3.1.1.4 The Belgian Vennootschap met Sociaal Oogmerk (VSO) legal label

In Belgium, in 1995, the legal label for social enterprises, the so-called ‘VSO’ label, was included in the Belgian Companies Code of 1999. The VSO legal label was introduced to increase the marketability and recognition of existing social enterprises, such as cooperatives and mutual societies. Furthermore, it provided an alternative entrepreneurial type to commercial enterprises with for-profit objectives that wish to shift to social purpose seeking activities.1 However, in Belgium, the VSO legislation has not been widely used.2 Defourny and Nyssens reported that the VSO label has only had little success over the years.3 Cafaggi and Iamiceli – based on the research results of Defourny and Nyssens – also argued that the evolution of the company with a social purpose was unsuccessful ‘due to the burden of the requirements imposed by the law or the lack of substantial tax incentives’.4 Additionally, in a country-specific empirical research project implemented by the Belgian King Baudouin Foundation in 2013, it was pointed out that:

It has been reported that up to 700 organisations have adopted the VSO legal label so far.6 In an earlier legal study, Lambooy and Argyrou provided an overview of the legal regime for the VSO label.7 It appeared that the VSO label can be adopted by all types of business organisations with legal personality, including companies, regulated by the Belgian Companies Code of 1999. Article 661 in conjunction with Article 2(2) of the Belgian Companies Code of 1999 provides the rules on the VSO label. Article 661 contains a list of cumulative requirements that all forms of business organisations with a share capital, and established under Belgian law, can adopt if they wish to acquire the VSO label. These are the private limited liability company, the limited liability cooperative and the unlimited liability cooperative, the public limited liability company, and the European economic interest groups (hereafter ‘EIG’). The Article 661 requirements have to be included in the business organisation’s AoA either prior to incorporation or by amending the existing AoA. The most characteristic requirements include: (i) explicit reference in the AoA that the shareholders only seek limited profit or no profit; (ii) a description of the social purpose; (iii) a policy for the distribution of profits according to the social purpose; and (iv) a voting cap which cannot exceed one tenth of the votes deriving from all shares represented in the general assembly (i.e. the imposition of a 10% voting cap to each shareholder). Additionally, legal entities with the VSO label are required to annually issue a special report which explains the means that the business organisation has undertaken to implement the statutory social purpose. The special report must be in the form of an overview that showcases how investments, operating expenses, rewards and remuneration have been allocated towards the fulfilment of the social purpose.

Article 661 does not contain provisions that create a special corporate governance regime for social enterprises with the VSO legal label. Thus, the corporate governance is subject to the pertinent rules provided by the Belgian Companies Code of 1999 for the specific legal type of such VSO social enterprise. However, Article 661(8) of the Belgian Companies Code of 1999 introduces the obligation for VSO social enterprises to include provisions in the AoA which permit employees to acquire membership rights/shares after the completion of one working year and to lose this capacity a year after the employment relationship has been terminated.8 The purchase of shares, either existing or new, and the entrance into the organisation as members/shareholders, is also subject to the approval of the competent governing body of the VSO; either the general assembly or the board of directors.

Furthermore, various rights are conferred to employees who acquire membership rights/shares in an organisation that has adopted the VSO label. These include: (i) management rights; (ii) voting rights; (iii) rights to profits and dividends; and (iv) rights to acquire information. Regardless of the number of shares which an employee is allowed to purchase, Article 661 requires that each VSO include in its AoA a provision with respect to the exercise of voting rights attached to such membership rights/shares. According to this provision, everyone who takes part in a vote at the general assembly, can exercise only a certain number of votes which cannot exceed the maximum of one tenth of the votes deriving from all the shares represented. The percentage is reduced to one twentieth if employees are members/shareholders. Legislation imposes only this maximum rate of voting rights that can be exercised by the members/shareholders. However, VSO social enterprises are also allowed to stipulate in their AoA more stringent restrictions to further reduce the voting rights of the members/shareholders. This can ultimately result in the application of the democratic ‘one man, one vote’ rule, which is usually applicable to cooperatives.9

As regards the rights of members/shareholders to profits and dividends, Article 661(5) allows members/shareholders to participate in the enterprises’ profits, by receiving dividends only to the limited extent prescribed by law. Currently, the regulations provide for a cap of 6%.

Finally, the right to information entails the rights of members/shareholders to particular information concerning the company’s operations, financial situation, access to books and other documentation. With respect to these rights, different rules may apply depending on the type of legal entity that has adopted the VSO label.