ALRC Review of Legal Structures for Social Enterprises

Business StructuringNot For ProfitCommercial Contracts
Written By Paul Gray

On 2 December, the Australian Law Reform Commission (ALRC) released its report. ‘The Future of Law Reform: A Suggested Program of Work 2020-25’. The report highlights five areas of law they suggest for ALRC inquiry over the next five years, with one such topic being the legal structure for social enterprises.

The ALRC define ‘social enterprises’ as organisations that conduct their business to procure a profit, but remain intentionally committed to addressing social and environmental problems and to helping improve communities. The ALRC Report suggests that current legal structures inadequately address the needs of social enterprises, and an inquiry would allow for investigation into how reformed, or entirely new, corporate structures, could be introduced.

The Report proposed a review into whether amendments should be made to the Corporations Act 2001 (Cth) (Corporations Act), the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (ACNC Act), and any other Commonwealth laws, to provide for a more appropriate corporate structure for social enterprises. The report states that an inquiry could lead to propositions regarding:

  • appropriate methods for social enterprises to be able to raise capital;

  • appropriate regulatory bodies for social enterprises;

  • desirable amendments to existing legal structures for charities and not-for-profit entities; and

  • the interaction of the ACNC Act with related state and territory legislation.

In our experience, this review is overdue, given the uncertainty for many not-for-profits around their obligations as a corporation and as a charity. The interaction of the Corporations Act and ACNC Act in particular is at best a make-shift arrangement for this sector. More broadly, the role of the social enterprise and government’s policy approach to such organisations should be re-assessed, as the line between what constitutes a not-for-profit and a for-profit enterprise has been blurred for some time from a governance, operational and competition perspective.

The ALRC suggests a 12 month timeframe for the inquiry. 

For further information or advice, please contact:

Paul Gray
Principal Lawyer
T  03 5225 5231
E  pgray@ha.legal

Jesse Drever
Lawyer
T  03 5225 5226
E  jdrever@ha.legal

Paul Gray https://www.harwoodandrews.com.au/paul-gray
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