Social Enterprises: How Should Company Law Balance Flexibility and Credibility?

• Published in: European business organization law review Vol. 15; no. 2; pp. 267 - 308
• Main Authors: Sørensen, Karsten Engsig, Neville, Mette
• Format: Journal Article
• Language: English
• Published: The Hague, NL T.M.C. Asser Press 01.06.2014; Springer International Publishing; Springer Nature B.V
• Subjects: Certification; Commercial law; Comparative Law; Credibility; Due diligence; European Law; Flexibility; International & Foreign Law; International Economic Law; Law; Law and Criminology; Legislation; Limited liability companies; Manycountries; Mission statements; Nonprofit hospitals; Private enterprise; Private International Law; Regulation; Social entrepreneurship; Social responsibility; Studies; Trade Law; Working groups; social enterprise; duty of management; asset locks; statement of purpose
• ISSN: 1566-7529; 1741-6205
• DOI: 10.1017/S1566752914001128

In recent years, many countries have introduced special regimes to facilitate the organisation of social enterprises. Many of these include company law rules which may either provide for a special corporate form for social enterprises, or are part of a certification scheme for such enterprises. This article analyses how these company law issues have been addressed. It focuses on the US benefit corporation, the UK Community Interest Company and the recently proposed Danish certification regime for social enterprises. An analysis is made of how the different systems aim to find the right balance between flexible rules that are sufficiently attractive to entrepreneurs and (social) investors, and rules which ensure that the designation of ‘social enterprise’ is credible. It is pointed out that the three systems balance these requirements quite differently, and the advantages and disadvantages of each are discussed. One of the key elements in the governing of social enterprises is the regulation of how assets can be transferred from these enterprises. It is concluded that a certification scheme seems preferable to a new corporate form, and several recommendations are made as to how to find a system that is more credible than the US solution and more flexible than the UK and Danish solutions.