The C3 very much mimics the UK’s Community Interest Company.
As the C3 is a taxable corporation, there is no doubt that this structure can be used to do business, and generate profits — elements that are not so expressly stated for charities and non-profit organizations.
The C3 features a 40% cap on dividends paid out to investors, to enable more capital to remain within the social enterprise, and to flow unfettered to qualified entities such as charities.
In cases of C3 dissolution, the majority of assets remaining after debts are settled must flow to a qualified entity.
An additional layer of transparent community reporting is required at year-end, showing how the C3 has manifested its social, cultural, or environmental goals (which must be embedded in its articles of incorporation).
We imagine that the C3 will serve as a suitable container for charities operating unrelated businesses.
The C3 may also be attractive to traditional corporations wishing to entrench goals beyond that of maximizing shareholder profits.
The question of whether a non-profit organization (i.e. without charitable status) can own a C3 is more nebulous. Non-profit ownership of a C3 may signal profit intent, which could jeopardize the income tax exemption of the non-profit parent. CRA will provide opinions on a case-by-case basis.