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New funding and financing models
With the increasing tightening of funding of not-for-profits, and the ever-present unmet social and environmental needs, new funding approaches are emerging.
Australia is beginning to adopt some approaches pioneered internationally, that seek to provide funding for activities that generate positive social or environmental impacts. These approaches include:
- social or environmental impact investments
- community finance
- new lending practices, and
- social impact bonds
Many of these approaches offer a blended return - a financial as well as social or environmental impact.
Each of these approaches raises legal issues for not-for-profits. In particular:
- for a not-for-profit to be able to seek impact investors, it must set up a structure that can attract investors
- not-for-profits can’t attract equity investors
- not-for-profits can’t be 'owned' in the same ways that for-profits can be (ie. they can’t have shareholders), and
- not-for-profits can’t distribute profits
For these reasons, legal structuring needs to be carefully considered if a not-for-profit wants to be able to attract investors.
Our Social Enterprise Guide steps through legal structuring in more detail, including hybrid structuring that can enable not-for-profits to benefit from equity investors.
Crypto-assets are generally considered a high-risk investment and high risk investments are typically not appropriate for charities.
Because charities are required to manage their financial affairs responsibly (under Governance Standard 5), the Australian Charities and Not-for-profits Commission (ACNC) has published guidance for charities on accepting donations of crypto-assets or investing in crypto-assets as a way to raise funds.
Generally, the risks connected with a charity investing in crypto-assets are greater and harder to manage than the risks connected with accepting donations because there are external providers who can, for a fee, convert the assets into cash before the charity receives the donation.
If your organisation is considering whether to accept donations of crypto-assets or invest in crypto-assets, refer to the ACNC’s guidance.
Refer to the ACNC’s guidance on charities and crypto-assets for information to help charities and their Responsible People understand the opportunities and risks associated with these assets.
The content on this webpage was last updated in February 2023 and is not legal advice. See full disclaimer and copyright notice.