Social enterprises and equity crowdfunding – A proposal to share legal infrastructure

Social enterprises the generic term used to describe for-profit companies with a social purpose, have gained popularity as Benefit Corporations, BCorps, and CICs in various jurisdictions. In a new article published in the Australian Business Law Review, I discuss, with particular reference to Australia, the synergies between these types of companies and a relatively new form of fundraising – equity crowdfunding.

Although Lemonade (a public benefit corporation and a BCorp) has made the news for its recent IPO, it is important to remember that most social enterprises are much smaller. As I note in my article, the social enterprise movement initially arose as a people’s movement. A parallel people’s movement is that of equity crowdfunding. Equity crowdfunding helps small founders access a new source of funding – that of the retail investor; and the retail investor is often drawn to social enterprises. As two new legal innovations with similar roots, my article proposes that it will be useful and also efficient for the government to use infrastructure to help and nurture both industries, perhaps even fostering a symbiotic relationship. I consider using a common regulator, common programs to educate the public which is an important stakeholder in both movements, common dispute resolution mechanisms, and even common professional bodies to provide guidance and support to founders.

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