Treasury Committee considered recommendations of Legal Models Working Group

By Professor Bronwen Morgan, UNSW

Cooperative or company limited by guarantee? Legal entity choice is a key element our study of small-scale initiatives in Australia that mix elements of social activism and social enterprise in an effort to respond to environmental challenges. Entity choice determines precise roles and responsibilities, as well as financial flows. These demarcations often need to be revisited by emergent groups who are tackling such large challenges as democratising food and energy distribution monopolies. Turning to experts is often counterproductive. Legal expertise is often provided based upon familiarity with entities (particularly Pty Ltd) rather than from dialogue about goals and values.

Professor Morgan and Dr. Kuch have been grappling with these complexities by participating in The Social Enterprise Legal Models Working Group (LMWG). The LWMG was originally convened by the Centre for Social Impact as part of the “Social Innovation, Entrepreneurship and Enterprise Alliance” (SIEE) and has been operating as a working group chartered to investigate the issue of social enterprise business models/legal structures. The coordinator of the group has been Alan Greig, a Board member of Employee Ownership Australia. The Group’s Chair is Malcolm Rodgers, PSM, a former Director of Market Regulation in the Australian Securities and Investments Commission and an expert on corporations law.

The LMWG has now produced a draft report with a number of recommendations regarding the need to approach legal structures for social enterprise as a strategic business issue, particularly with regard to accessing adequate capital. You can access a copy of the report here, and a recording of a webinar held recently on the report here.
The report also considers – and extensively reports on – the range of social enterprise structures being legislated for in other countries, including the “community interest company” (CICs) in the UK and the “for social benefit corporation” in the US. For example, there are nearly 8000 CICs in the UK following the introduction of this legislation in the UK in 2005.

Australia is far more limited in the choice of social enterprise entities than these jurisdictions. On this, the LMWG has produced a “Summary” of legal models applying in other countries, which you can see here. The group has also produced a useful matrix breaking down the key differences between the legal models available in Australia, available here. A short paper by the LMWG was discussed by the Prime Minister’s Business Community Partnership in May 2015 beginning a policy debate at government level about this important issue. 

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