This case study supports and illustrates the theoretic factsheet "Legal forms for social enterprises" with practical insights.
Tinkisso-Antenna’s transition from NGO towards a limited liability company
Tinkisso-Antenna is an NGO based in Conakry, the capital of Guinea. It uses entrepreneurship and market based approaches in order to produce liquid chlorine and health related products and market it in different regions of the country. WATA™ technology is used to produce the chlorine which is branded as “Chlore’C“ and conditioned in 250ml flasks as shown in the picture.
Tinkisso’s origins can be traced back to 2010, when a collaboration with Antenna Foundation was initiated to pilot chlorine production and dissemination in the northern region of Guinea. The significant decrease in the number of diarrhea and cholera cases within the intervention zone cemented this multilevel partnership and built the basis to leverage the initial success (BÜHLMANN, 2014; MAURER, 2018).
Today, Tinkisso-Antenna has centralised its chlorine production in the capital city Conakry. It distributes Chlore’C through different channels, reflecting a diversified distribution strategy with direct sales to urban communities, through a reseller network (kiosks, pharmacies), institutional channels (Ministry of Health and UNICEF) and direct sales (NGOs, sales posts and through door-to-door activities). At present, Tinkisso is operating in 5 provinces (Conakry, Boké, Kindia, Mamou and Labé) and has delivered over 700,000 chlorine flasks reaching more than 100,000 people in 2016 (DUVERNAY & CAMARA, 2016).
Tinkisso-Antenna was established with the long-term aim of achieving financial viability through a market-based approach. In 2014, the business activities broke even, reaching scale with Chlore’C. With this success, the question of transforming the legal status of the NGO into a limited liability corporation (LLC) or a cooperative had to be posed, as activities became more and more business oriented. In order to split the activities of the NGO and create a potential for-profit entity, Tinkisso-Antenna had to take several strategic decisions. Eventually Tinkisso-Antenna has opted for a tandem form with two legal entities.
A variety of questions arose like to determine, which activities shall be performed by the NGO and which by the for-profit company. Additionally, the question of what legal form shall be obtained had to be found a solution for. In the Guinean context, different legal structures had to be considered, as the legal form of a social enterprise does not exist (yet). Options are Limited Liability Company (with the French title SARL (Société à Responsabilité Limitée) and Public Limited Company (with the French title SA (Société Anonyme)) (ZAMORA, 2016). Tinkisso-Antenna decided to register its business as SARL, as the required share capital is much lower than for establishing an SA, while all other requirements are equal. To establish the limited liability company, Tinkisso-Antenna had to fight itself through the bureaucratic jungle of Guinea’s administration, obtaining a tax registration certificate among others. Eventually in late 2017, Tinkisso-Antenna was able to establish its new legal status after 1 year of efforts.
Lessons learnt from scaling up safe water activities and reflecting on obtaining a legal status
- During scaling up, new challenges arise for a successful social venture. As Tinkisso-Antenna’s success arose from an NGO initiative, creating a tandem legal form with an NGO and a for-profit company, a clear distinction had to be made between the social and commercial activities.
- Transforming such a venture into an enterprise, or the split of certain activities towards a company, requires an NGO to actively communicate the goals, reasons and values behind such a decision. Should this not be the case, there is a risk of misperception by different actors, particularly in the humanitarian or public sectors. The NGO reputation has to be kept up and shall not per se be associated with commercial activities neither. An option to meet this challenge is the launch of a for-profit company to conduct the more commercial activities of the social venture.
- Knowing the local context, language and administrative steps facilitates the transition towards another legal structure. Nevertheless can the transformation be time-consuming.
- The challenge of transitioning from an NGO towards a limited company should however not be underestimated. The management has to handle external bureaucratic hurdles that might arise. Meanwhile a more business-driven mind-set and skills have to be developed within the team in order to run the for-profit entity.
- The social venture might also have to adapt to fast changing environments. The political or humanitarian context might indeed quickly change and accordingly also the way the product has to be marketed or distributed in other market segments. The social business has to retain enough flexibility in order to adapt to these changes. To maintain and increase the viability, Tinkisso has accordingly developed further products such as soap, DEBB (a chlorine solution for disinfecting vegetables before consumption) and Chlore’C with a different concentration and branding for cleaning purposes (see picture below). Additional products are under development in order to increase revenues and tap into new customer segments.
- Having a broader product portfolio is more attractive for shop keepers and will potentially lead to higher revenue for them if more and/or complementary products can be offered to customers.
Recommendations for finding the right legal structure for your social enterprise
- Keep in mind that the transition from an NGO-entity towards a for-profit legal structure will take time and resources and has to be planned in advance.
- It is important to develop a clear communication strategy when transforming an NGO initiative into a social venture or for-profit company.
- As company an even more thorough focus on commercial viability has to be put. This comes also with training of staff and/or hiring new staff and commercially skilled people for the further development of the company. (factsheet on sales process)
- Being profitable with only one successful product is risky and may not provide sufficient revenues to cover fixed costs: in order to balance risks, a social enterprise should innovate and diversify the product portfolio with complementary products or services (see factsheet on business development for more information).