2.7.2.1 Profit distribution constraint: the asset-lock scheme

The Koinsep is a commercial organisation by law. Any Koinsep can undertake commercial economic activities and thus generate revenue and make profit.1 However, Article 7(1) of the Social Entrepreneurship Law of 2011 states that the Koinsep is not allowed to distribute any profits to its members. Profit distribution to Koinsep members is prohibited and profits are subject to legislated caps, which direct their distribution to specific activities (i.e. a ‘targeted distribution cap’). In particular: (i) they must be mainly reinvested in the enterprises’ activities and purpose, i.e. 60% of the profits must be reinvested for the generation of new employment positions; (ii) 35% is equally distributed to the employees in the form of remuneration for their productivity; and (iii) 5% is allocated to reinvestment in the enterprise’s reserves.2 However, from these legal requirements it is understood that this arrangement would enable the profit distribution constraint stipulated in the Greek legislation to be used by Koinsep members and the members of the managing committee to receive potentially part of the profits – subject to the cap – as a productivity award so long as they are also employed by the Koinsep.3