Legal Concept Maps

The social enterprises set out in the maps all meet a set of core criteria which the legal experts have developed, using the European Commission’s Social Business Initiative (“SBI”) definition of social enterprise. The SBI definition incorporates the three key dimensions of a social enterprise that have been developed through a consistent body of European academic and policy literature:

• An entrepreneurial dimension: engagement in continuous economic activity;
• A social dimension: a primary and explicit social purpose;
• A governance dimension: the existence of governance mechanisms to ensure prioritisation of the social purpose and which demonstrate sensitivity to different stakeholder interests.

The above dimensions have been used to develop a set of core criteria, which reflect the minimum conditions that an organisation must meet in order to be categorised as a Social Enterprise under the EU definition. The core criteria are:

• The organisation must engage in economic activity;
• It must pursue an explicit and primary social aim that benefits society;
• It must have limits on distribution of profits or assets to prioritise the social aim;
• It must be independent from the State or other for-profit organisations; and
• It must have inclusive governance i.e. characterised by participatory and/or democratic decision-making processes.

The legal experts who helped produce these maps identified that an important distinction needs to be made between legal forms and legal statuses of social enterprises. The maps operate on the basis that a legal form is the foundational legal structure adopted by a business, to which Member State law, regulation and tax treatment primarily attaches and relates. Examples include the legal forms of sole proprietorship, partnership, foundations, associations, co-operatives and companies. Typically, constitutional, statute and case law will treat each legal form as a different kind or type of legal structure. A legal status attaches to a number of legal forms and is typically tax driven, such as in the case of the charitable tax relief on donations and income tax which are available for certain forms of foundations, associations, non-profit companies, and integration enterprise tax status, which exists in some Member States.

Legal status can apply to one or more legal forms. Whilst all social enterprises will use some legal form or another, the vast majority of social enterprises tend to use and adapt legal forms which enjoy no legal recognition as a social enterprise. Some social enterprises will benefit from some other legal status, such as a non-profit tax status or a work integration enterprise status. However, only a relatively small number of social enterprises will currently use a specific social enterprise form or benefit from a social enterprise legal status. Where there is a legal status, its success will still depend on the relevant underlying legal forms being suitable for social enterprises.

As is evident from the above, the relationships between legal forms, legal status and social enterprise are not always easy or simple to understand. These overlapping legal concepts can complicate and confuse discussions about social enterprise, particularly where discussions are taking place across borders between people with different disciplines and backgrounds, including legal practitioners and others. We have therefore sought to map the relationships between these different legal and quasi-legal concepts by using a form of Venn diagram, as shown in the maps.

These legal concept maps provide a visual picture of how these different concepts relate, and especially, how different legal forms and legal statuses in different countries are related to each other and the SBI definition of social enterprise. Our hope is to be able to maintain and update legal concept maps for each European country, to enable more accurate and informed dialogue and policy to support the legal development of social enterprise in Europe.

The maps provide a conceptual framework for the purposes of easy comparison only and are not intended to represent a comprehensive understanding of these different legal concepts. In compiling the maps for different countries, a number of judgements have been made about how best to complete the maps, which in some cases is a matter of interpretation. These maps should therefore be regarded as a useful starting point.