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Company buys social enterprise to win business
By Nick Cater, Third Sector, 11 June 2008
A social enterprise sold for millions is to be used to help win new business for its new commercial owner.
Construction, maintenance and council services company May Gurney bought community interest company ECT Recycling for £3.4m last week from the ECT Group, which also runs Ealing Community Transport (Third Sector Online, 9 May).
A May Gurney spokeswoman said that it will use ECT Recycling's goodwill, knowledge, staff skills and contacts to win new business, but that future contracts were likely to go through a fully for-profit company.
ECT Recycling has waste contracts worth £175m and made £1.7m pre-tax profit on £46.9m turnover for the year to April 2008. As a community interest company limited by shareholding, it can return only 35 per cent of its profits to shareholders and must reinvest 65 per cent in its operations.
The CIC regulator said it would be monitoring the deal, one of the first involving a commercial company and a CIC.
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Paul Edwards, 16 June 2008, 09:08
Is this a case of a profit-driven company buying a non-profit in order to benefit from its reputation as a social enterprise? If so; will not people be encouraged to continue to trade with this company, thinking that there is going to a community benefit? Is this not deliberatly misleading the consumer?[Report this post]