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NOT-FOR-PROFIT LAW'S RESPONSE TO THE FEDERAL GOVERNMENT'S DISCUSSION PAPER ON SOCIAL IMPACT INVESTING
Not-for-profit Law was pleased to provide a response to some of the questions posed in the Federal Government's Social Impact Investing Discussion Paper. We support the Federal Government's decision to consult widely on the role of Government in enabling social enterprise and impact investing. Our submission addresses in particular:
- the importance of intermediaries in growing impact investing in Australia;
- the need to define social enterprise;
- the need to improve marketplaces for impact investing;
- the need to extend crowd sourced equity fundraising to proprietary companies;
- the need for legal structures for social enterprise,
- the potential of social investment tax relief
- the potential of pro bono targets for non-legal professional services; and
- that precedent constitutions are unlikely to have a catalysing effect on impact investing in Australia, and suggest a range of other areas where social enterprises and not-for-profits require additional support.
Summary of recommendations
We recommend that the Federal Government:
- provide a package of funding to support the work of intermediaries providing free and low cost assistance to social enterprises and not-for-profits seeking to become impact investment ready, and to those providing a linking role between investors and impact investment ready enterprises.
- either define “social enterprise” or provide guidance on appropriate use of the term.
- continue to prioritise its work creating an appropriate framework to support crowd sourced equity fundraising through its Corporations Amendment (Crowd-sourced Funding) Bill 2016 (Cth).
- prioritise extending access to crowd sourced equity fundraising to proprietary companies, as the vast majority of for-profit social enterprises are structured as proprietary companies.
- address issues regarding the legal structural framework for social enterprises by: a) preparing a modification to directors’ duties under the Corporations Act 2001 (Cth) that addresses concerns about the potential conflict between directors’ duties and social purpose-based decision making; and b) draft legislation for a hybrid legal structure (we do not consider that the benefit corporation is a hybrid legal structure) for consultation that has both classic not-for-profit features and the ability to issue shares and make distributions to investors, informed by the United Kingdom (UK) Community Interest Company (CIC).
- investigate the potential of a Social Investment Tax Relief Scheme to increase private impact investing in Australia.
- support a clearing house for non-legal professional services to democratise access to pro bono non-legal professional services for social enterprises.
- set pro bono targets for non-legal professionals such as accountants and management consultants to improve the ecosystem for social enterprises and not-for-profits.
Read our submission