Concept of the new law on social entrepreneurship in Czech Republic

Social entrepreneurship is becoming increasingly widespread in Central European countries, where the number of organisations operating as de facto social enterprises seems to be on the increase.

To try and make sure that the law supports the creation and recognition of social enterprises, legislators in the Czech Republic have decided to adopt a law on social enterprises, which will introduce a distinct ‘social enterprise status’. The proposed regulation is currently being reviewed by the Czech Government and the draft law is expected to be developed by the end of this year.

The proposed legislation will recognise two types of social enterprises: (1) general social enterprises and (2) integration social enterprises. The concept is rather liberal compared to many other EU countries with social enterprise regulation and defines eligible applicants as all natural persons or legal entities engaged in entrepreneurial activities which meet economic, governance and social criteria, including:

• a profit distribution cap of 50 %
• a requirement to have at least 30 % of its income from its own economic activities
• obligatory involvement of the employees and members in the decision-making about the future of the social enterprise; and
• engagement in a socially beneficial activity that is defined in the constitution.

In addition to this, integration social enterprises will be required to have a proportion of employees from marginalised groups (at least 30% of the average annual number of employees). The benefits for natural persons and legal entities with social enterprise status have not yet been specified, but they will most likely include preferential public procurement rules, targeted state financial support and fiscal advantages. Yet another example of social enterprise law in development.