, along with a requirement to submit an annual financial report, is set in place to ensure that profits are invested in the community or reinvested into the company’s operation rather than going into pockets of shareholders. Upon dissolution, an asset lock is triggered, where only qualified entities who share the same community purpose are entitled to receive the distributable assets of the CIC.[5]

While CICs may resemble charitable organizations, they will differ particularly when it comes to tax treatment: unlike charities, CICs are not tax exempt nor can they issue tax receipts. Companies should be mindful of this difference when deciding which structure best meets their needs.

Social enterprise is a rewarding way of doing business for organizations who wish to invest in their community – and who understand that today’s consumers want to use businesses that operate in an ethical, sustainable, and community-minded way. For organizations who share these values, the CIC presents a new opportunity and a valuable pursuit.

This newsletter is produced by Wickwire Holm to keep our clients and friends informed of developments in the law and immerging issues. It is intended for general information purposes only. In preparing and circulating this newsletter, Wickwire Holm is not providing legal or other professional advice. Readers are urged to consult their professional advisers before taking any action on the bases of information contained in this newsletter.

If you have any questions about any issues raised within this newsletter or a related issue, please contact us at wh@wickwireholm.com or 902.429.4111.

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[1] Brent Randall, “How to Structure Community Interest Companies” (30 April, 2014), Drache Aptowitzer LLP, online: [Randall].

[2] NS Community Interest Companies Act, SNS 2012, c 41, s. 9(1) [NS CICA].

[3] Government of Nova Scotia, News Release, “Government Introduces New Business Designation” (15 June, 2016), online:

[4] Randall

[5] NS CICA, s. 9(1).

 

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