An opportunity exists to capitalize on regulatory changes that have taken place in the U.K. and U.S. and the experience they have gained implementing those changes. Their knowledge can be used as a base to effect change in Ontario that will assist social entrepreneurs to raise the necessary capital to scale their business activities. Ogilvy Renault LLP and MaRS will present the recommendations in this white paper to the Ontario government and stimulate a dialogue between government leaders and policy makers, members of the social enterprise community in Ontario and those that have lead the way to hybrid corporate legal structures in the U.K. and the U.S.
L3Cs are intended to have at least two tranches of capital which will possess differing allocations of risk and reward.
A high-risk junior tranche is intended to be provided by foundations in the form of PRIs, from which foundations are willing to accept below-market rates of return. By allowing foundations to absorb excess risk and receive below-market returns, the junior tranche provides the backbone of the L3C and positions the L3C to attract additional capital from other investors seeking market or near-market returns.
Senior tranches of capital are intended to be provided by investors who may have the desire to invest in projects that provide tangible social benefits. With the junior tranche in place, the L3C can offer market rates of return at acceptable levels of risk to institutional and other traditional investors. Mezzanine tranches may also be created for other socially conscious investors who may be willing to forego market-rate returns in favour of accepting part of the return in the form of enhanced social benefit.
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Social Entrepreneurship Legislative Innovations
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