Nova Scotia Introduces the Community Interest Company

December 2012 | Kate Lazier

The Nova
Scotia Legislative Assembly has recently passed the Community Interest Companies Act. This Act allows for a new
category of share capital company known as a “Community Interest Company” or
“CIC”.  Earlier this year, British
Columbia passed similar legislation which created a new category of share
capital company known as a “Community Contribution Company” or“CCC”.  This legislation was discussed in our April
2012 newsletter

Community
interest companies are incorporated under the Companies Act in Nova Scotia and then apply to be designated as
community interest company.  An existing
company may apply for designation as a community interest company by having the
all members of the company, including non-voting members, approve a resolution
to amend the company’s governing documents to comply with the requirements for
a community interest company.

To be
designated as a CIC, the company must have a community purpose.  A community purpose is defined in the Act as a
purpose beneficial to society at large, or to a segment of society that is
broader than the group of persons related to the community interest
company.  Examples of such community
purposes are the provision of health, social, environmental, cultural or
educational services. 

The name
of the company must end in the words “Community Interest Company” or
” société d’intérêt communautaire” or the abbreviation
“C.I.C.”, “CIC”, “S.I.C.” or “SIC”.

A
community interest company can only declare dividends in accordance with the
regulations and the Companies Act.  The company is also restricted from giving
away assets for less than fair market value, unless the recipient of the assets
is a registered charity, a society under the Societies Act (Nova Scotia) or a non-profit association under the Cooperative Associations Act (Nova
Scotia).  The company must produce annually
a community interest report for shareholders and the Registrar of Community
Interest Companies.

While
this is a new form of corporation, this legislation does not change the Income Tax Act rules.  Thus, the corporation will still need to
comply with the rules necessary to be a non-profit organization (NPO) or will
pay tax as a for-profit corporation.  

The Nova
Scotia Act received Royal Assent on December 6 2012.  Neither the Nova Scotia legislation nor the
British Columbia legislation are in force yet as we are awaiting Regulations for
the new Acts.  We will update readers of
this newsletter when this legislation comes into force.

Disclaimer

This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

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