Proposing a new legal structure for Social Enterprise in New Zealand
Following ongoing consultation, this document has now been updated in March 2018 after the initial release in September 2017 at the SEWF.
Legal structures currently available to New Zealand social enterprises are essentially limited to for-profit and non-profit categories.
Social enterprises operate via a ‘profit-for-purpose model’, so organisations face challenges when choosing a particular legal structure. The choice has implications for legal activity, access to funding, and governance obligations. These challenges are set out in detail in this discussion paper.
There are existing ways to creatively address these challenges, including altering company constitutions, or using multiple structures. However, these solutions do not address the fundamental issue that social enterprise currently lacks a recognised and unique identity, which has consequences for the overall sector and impedes access to both public support and investment. Furthermore, the creative solutions are expensive and inaccessible for many social enterprises, which have limited resources and access to legal support.
Overseas, new hybrid legal structures have been created, which are uniquely suited to supporting social enterprises’ needs. These include the Public Benefit Corporation in the United States (in 32 states) and Community Interest Company in the United Kingdom. The creation of a legal structure for social enterprise in New Zealand would deliver significant benefits for the sector. This could be designed to enable enterprises to flourish, and allow them enough flexibility to each determine their own needs while still remaining accountable to the benefit they set out to deliver. Fundamentally, a new structure would increase the legitimacy of the sector and attract the benefits of a recognised identity.