2.8.1 The points of similarity

The requirement for a social enterprise to promote and pursue a social purpose arguably lies at its irreducible core. In fact, in each of the three examined tailor- made legal frameworks for social enterprises, it is notable that the social purpose is a mandatory legal requirement and a key component of the activities of the examined legal forms, i.e. the VSO, Koinsep and the CIC. The purpose of the tailor-made legal forms comprises non-financial (social, collective, community-based) elements that differ in the various examined legal frameworks. However, the commercial and entrepreneurial character of the purpose is maintained without necessarily addressing profit-making activities.

Additionally, at the core of the legal nature of a social enterprise are also its participatory and inclusive governance arrangements. The participatory governance variable features in the role and rights of various types of stakeholders in decision-making processes. Although the various types of participation of stakeholders in decision-making processes are constituted differently in the examined legal frameworks, the legislatively prescribed participation and consultation rights allow for either formal/informal, direct/indirect and/or the structural/ad hoc participation of stakeholders in decision-making processes.

Another element that is part of the core legal substance of social enterprises is the responsibility and transparency element that was also encountered in the examined legal frameworks. A requirement was detected for compliance with reporting obligations and/or the application of high levels of transparency regarding transactions and activities of the social enterprise. Such provisions serve to prioritise the social objectives of the social enterprise over other financial objectives and to promote the use of its assets and profits towards the fulfilment of those social objectives. The production of social reports integrated into the annual accounts of the social enterprise (an integrated account of financial and non-financial elements) was a common feature across the jurisdictions, as was the need for scrutiny by external authorities, i.e. the Registry or the Regulator, and/or the national courts. Thus, it amounted to a fundamental legal characteristic of the examined tailor-made social enterprise legislation.

The accountability of the decision-makers is another factor addressed in the examined legal frameworks. The accountability of decision-makers regarding the pursuit of social objectives is commonly safeguarded via external mechanisms prescribed by law, which scrutinise the activities and the affairs of social enterprises.

Finally, at the core of the legal substance of the social enterprise, there is also the profit and asset distribution constraint that was identified in all three examined legal frameworks. Likewise, the legal frameworks each contained asset-lock provisions that either entirely prohibit the distribution of profits and assets to the members of the organisation or allow for a limited distribution of profits subject to regulated caps either during the active period of the social enterprise or in its winding-up phase.