In response to the fast changing business environment, SEBC regularly organizes trainings, seminars and workshops of a wide range of themes to equip social enterprises with market savvy business knowledge. Moreover, SEBC endeavors to make the most out of these capacity building programmes by preserving and disseminating the invaluable knowledge and insights shared by speakers. This webpage recapitulates content highlights of selected events.
- Symbiosis between Arts and Inclusion (based on a networking and sharing session of the Social Innovation Series took place on 15 March 2019)
- Considerations to Legal Forms and Corporate Governance of Social Enterprises (based on a seminar took place on 22 February 2019)
- Corporate Governance and Financial Competitiveness of Social Enterprises (based on a seminar took place on 22 January 2019)
Symbiosis between Arts and Inclusion
Author: Joyce Wong, Social Enterprise Business Centre
At present, there are a lot of social enterprises and social service operators that provide platforms for people with different abilities to realize their worth - in domains of education, sports and arts, as well as promote social inclusion. To facilitate exchange between different stakeholders in the inclusion and arts sectors, the Social Enterprise Business Centre runs a “Social Innovation Series”, comprises quarterly meet-ups at which participants converse with each other, so as to exchange and expand their knowledge, skills and network.
The last such event was held on 15 March, themed “Arts and Inclusion: Projects related to People with Different Abilities”, at which two social innovators were invited to speak on their experience in developing projects that champion equality in arts sharing and performance. The two speakers were: Rico, Founder of “Beyond Vision Projects” (BVP), a grantee project of the SIE Fund; and Comma, Founder of “Theatre in the Dark” (TiD). They also had a heart-to-heart with nearly 20 participants on how to create art through inclusion; and ways to achieve inclusion through arts.
Learning from people with different abilities
BVP is a project about Tactile-Audio Interaction System (TAIS). Rico believes that everyone has the rights to enjoying arts and visual cultures; and that vision and even cognition are not the only means to achieve this. Even though Rico has full vision, he received a lot of help from visually impaired people when he was on his PhD research. In order to express his gratitude, Rico set-up BVP, a social enterprise that helps presents the visual world through touch and sound to the blind. The TAIS cultivates users’ curiosities and encourages asking questions. Rico believes that asking questions is the first step to inclusion.
Apart from using arts to facilitate inclusion, Rico has also hired a staff who is physically challenged. “Facing challenges is a stage everyone must go through in growing and learning, including people with different abilities. We should not underestimate their capabilities - because we always learn from one another, instead of one party just giving help to the other uni-directionally,” said Rico.
Equal pay for people with disabilities, commensurate with their equal worth
TiD is founded by Comma, who has non-congenital blindness. It is an equal arts platform that allows people with different abilities shine - while making a decent remuneration with dignity. Performers include people with visual impairments, people who are formerly mentally ill, people with autism, people with intellectual disability, and the non-disabled. Speaking of “discrimination”, Comma mentioned that even though it creates hard feelings, “discrimination” is still better than “disregard”.
Further, Comma advocates equal pay for people with disabilities. Some participants agreed, but lamented that too few employers were willing to give equal pay to people with disabilities. “Equal pay for people with disabilities is absolutely important. We need to let them know that their disabilities neither make them cheap labor, nor them necessary beneficiaries of our charity or pity; rather, they demonstrate their talent and capability that deserve equal and respectful pay,” Comma responded.
Rico (left) and Comma, respectively founders of Beyond Vision Projects and Theatre in the Dark.
Thanks to Rico and Comma for speaking at the seminar and spurring a very fruitful discussion.
Considerations to Legal Forms and Corporate Governance of Social Enterprises
Author: Janie Chan, Social Enterprise Business Centre
In Hong Kong, there is no legal definition of social enterprise (SE), nor is there a formal registration system or specified legal form for SEs. In the absence of a formal and established regulatory and legal framework, many existing SE practitioners, or those who are interested in setting up one, may easily find themselves in breach of the law due to their lack of legal knowledge. The Social Enterprise Business Centre therefore organized a “Social Enterprise Seminar: The Legal Forms and Corporate Governance of Social Enterprises” on 22 February 2019, where two members of The Law Society of Hong Kong, Mr. Albert So and Ms. Michelle Chow, spoke on the legal forms and corporate governance of SEs.
Legal forms of SEs
Since there are no laws governing SEs and their official registration in Hong Kong, a SE may exist in different legal forms, including a registered society, company, or trust. As some SEs are set up by charitable organizations, some people may confuse them with charities, but there are in fact conceptual differences between the two. A SE is a business enterprise that operates with an intrinsic social objective, whereas a charity may only embody social objectives without having to incorporate any business elements or considerations in its operation. Further, a charity is not allowed to remunerate its directors, while a SE usually distributes a maximum of 35% of its profit to its shareholders.
Prevention of Bribery Ordinance
Mr. So also highlighted the Prevention of Bribery Ordinance (Cap 201) when addressing conflict of interest. The Prevention of Bribery Ordinance prescribes that no agent shall solicit or accept any advantage without the permission of his principal when conducting his principal's affairs or business. “Advantage” in this context includes money, gifts and services, but does not include entertainment. Mr. So therefore reminded participants of the seminar that as a precautionary measure, they should report to their organizations if they feel a potential conflict of interest arise. This would prevent them from committing an offence so long as the relevant agent receives approval or is not involved in the decision-making.
Tax exemption and Business Registration
Section 88 of the Inland Revenue Ordinance (Cap 112) provides that charitable institutions or trusts of a public character may be exempted from tax, and they can seek recognition of such exemption by the Inland Revenue Department. Such organizations are also exempt from the obligation of business registration. In the seminar, a participant shared that, his organization’s funding application was rejected as it could not provide a Business Registration Certificate, even though the organization acquired charitable status. Ms. Chow advised that charitable organizations could provide the certification of tax exemption under Section 88 of the Inland Revenue Ordinance to prove its exemption from tax and business registration.
More than 50 executives from social enterprise and social service sectors attended the seminar.
Staff of SEBC presented souvenirs as a token of thanks to Mr. So (right) and Ms. Chow (middle).
HKCSS has published SE Good Start - "A Practical Guide of Setting up a social enterprise" and "Choosing a Legal Form and Recommended Practices" to provide practical information to aspiring social entrepreneurs. The contents cover the distinction between social enterprise and ordinary enterprise; five stages of setting up a Social Enterprise: Inspire, Incubate, Innovate, Invest, Impact; and information on structuring and choosing a legal form for SEs, as well as recommended practices for SEs, case studies and analyses.
SE Good Start comprises two books. You are welcome to download it from our website: https://socialenterprise.org.hk/en/content/se-setup-guide
Our thanks to Mr. So and Ms. Chow for speaking at the seminar, and the Law Society of Hong Kong for giving professional advice and recommendations on the contents of the seminar.
Corporate Governance and Financial Competitiveness of Social Enterprise
Author: Janie CHAN, Social Enterprise Business Centre
Social Enterprise Business Center, the Department of Accountancy of the City University of Hong Kong, and Davis Polk & Wardwell co-organized a seminar on “Corporate Governance vs Financial Competitiveness: A Scenario of Social Enterprise in Hong Kong” on 22 January. In the seminar, Prof. Phyllis Mo, Dr. Sidney Leung and Mr. Howard Ling, lead researchers of a research on corporate governance of social enterprises (SE), presented the research findings. Ms. Noble Mak, Associate of Davis Polk & Wardwell shared practical advice on drafting the terms of reference of the Committee. Mr. Angus Chan from Comfort Me, spoke on the social enterprise's most recent experience setting up her advisory committee.
SEs with Dual Goals (achieving finance returns in addition to social impact) are more profitable than SEs focusing on only social impact
Prof. Mo, Dr. Leung and Mr. Ling conducted a research on the financial competitiveness, sustainability and corporate governance of SEs. The researchers conducted in-depth interviews with 22 local social enterprises with at least 5 years of operation. The sample social enterprises in the study were identified based on the proportional allocation of stratified random sampling.
They found that “SEs that aim at making both social impact and financial returns” had more profitable years in the last 5 years than “SEs that only focus on achieving social impact” (i.e. less concerned with making financial returns). The former had 2.75 profitable years (out of 5); the latter, only 2.10 years.
The research result shows that “SEs that aim at making both social impact and financial returns” had more profitable years in the last 5 years than “SEs that only focus on achieving social impact”.
Overseeing/advisory committee with professional background helps improve an SE's sustainability
The research team also identified operational differences between SEs with an overseeing/advisory committee and SEs without. For example, the former tends to be more concerned with “sales performance”; and the latter considers “employee issues” as the most important item for discussion in management meetings. When the performance of an SE is lower than the budgeted/planned performance, the former prefers the response option “revising business strategies”; in contrast, the latter tends to get through tough times by “cutting costs”.
The research found that when the performance of an SE is lower than the budgeted/planned performance, SEs with an overseeing/advisory committee tends to respond with “revising their business strategies”; and those without prefers the option of “cutting costs”.
The research also found that having an overseeing/advisory committee is more conducive to an SE's sustainable development. The researchers recommend social enterprises to establish an advisory committee and suggest the inclusion of three types of talents in the committee: “someone with expertise in sales and marketing”, “someone from the accounting and finance profession”, and “someone from an industry related to the SE's business”.
It is advisable to understand relevant legal issues before setting up an Advisory Committee
Ms. Mak, Associate of Davis Polk & Wardwell gave some practical advice on setting up advisory committees. “Before setting up an advisory committee, SEs should identify potential advisory committee members, revise the Articles of Association (and Form NAA1 - Notice of Alteration of Company's Articles), as well as prepare terms of reference for the advisory committee, appointment letter, shareholders’ resolutions and board resolutions. It is also important to carefully consider the committee’s role, composition, members’ level of involvement, reward and compensation, confidentiality, and potential conflicts of interest,” she suggested.
The strategy and considerations of setting up Advisory Committee
The founders of Comfort Me wanted to improve governance by setting up an advisory committee. They also wanted to take advantage of committee members' professional knowledge to expand their business. Mr. Chan believes that it is important that the committee members are from a diverse background. “Having advisors from different professional backgrounds allows SEs to tap into networks other than their own, and acquire new knowledge from outside of their domains. SEs may also invite respected members of their respective fields as advisors, which may help expands their networks and brings more business opportunities, even increases confidence of existing and potential partners and clients.”
Angus emphasized that creating conditions favorable to the effective operation of the committee was as important as setting up a committee. SEs should give appropriate power and responsibilities to the committee, and strive for a balance of opinions within the committee. Committee members should also be open to scrutiny and criticism. Further, SEs may consider offering equity or stock option to committee members to encourage impact investment.
From left: Prof. Phyllis Mo from the Department of Accountancy of the City University of Hong Kong, Mr. Angus Chan, Project Manager of Comfort Me, Mr. Howard Ling, Chief Consultant of Social Enterprise Business Centre, Dr. Sidney Leung from the Department of Accountancy of the City University of Hong Kong, and Ms. Noble Mak, Associate of Davis Polk & Wardwell.
Special thanks to the five guests for speaking at the seminar, and KPMG which provided the venue for free.
More about CityU’s research on corporate governance of social enterprise: https://www.cb.cityu.edu.hk/ac/research/knowledgetransfer/ or scan the QR code below.
Our Centre's corporate partners provide free or discounted business support. Covered areas include: Legal, accounting, banking and insurance, marketing and HR etc. If you are interested in applying, please browse our webpage for more details.
If you are interested in setting up an advisory committee for your SE, please contact Ms. Siu at 2876 2902 / email@example.com.