Report confirms inadequacies of Legal Structures for Social Enterprise organisations and the need for change - June LawTalk column by Law Foundation Director Lynda Hagen
A recent Law Foundation-backed report could be the catalyst for a revamp of the law governing social enterprises – organisations that trade to deliver a social or environmental impact.
The report, Structuring for Impact: Evolving Legal Structures for Businesses in New Zealand, finds that current law is preventing social enterprises from reaching their full potential. It includes examples of social enterprise businesses that struggle to deliver impact, innovate and access finance.
There are more than 3700 social enterprises in New Zealand, contributing $1 billion to the economy. Legally, they sit between charities and private enterprises, using business structures to solve social, environmental and economic problems.
Structuring for Impact, released in April, was prepared as part of the Social Enterprise Sector Development Programme, a partnership between the Department of Internal Affairs and the Akina Foundation. Some 25 organisations were interviewed.The report provides examples of social enterprises held back by the Companies Act, and presents the difficulties they’ve faced in accessing equity funding and in conveying the importance of their impact and commerciality to traditional lenders.
Akina Chief Executive Louise Aitken says there has been “fantastic” feedback on the report from the business, philanthropic and social enterprise communities. While there had been no formal official response at the time of publishing, she expected to engage with the Government soon on next steps, which would involve working in partnership with DIA and several ministers.
“This is a great opportunity to explore how legislation like the Companies Act could be used to enable the Government’s Living Standards Framework to be an important part of the economy,” she says.
“We hope to achieve a conversation within government about the value and impact of social enterprises. Big business globally is starting to recognise this role, and customers and employees are demanding it.”
Akina is working in partnership with 14 ministries, led by DIA, to establish a social enterprise sector in New Zealand over three and a half years.
Structuring for Impact: Evolving Legal Structures for Business in New Zealand – Research Report – PDF 72 pages
The Law Foundation contributed $47,100 to enable qualitative research for the Structuring for Impact report