1. Legal framework for social enterprises
27 June 2013
ICNL Alliance Institutional Training Programme
Budapest Training

2. Copyright © 2013 European Center for Not-for-Profit Law

3. „Nobody knows exactly what it is, but everybody knows that it exists”
Bruno Roelants
Copyright © 2013 European Center
for Not-for-Profit Law

4. Purpose of the session
Understand the concept of social entreprenuership
Share in-country and regional experience
What legal issues affect social enterprises?
How ICNL/ECNL/BCNL can contribute in this area?
Copyright © 2013 European Center
for Not-for-Profit Law

5. Definition
„A social enterprise is a business created to further a social purpose in a financially sustainable way.” (NEsST)
„A business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximize profit for shareholders and owners.” (UK Government)
APPROACH
Copyright © 2013 European Center
for Not-for-Profit Law

6. Defining characteristics of social enterprises
1. Governance criteria
Autonomy- voluntarily established, independent, private legal entities
Decision-making power is not based on capital share
Ownership- both non-profit structures and private companies
2. Economic criteria
Producing goods and/or selling services
Paid work- at least 1 employee
3. Social criteria
Primarily social purpose - serve the public at large or a recognized social group
Limited distribution of profit
Copyright © 2013 European Center
for Not-for-Profit Law

7. Concept of social enterprises
Social entreprenuership
Third sector becoming more „economic”
Copyright © 2013 European Center
for Not-for-Profit Law

8. Providing services of general interest
Areas of operation
Reintegration
into the labour market
Providing services of general interest
Copyright © 2013 European Center
for Not-for-Profit Law

9. Fragile segments of society General interest
Who is targeted?
Fragile segments of society
General interest
Copyright © 2013 European Center
for Not-for-Profit Law

10. Areas of social entreprenuership
Source:Georg REIBMAYR, Attaché for Labour, Social Affairs and Consumer
Protection at the Austrian Embassy Chisinau, 14 June 2013, Moldova
Copyright © 2013 European Center
for Not-for-Profit Law

11. Areas of social entreprenuership
Source:Georg REIBMAYR, Attaché for Labour, Social Affairs and Consumer
Protection at the Austrian Embassy Chisinau, 14 June 2013, Moldova
Copyright © 2013 European Center
for Not-for-Profit Law

12. Areas of social entreprenuership
Source:Georg REIBMAYR, Attaché for Labour, Social Affairs and Consumer
Protection at the Austrian Embassy Chisinau, 14 June 2013, Moldova
Copyright © 2013 European Center
for Not-for-Profit Law

13. Areas of social entreprenuership
Copyright © 2013 European Center
for Not-for-Profit Law

14. Areas of social entreprenuership
…. or it is only a good PR tool and part of a sound management plan?
Copyright © 2013 European Center
for Not-for-Profit Law

15. Benefits of legal environment for social enterprises
Make the social economy more visible
Help identifying SEs
Avoid the misuse of state and EU funding
Help determining the economic power of SEs
Facilitate the development of SEs
Legal basis for measures and policies supporting SE
General obligations of the government to further social economy
Copyright © 2013 European Center
for Not-for-Profit Law

16. Legislative framework
Spain: Law on Social Economy (2011)
Slovenia: Law on Social Entrepreneurship (2011)
Italy: Law on Social Enterprises (2005) and Legislative Decree on the Law on Social Enterprises (2006)
United Kingdom: Community Interest Company Regulations (2005)
Slovakia: Law No. 5/2004 on Employment Service
Copyright © 2013 European Center
for Not-for-Profit Law

17. Legal forms of SE Association Foundation
Not-for-profit company (Austria)
Limited liability company (UK)
Private institute (Slovenia)
Public benefit organizations (Slovenia, Spain, Italy)
Social cooperative (Spain, Italy)
Unincorporated association or trust (UK)
Industrial and providential societies (UK)
Community interest company (UK)
Charitable incorporated organizations- CIO (UK)
Copyright © 2013 European Center
for Not-for-Profit Law

18. Social cooperative- Italy
May be established for the general interest of the community and for social integration of citizens
Type A: provide social, health, and educational services (80%)
Type B: produce goods and services which further the work integration of the disadvantaged groups
At least 30% of the workers must be disadvantaged
Copyright © 2013 European Center
for Not-for-Profit Law

19. Criteria of social enterprises- Italy
Private legal person
It engages in regular production and exchange of goods and services having „social utility” and seeks to achieve public benefit purpose
Min. 70% of its income from entrepreneurial activities
Does not distribute profit
Volunteers: up to 50% of the work force
Workers and customers involved in the decision-making
Copyright © 2013 European Center
for Not-for-Profit Law

20. Criteria of social enterprises- Slovenia
It is established to
pursue qualified public benefit goals OR to
facilitate employment of vulnerable groups
Regular production of goods and provision of services
Governed democratically (one member-one vote)
Engages volunteers in its activity
Provides participation in decision-making for worker and volunteer
Does not distribute profit or in a limited extent
Copyright © 2013 European Center
for Not-for-Profit Law

21. Criteria of social enterprises- Slovenia
2 TYPE:
Type A- carries out social entrepreneur activities, generates at least 50% of its income from this activity, employs at least 2 workers
Type B- engage in any kind of business but at least 1/3rd of all employees come from the most vulnerable groups in the labour market
Copyright © 2013 European Center
for Not-for-Profit Law

22. Slovakia- narrow definition of social enterprises
Transitory enterprise
Legal or natural person
with a workforce at least 30% of whom were disadvantaged job seekers;
Supports and helps employees find work on the open labour market;
Annually uses at least 30% of the finances on creating jobs or on improving working conditions
Entered in the social enterprises register.
Right to a contribution: 12 or 24 months, most important source of income
Copyright © 2013 European Center
for Not-for-Profit Law

23. Community interest company (UK)
Limited liability company
Established to further business in order to benefit community, rather than generating profit
Key features:
Community interest test: shall be established for community purposes
Asset lock: prevents from distributing the assets for less than the market value
Copyright © 2013 European Center
for Not-for-Profit Law

24. More countries to come… Poland
The Council on Systemic Solutions in the Field of Social Economy
National Programme of Social Economy Development
Law on social enterprise
Pilot loan fund for social enterprises
Copyright © 2013 European Center
for Not-for-Profit Law

25. What legal issues affect social enterprises?
Regulation on business activity
Volunteerism
State aid
Public procurement
Taxation
Copyright © 2013 European Center
for Not-for-Profit Law

26. What ICNL/ECNL/BCNL can do on this field?
Copyright © 2013 European Center
for Not-for-Profit Law