2.7 Financial structure in the Belgian, Greek, and UK social enterprise law

This Sub-section 2.7 examines the final legal variable of financial structure and incentives. Sub-section 2.1 in this article indicated that there are several definitions of a social enterprise. Some of which (for instance the definition provided by EMES) highlight the significant level of economic risk that is borne by the members and/or stakeholders of a social enterprise. What is meant by the term ‘economic risk’ is that the financial viability of a social enterprise depends on the efforts of its members to secure adequate resources to support the enterprise’s social objectives. Therefore, this variable relates to the way in which the selected legal form used for the social entrepreneurial activities is sustained, i.e. funded, including the possibilities contained in the legislation for the social enterprise to obtain funding from external resources for example via its charitable status. A study conducted by the European Center for Not-for-Profit Law (ECNL) adds that social entrepreneurial activity should be an economic activity that produces goods and/or sells services and that there should be a trend towards paid work.1 In its SBI Communication of 2011, the Commission notes the entrepreneurial character of social enterprises and the innovative nature of the business models that they adopt to exercise their business activities.2 However, the defining characteristic of the financial structure of social enterprises relates to the use of their profits, which is directed primarily towards the achievement of the social purpose. The current Sub-section also covers the constraints on the distribution of profits and the existence of asset-lock schemes that prohibit any distribution, or transfer of the social enterprise’s assets to natural or legal entities with something other than a social purpose.