The Social Enterprise Legal Models Working Group (LMWG) – which was originally convened by Centre for Social Impact as part of the “Social Innovation, Entrepreneurship and Enterprise Alliance” (SIEE) – 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 EOA, representing EOA on the SIEE. The Group’s Chair is Malcolm Rodgers, PSM, a former Director of Market Regulation in ASIC and an expert on corporations law.
You can see our most recent training session on what to consider when setting up a legal model for a social enterprise.
The breadth of social enterprise ‘types’ is well described in the Social Enterprise Manifesto that the SIEE has produced.
The LMWG has now produced a “Final 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.
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 11,000 CICs in the UK following the introduction of this legislation in the UK in 2005, many of them employee-owned.
(For more information on this, see our work on creating a “Community Interest Company structure in Australia”)
For an excellent study on the topic of legal models for social enterprises – one that was used as background by the UK Cabinet Office for the development of the community interest companies legislation in the UK – see the report “Private Action, Public Benefit: Organisational forms for social enterprise (2002).”
The original vision and strategy for the social enterprise were released in the UK Government’s announcement “Social Enterprise – A Strategy for Success“ in 2002, which indicated that the main focus – as the then Minister stated – is “to challenge the established models – financial, legal and regulatory – so that we unlock the potential in the social economy” and “I want to ensure that we do more to encourage, grow and sustain social enterprises – to ensure that social enterprise is not seen as a ‘sideshow’ to the ‘real’ economy but rather an integral and dynamic part of it.”
Australia is way behind other jurisdictions in the development of legal models/structures for social enterprise. On this, the LMWG has produced a “Summary” of legal models applying in other countries.
The LMWG is also actively promoting research on these developments and is undertaking educational work on the issues involved. In this regard, it has developed a “Legal Models Comparison Matrix” as an educational tool to assist with the identification of legal forms in Australia and the choices involved therein for social enterprises. The matrix is now in the process of being distributed to social enterprise intermediaries and their business advisors, as well as to those enquiring about starting up social enterprises. The general public will find it useful as well.
An Australian version of this employee-owned social services model has also recently started up – see the Australian Independent Living Enterprise trading as Cooperative Home Care.
There was a public webinar on the topic on the 18th February 2015 – for the details see “Webinar- Starting out in social enterprise? What legal structures are possible?”
LATEST NEWS (December 2019): It is pleasing to see the announcement by the Australian Law Reform Commission (ALRC) that they now have on their ‘task list’ investigating the need for a new, dedicated legal structure for social enterprises. You can see the announcement about this here,
Social enterprises are organisations that seek to make money, but are also committed to social or environmental goals. It has been suggested that existing legal structures fail to reflect the needs of social enterprises. An ALRC inquiry would examine whether new corporate structures should be introduced.
For more information, see the “Future for Law Reform Final Report”
Alan Greig
Board member, Employee Ownership Australia Ltd, and
Co-ordinator, Social Enterprise Legal Models Working Group
Email: ahgreig@bigpond.com
Related pages: Public Service Mutuals, Employee Buyouts
“I’m late to the party here but I want to say many thanks for this excellent material. I get asked questions about different legal entities on a daily basis. This is incredibly useful – for SEFA as well as for our clients. Thanks!”
Ben Gales, Chief Executive Officer, Social Enterprise Finance Australia
Resources:
ALTERNATIVE OWNERSHIP ENTERPRISES: An Introduction for Mission-Oriented Investors | November, 2023.
The conventional enterprise ownership model–and the investments that are designed for it–are creating an economy that works for the few, not the many. Fortunately, there is a rich body of work which is building new possibilities: Alternative Ownership Enterprises (AOE). AOEs are firms that significantly shift economic value and decision-making power toward the non-investor stakeholders they impact, such as workers, producers, consumers, community members, or even a non-financial purpose.
Investing in Enterprises That Work for Everyone | October 2023
Impact investors can support a more just economy by prioritizing alternative ownership enterprises that shift power away from shareholders to workers, the community, and the planet.
Is there such a thing as a genuine social enterprise? (February 2022)
LMWG Submission to the Consultation on the Victorian Social Enterprise Strategy (November 2020)
Discussion Paper: Co-operatives and Mutuals as Social Enterprises (October 2020)
An article on the ARLC review has been published in Australia’s Pro Bono News. It features an interview with Employee Ownership Australia’s Angela Perry on the topic, see – Social enterprise structure under review (December 2019)
Making Progress on Social Enterprise Legal Models, 13 February 2019
Mission-led employee-owned firms: The best of the best – Mission-led employee-owned firms embody a powerful model of enterprise design for a new era of environmental sustainability and social equity.
Legal models beyond the corporation in Australia: plugging a gap or weaving a tapestry? By Prof Bronwen Morgan, University of NSW Law School.
“Building the ‘New Economy’ With Sustainable Social Enterprise”
“Where are the community enterprise lawyers? Discussion paper”, August 2016.
Another key, short document in terms of describing what social enterprise is that from SEUK called “What Makes a Social Enterprise A Social Enterprise”.
Legal Structures for Protecting the Commons
Cooperative Checklist – Employee owned cooperatives – Governance Checklist under Australian Cooperative Law
EOA’s submission to the Senate Enquiry on worker owned Mutuals and Cooperatives (July 2015)
