Understanding Social Enterprise in the Charitable Context

Written on January 15, 2013 – 8:15 am | by Jasmine Sweatman

There is a growing trend towards social enterprise programming and activities in the charitable sector.  In the wider non-charitable non-profit sector, social enterprise has been growing and developing at a much faster pace because it has not had the same regulatory constraints.  On July 26, 2012, the Canada Revenue Agency’s Charities Directorate released an updated guidance on Community Economic Development Activities and Charitable Registration (the “CRA Guidance”) to outline the requirements that registered charities must meet when carrying out social enterprise programs and activities.

The Charities Directorate uses the term “community economic development” but does not define the term other than by referring to related terms such as social enterprise, social finance and community capacity building.  However, the Charities Directorate describes community economic development activities as those which improve economic opportunities and social conditions of an identified community.  Further, it provides a list of activities that would be considered community economic activity:

  • Activities that relieve unemployment;
  • Grants and loans to eligible beneficiaries;
  • Program-related investments;
  • Social businesses for individuals with disabilities; and
  • Community land trusts.

The following are the main requirements outlined in the CRA Guidance that charities must meet to be eligible for charitable registration or to maintain its charitable registration:

  • The community economic development activity must further a charitable purpose such as: relief of poverty, advancement of education; and a benefit to the community in other ways that the law regards as charitable;
  • Any private benefit flowing from the activity must be incidental to the public benefit being delivered.

Charities wanting to pursue social enterprise activities need to ensure that their board is sufficiently educated on the rules and regulations which govern social enterprise, and is able to properly assess proposed programs and initiatives and whether it is in the best interests of the organization.

Lesson Learned:Social enterprise is an alternative means by which charities can carry out their objectives and maximize social finance opportunities for the benefit of their communities.  However, before jumping on board, charities should review the applicable rules and regulations and take the time to assess the feasibility of the proposed program or activity.

Until next time,

Jasmine Sweatman / Sophia Dunkley

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