How to Kick Start a Social Enterprise Joanne O’Brien T: E:

WHAT IS SOCIAL ENTERPRISE? A more creative capitalism that can adapt business and the market to better address unmet social needs Non-loss businesses with social objectives Businesses that trade to tackle social problems, improve communities, people’s life chances or the environment Profit for purpose

WHY SOCIAL ENTERPRISE? Economic and social factors have created an increased need –Reduced government funding –Need for innovative solutions to new problems Growing field of academic study & research Plethora of definitions Social Traders, Social Ventures Australia

CONTEXT Sourcing finance Delivery of products & services Marketing Employees & Volunteers Legal structure to support desired aims outcomes LEGAL COMPLIANCE

LEGAL STRUCTURE What legal structure will you use? Options: 1. Operate within an existing NFP/charity Possible regardless of whether the NFP/charity is a company limited by guarantee or an association Establish a separate business unit Its own reporting lines 2. Establish a new separate legal entity

IN HOUSE OPTION Advantages –Minimal establishment costs –Utilises existing staffing & financial reporting frameworks –No changes at Board level –Surpluses become part of general revenue & can be utilised for core purposes

IN HOUSE OPTION (Cont’d) Potential problems –Impact on charitable status –Impact on tax endorsements –Risk to core business

OUT HOUSE OPTION Set up a new separate legal entity to operate the social enterprise Alternatives: –Company limited by guarantee –Proprietary Limited company –Incorporated Association –Trust

COMPANY ALTERNATIVES Minimum requirements : –Public Company (Ltd) 3 Directors 1 Member & that can be a corporate member –Private Company (Pty Ltd) 1 Director 1 Shareholder

ISSUE (CONT’D) A private company can distribute dividends A company limited by guarantee can only use its income & property to further its objects –One of those objects can be “To contribute funds to XYZ Foundation/Ltd ” –Loans & service agreements can be use d

ISSUES (CONT’D) Registration as a charity with ACNC? Entitlement to tax concessions? Who will be the Directors? –The whole Board of the parent; or –Sub-set of the parent Board; or –Individuals with particular skills + a representative of the parent Board

KEY CONSIDERATIONS How those issues are resolved depends on: –The nature of the enterprise; and –Its dominate objective: To generate funds; or To provide social outcomes

CASE STUDY 1 Aged Care Provider Ltd PBI Operating a construction business Building for itself & other Providers Builder’s Licence required minimum asset ratio that could not be met because of the accommodation bond liabilities Large cash reserves

CASE STUDY 1 The Solution: –Amend Constitution to allow the entity to set up an enterprise –Register a Pty Ltd company –Issue shares equal to the cash injection required – minimum amount to secure builders licence –CEO became the sole Director

CASE STUDY 2 Endorsed PBI – Homelessness Incorporated Association Aim to provide free/low cost health service Partnership with established health services Substantial investment required for premises fit out Collaboration with charitable foundation

CASE STUDY 2 The Solution: –Amend Constitution to allow the entity to set up an enterprise –Register a Ltd company –Association and Foundation members –Capital to be raised by way of loans & donations to the new company –Written agreement between members

Thank You Joanne O’Brien T: E: Level 10, 193 North Quay Brisbane Qld 4000