The social enterprises CAN and Senscot say they will not accept further funds from UnLtd, a £100m-endowed fund for social entrepreneurs, because they say that UnLtd’s vision is "fundamentally damaging to public perceptions of third sector activity".
CAN, which offers business support and office space to charities and social ventures, and the Social Entrepreneurs Network Scotland, better known as Senscot, were two of the seven organisations that founded the Foundation of Social Entrepreneurs in 2001.
The following year, the foundation won a bid for a £100m endowment from the now-closed Millennium Commission’s Millennium Awards Trust. The foundation set up UnLtd, and Scotland UnLtd to distribute these funds.
In a joint statement by CAN and Senscot, the organisations said: "There was an erosion of the not-for-private-profit principles from 2008 and, by 2012, it became clear that a significant number of MAT endowment awards were made to structures without asset locks (despite HM Treasury requiring a beneficiary of tax relief to be investing in an asset-locked legal form)." CAN and Senscot said that they had meanwhile continued to operate Scotland UnLtd "according to the founding principles".
They said: "Although recognising the enormous potential for business to adopt a pro-social stance, CAN and Senscot consider UnLtd’s vision of a ‘private profit social sector’ to be fundamentally damaging to public perceptions of third sector activity".
CAN and Senscot say they will not accept further funds from UnLtd. "Our relationship with UnLtd is at an end," they said.
In a lengthy response, UnLtd said it was disappointed to note the CAN-Senscot statement. "We are all the more disappointed given their strong contribution to UnLtd’s work and the wider social economy over the years," UnLtd said. "However, we welcome the opportunity for constructive debate on this important issue."
It said that few grantees "have created any kind of constitution or legal entity at the point we start our support" and that all are "determined to achieve sustainable social benefit". UnLtd said that it had been careful to "lock in" the social mission of social entrepreneurs who create companies limited by shares through various arrangements.
UnLtd also said it had "worked hard on the development of regulatory and reporting arrangements for social entrepreneurs and the ventures they create", and lobbied for better regulation of community interest companies and on the social investment tax relief.
According to the accounts for the Foundation of Social Entrepreneurs for the year to 31 March 2013, it had total assets of £124.1m, had income of £10.4m and spent £9.9m in the year.