esela members event luxembourg 24 october 2017 · 2019. 6. 5. · 1. management must act for...

ESELA Members Event – Luxembourg – 24 October 2017

The Misallocation of Capital:

Using Benefit Corporation Governance to Align

Our Investments With Our Needs

Frederick H. Alexander

October 2017

Financial capital is the fuel that allows the

private economy to provide the goods and

services we rely upon.

3

Capitalism

The corporation is a marvelous piece of

financial technology that allows disparate

investors to pool their financial capital and

diversify their risk.

4

Corporations Pool Capital

• Royal charters: trading companies

• Legislative charters; infrastructure:

bridges, canals, railroads

• Limited purpose, free incorporation:

manufacturers

• General incorporation: all business

Note the move from public purposes to “business is good.”

5

History of the Corporation

$350T - VOE

$100T - Debt

$70T - Public Equity

$10T - PE & VC

Where is the Capital?

6

Business & Consumer

Government

Spending*

Who Allocates Capital?

80%

* Excluding transfer payments

20%

7

Investment Channel

DUTY INVESTMENT

Pensioners Endowment Beneficiaries Insureds Foundation Causes

Pension Funds Insurance Cos Mutuals Funds Endowments Foundations

Advisors Investment Banks Management Institutions

Public Cos Privates Cos Direct Investments

Savers

Asset

Owners

Asset

Managers

Assets

8

• Protect and grow savings and allow transfers to future

self and later generations

• Direct savings to capital projects

• Steward that capital

9

Purpose of Financial Industry

Concern: agent management will usurp shareholder capital.

Agency Problem in the Industrial Corporate

Economy: Beyond the Pin Factory

10

Corporation

Disaggregated

Shareholders

Management

w/control

1. Management must act for benefit of

shareholders

2. Shareholders are only interested in financial

return on investment

3. Therefore, director duty is to increase return on

stock

Shareholder Primacy Solution Syllogism

11

Financial capital is indifferent to strategy, as long as return

on investment is maximized

Investment Capital Deployed to Yield Return

12

Value creation & sharing: positive sum

(reduction in energy use)

“Phishing”: zero sum strategy

(high pressure sales tactics)

Exploiting externalities: negative sum strategy

(carbon emission

w/o factoring in cost)

Sources of

capital return

Primacy Trap

13

Negative sum strategy satisfies up-the-channel duty,

creating incentive for capital to be allocated to create net

negative effects.

Modern Portfolio Theory amplifies the effect by emphasizing

importance of alpha and tracking error

• Managers seek to “beat the market”

• Managers treat market performance as exogenous

Beta

Alpha

BUT . . .

Source of Returns is the Market

80%

20%

14

15

Ms. Jones

Defined

Contribution Property, casualty 10 year old son Mr. Jones’ defined

Plan life insurance will attend college benefit plan

Endowment Union Fund

Mutual Fund Managers Manager Manager

ₒ ₒ ₒ ₒ ₒ ₒ ₒ ₒ ₒ ₒ ₒ ₒ ₒ ₒ

Investment Web

16

• Investor activity, both capital allocation and

investment stewardship, determines market

performance.

• Investor focus on individual company

performance alone inevitably leads to systemic

damage.

Modern Portfolio Theory Is Wrong

17

In order to benefit from their investments over the

long term, citizen shareholders need responsible

corporate citizens, pursuing sustainable, long-term

strategies.

What Investors Really Need

18

The primary failure of capital markets in relation to sustainable development is one of misallocation of capital. This, in turn, is a result of global governments’ failure to embed environmental and social costs into companies’ profit and loss statements. As a consequence, capital markets do not incorporate companies’ full social and environmental costs. The consequences of this are that unsustainable companies have a lower cost of capital than they should and so are more likely to be financed than sustainable companies. Aviva Insurance

Market Failure

19

Benefit corporation governance allows corporations

to adhere to authentic sustainability principles.

Benefit Corporation Governance Can

Change the Paradigm

20

Three Key Elements

of Benefit Corporation

Benefit corporation governance is a

legal tool that helps for-profit

companies create positive impact on

society and the environment. It aligns

investors, boards, shareholders and

stakeholders around a shared

objective: creating durable and

shared long-term value.

Expanded Purpose Beyond maximizing share value to explicitly

include general public benefit

Accountability Directors are accountable to balance stockholder and

stakeholder interests when making decisions

Transparency The legislation requires transparency to your

shareholders with respect to the expanded purposes.

21

Current Law and Markets

Erode Purpose and

Sustainability in For-Profit

Companies

Under Current Practice:

● The ultimate goal of directors is to

create and maximize share value.

● Value maximization is focus in exit

transactions.

● Business strategies that require

authentic commitment to

stakeholders may be

compromised.

22

Benefit Corporation

Law Provides Tools to

Protect A Sustainable

Vision

Benefit Corporation Status

Expands:

● Corporate Purpose

● Business Judgment Rule

● Liability Protection for Directors

● Flexibility in Change in Control

Situations

23

Benefit Corporation

Governance Allows

Corporations to Fully

Integrate Sustainability

Into Operation

● Many companies thrive by integrating

sustainability into operations

● Under conventional corporate

governance, sustainable performance is

always contingent on narrow conception

of fiduciary duty

● Benefit corporation governance allows

full integration by committing to future

sustainable performance

● This full integration permits the creation

of durable wealth within stable systems

● Creates benefits across portfolio and

systems for universal owners

24

Benefit corporation

status can be used to

preserve long-term

perspective in the

public markets

● Public companies are subject to short-term

pressures not experienced by private

companies (Etsy, Whole Foods and

Unilever).

● Many advisers will recommend classified

boards and dual class stock as ways to

address these pressures. These

structures are controversial, and can draw

activist attention.

● Benefit corporation governance is a way to

address this issue directly, without

affecting shareholder rights. May attract

shareholders with a longer term

perspective, and provide management

with credibility to make long term choices.

25

Now Is The Time: Institutions’ New

Power

Boards declassified

Majority voting

Proxy access

Proxy contests

Say on pay

26

How Is Power Being Used?

Board diversity, independence

Shareholder rights

Pay for performance

Environmental/Social?

Long-termism?

27

Opportunity

Long term, universal investors have more power than ever

before. Their return is based 80%+ on the return of the

market, and their beneficiaries are just plain folks who need

a thriving economy and healthy planet. Contemporary

corporate governance developments represent our best

chance to deliver the message that the interests of the

citizen shareholders who own the market is best served by

corporations that maximize value across human, natural and

social capital, as well as financial capital. Benefit

corporation governance is the best way to implement this

critical change.

28

Evolving Investment Standards Point

in This Direction

ICGN encourages companies, boards and

investors to think and act systemically with

regard to preserving the integrity and

stability of financial markets as a whole. --

ICGN

. . . the Fund’s large size and broad

holdings mean that direct and indirect

exposure to market-level risks is

inevitable. The fund is also mindful that

when market level efforts create a rising

tide that lifts all boats, the Fund is among

those who will benefit most.

-- NY Common Fund

As one of the largest asset managers in the world, we have an important responsibility to the millions of individuals who entrust their financial futures to us through retirement plans, endowments and foundations, financial intermediaries, and sovereign institutions. Our mission is to invest responsibly on their behalf to enable economic prosperity and social progress over the long term.

-- Ron O’Hanley, Chairman of State

Street

Investment practices that foster

intergenerational transfers of risk and

wealth raise duty of impartiality

concerns for long-term investors.

Changes in understanding of systemic risk, and related investment

management practices among global

peers, demonstrate an ongoing

evolution in the prudence standards against which the conduct of fiduciaries

is judged.

-- BlackRock/Ceres 21st Century

Engagement

29

Shareholder Protections

Protection Type Conventional Corporation Benefit Corporation

Elect Directors Governance ✓ ✓

Transaction Votes Governance ✓ ✓

Mission Alteration High Vote Governance ✓

Duty of Care Fiduciary Duty ✓ ✓

Duty of Loyalty Fiduciary Duty ✓ ✓

Duty of Disclosure Fiduciary Duty ✓ ✓

Derivative Suits Enforcement Mechanism ✓ ✓

Director/Class Action Enforcement Mechanism ✓ ✓

Books & Records Action Enforcement Mechanism ✓ ✓

Election Review Enforcement Mechanism ✓ ✓

Heightened Scrutiny Standard of Review ✓ ✓

Entire Fairness Standard of Review ✓ ✓

Benefit Report Disclosure Right ✓

30

Director Protections

Protection Conventional Corporation Benefit Corporation

Business Judgment Rule ✓ Expanded to include decisions made to benefit stakeholders

Indemnification ✓ ✓

Insurance ✓ ✓

Exculpation ✓ Expanded to include any balancing decision among

stakeholders, including shareholders

Legal permission to consider

stakeholder interests in sale

process

✓

Legal permission to consider

stakeholder interests in

defensive situations (hostile

takeovers)

✓

31

Venture Capital Case Studies

Total raised = $32.7 Million Total raised = $173 Million

32

Natura Public Conversion Case Study

33

Public Company Subsidiaries

Plum Organics (Campbell’s)

DanoneWave (Danone)

Happy Family (Procter & Gamble)

Lung Biotech (United Therapeutics)

34

Case Study: Laureate Education IPO

Sponsor

Private equity backed

Bankers

Credit Suisse; Morgan Stanley;

Barclays; J.P. Morgan; Macquarie,

BMO Capital Markets; Citigroup;

Goldman Sachs & Co.

Lawyers

DLA Piper / Simpson Thacher

Profile

$4.2 billion 2016 revenue

70 campuses/online schools

Operations in 25 countries

Funding

Pre-IPO round: $400 million

IPO: Raised $490M; priced on

February 1, 2017

Buying Social Within and Across the EU

David Hunter

The Aims for Today

Develop an appreciation of the potential significance for social

enterprises of procurement practices (primarily, but not exclusively)

public procurement practice

Highlight current practice in different jurisdictions across the EU

Identify some examples of good practice which could be applied more

widely

Generate interest in the new ESELA working group on public

procurement

Structure of this session

Brief introduction to EU approach to social procurement

Discussion – levels of awareness in different jurisdictions

Highlighting some UK initiatives

Discussion – initiatives in other jurisdictions; good practice

Where next?

EU initiatives

Europe 2020 Strategy (2010)

Buying Social Guide (2011)

Social Business Initiative (2011)

Procurement Directives (2014)

GECES Call for Action (2016)

Strategic Public Procurement Conference, Paris (2017)

Europe 2020 Strategy

“to enable procurers to make better use of public procurement in

support of common societal goals”

“Enabling procurers to use their purchasing power to procure goods and

services that foster innovation, respect the environment and combat

climate change while improving employment, public health and social

conditions”

Buying Social Guide

“A guide on taking account of social considerations in public

procurement”

A practical tool to help public authorities to buy goods and services in a

socially responsible way in line with EU rules.

It highlights the contribution public procurement can make to stimulate

greater social inclusion.

Social Business Initiative

Formally recognised the valuable contribution social enterprises make,

both economically and socially

Identified steps to be taken to support the development of social

enterprises.

A significant part of this was taking social enterprises into account in the

updating of procurement and state aid rules

Procurement Directive 2014

Strategic use of public procurement in response to new challenges

Better access for social enterprises and SMEs

Specifically:

Market consultation

Innovation Partnerships

Light Touch Regime

Reserved Contracts

Basis for Award (MEAT and lifecycle costing) Passporting and

simplification of the process

Limitations on restrictions for participation in the process (financial

thresholds; division into lots)

Labels; social and employment conditions

GECES

The Expert Group on Social Entrepreneurship (Groupe d'experts de la

Commission sur l'entrepreneuriat social - GECES)

Representatives from EU member states

Has reported on variety of topics relating to social enterprises

Most recently, a review of the current circumstances and

recommendations for progress, including …

… Buying Social version 2

Discussion

What is the level of attention given, or importance attached, to working

with social businesses in your country?

What is the prospect of this changing in the near future?

How would you compare the purchasing from social businesses that

takes place currently by:

(i) state bodies

(ii) private companies

(iii) other social businesses?

UK Initiatives: England (and Wales in part): Public

Services (Social Value) Act 2012

Statutory duty to “have regard to how what is proposed to be procured

may improve the economic, social and environmental wellbeing of the

relevant area and how that improvement may be secured”

Good in that it draws attention to the need to take social value into

account

Since coming into force, it has raised the profile of the issue and lots of

commissioners have developed social value policies and toolkits

But …

Social Value Act challenges

It is only a duty to consider at the outset of the procurement, so fairly weak

It applies to public services only (not works or goods) to which the

regulations otherwise apply

It is still restricted to relating to matters that relate to the subject matter of

the contract and must be proportionate

Some commissioners have defaulted to compliance mentality – what do we

need to do not to be in breach, rather than what opportunities do this create

for us?

It is about social value, not social enterprises

It can encourage the sense social value is distinct from quality, or value

more generally and not integrated into the wider offering

Still, overall, a step in the right direction

Scotland: The Procurement Reform (Scotland) Act 2014

and The Public Contracts (Scotland) Regulations 2015

The Act has social responsibility at its core and an intent to drive greater community

benefit through public procurement.

Provisions only began to come into force last year so limited opportunities to assess

in practice yet

Introduces the “sustainable procurement duty” – to consider how the process can

be used to improve the economic, social and environmental wellbeing of the area; to

facilitate the involvement of SMEs, third sector bodies and supported businesses; to

promote innovation relevant and proportionate to what is being procured

Requirement to have regard to guidance on Fair Working Practices, including the

living wage in the supply chain

Applies the regulations to ‘sub-threshold procurements (£2m for works, £50,000

otherwise

The Regulations very similar to England, but evaluation only on MEAT

Wales: Well-being of Future Generations (Wales) Act

2015

Does not mention procurement explicitly, but …

requires public bodies to do things in pursuit of the economic, social,

environmental and cultural well-being of Wales in a way that accords with

the sustainable development principle*;

requires public bodies to report on such action;

establishes a Commissioner for Future Generations to advise and assist

public bodies in doing things in accordance with the Act

“in a manner which seeks to ensure the needs of the present are met

without compromising the ability of future generations to meet their own

needs”

Specifically encourage working in ways which are demonstrably long term;

preventative; integrative; collaborative; inclusive

Northern Ireland

Development of a National Policy on Social Enterprise underway

Partnership between Department for Rural and Community

Development and Social Finance Foundation to produce research to

inform the policy

A policy commitment to a stronger Social Value Act than the English

one, which is in abeyance because the Assembly is suspended

Few commercial SEs as opposed to voluntary sector

Discussion 2

What initiatives exist in your jurisdiction (whether regulation, policy or in

practice) to encourage and enable greater purchasing from social

businesses?

What is the best example you are aware of of a procurement process

which has enabled social businesses to succeed?

What do you think would make a real difference in your country to

increase purchasing from social businesses?

Discussion 3 - What next?

ESELA Working Group on Public Procurement

Follow up information sharing

Topics for future focus

Others?

Contact Details

David Hunter

Consultant Solicitor

[email protected]

020 7551 7684

The EU General Treaty Principles

Non discrimination

Equal treatment

Proportionality

Transparency

Market Consultation

Expressly permitted by Article 40

Not just with providers but clients too

Important to do it well

Should be standard commissioning practice

Innovation Partnership

Where a commissioner is looking for something different

NOT restricted to very large, high tech procurements

Involves developing potential solutions with bidders and contracting with

one to implement the preferred option

Potentially useful where providers develop own ideas around what

might make a difference

Light touch regime

Applies to ‘health and social services’

Higher threshold (EU750,000)

Only restrictions above the threshold apply to how the market is informed of

the opportunity and the outcome of the process

Whether above or below the threshold, wide discretion around the process

itself – provided it complies with the Treaty Principles

Flexibility may make use of innovation partnerships more palatable

BUT remember Part B experience

Reserved contracts

Apply to a subset of those services to which the light touch regime

applies

Opportunity may be limited to qualifying organisations, namely:

have a public service mission

reinvest profits to further that mission

management or ownership of the organisation is participatory

has not been awarded a contract for these services in previous

three years

Can only apply to a contract for three years

Basis for Award

MEAT, but can be price only

Must use a cost-effectiveness approach such as life-cycle costing

May use price-quality ratio, using criteria such as qualitative,

environmental or social aspects

May set price and ask bidders to compete purely on quality

Criteria must relate to subject matter of the contract “in any respect and

at any stage of their life cycle”

Price Fixed – Assess Quality

Borne by Commissioner/

Service User Externalities

Usage Costs

Maintenance

End of Life

Costs Mitigation

Costs

Qualitative Criteria

Price – Quality Ratio

Life Cycle Costs

M.E.A.T.

Technical

Aesthetic

Accessibility

Design

Innovation

Staff experience and quals

After sales support

Social

Environmental

Carbon

Emissions

Other

Pollutants

Price

199999/0769/4077492.01

Section x: Structuring Social Enterprises in the EU

Alissa Pelatan (AMP Avocat)

Malcolm Lynch (Wrigleys Solicitors LLP)

Aurélien Chris Hollard (Arendt & Medernach)

Summary

- European Social Enterprise Definition

- UK Social Enterprise Legal Structures & Tax Efficient Investment

- Three recent SE legal statuses (SB, ESUS, SIS)

Social Enterprise in Europe

Definition of Social Enterprise


Operational Definition:

1. Enterprise must engage in economic activity: this means it must

generate income from market sources

2. Enterprise must pursue an explicit and primary social aim: a

social aim is one that benefits society or the environment

3. Enterprise must have limits on distribution of profits and assets:

the purpose of such limits is to prioritise the social aim over profit

4. Enterprise must be participatory: participation means it allows

stakeholder views to be appropriately represented

5. Enterprise must be independent: Independence means

independence from the state.


UK Social Enterprise Legal Structures &

Tax Efficient Investment

UK Social Enterprise Legal Structures

Long established companies New social enterprise

companies Long established societies Charitable legal forms

Legal entity

Private company limited by shares Public company limited by shares Private company limited by guarantee and having no share capital

Need to add safeguards e.g. voting rights

Community interest company limited by shares Public community interest company limited by shares Community interest company limited by guarantee

Co-operative society Community benefit society

Long established Charitable Trust (1) Charitable Company Limited by Shares or by guarantee (2) Community Benefit Society (3)

Newly established Charitable Incorporated Organisation(1)

Registrar

Registrar of Companies

Registrar of Companies

Mutuals Societies Registrar at the Financial Conduct Authority

(1) Charity Commission only

(2) Registrar of Companies, Charity Commission and HMRC

(3) Mutuals Societies Registrar and HMRC (England)

UK Social Enterprise Legal Structures and Tax Efficient Investment

Enterprise Investment Scheme (EIS)

Seed Enterprise Investment Scheme SEIS

Social Investment Tax Relief (SITR) Individual Savings Allowance (ISA)

Legal entity

Private company limited by shares Community interest company limited by shares Public company limited by shares Co-operative Society Community benefit society Unlisted

Private company limited by shares Community interest company limited by shares Public company limited by shares Co-operative Society Community benefit society

Charitable Trust Charitable Incorporated Organisation Charitable Company Limited by Shares or by guarantee Community interest company limited by shares or guarantee Community Benefit Society

Listed Public Limited Company e.g Retail Charity Bonds plc

Mandatory investment

period

Three years.

Three years.

Three years.

None

Maximum investment

Annual: £5 million per group. Lifetime: £12 million (£20 million if satisfy knowledge intensive test) per group

£150,000 per group in any three-year period.

Soon to be £1.5million per social enterprise in any three-year period.

None

Rate of income tax

relief on investment

30% up to maximum capital investment per investor of £1 million per year. Taxed on dividends

50% up to maximum capital investment per investor per year of £100,000. Taxed on dividends

30% up to maximum capital investment per investor per year of £1 million. Taxed on dividends and interest

None 100% relief on dividends and interest

UK Social Enterprise Legal Structures and Tax Efficient Investment

Enterprise Investment Scheme (EIS)

Seed Enterprise Investment Scheme SEIS

Social Investment Tax Relief (SITR) Individual Savings Allowance (ISA)

Capital gains tax

relief

1. Hold-over relief.

2. Exemption for gains on EIS investment if income tax claimed.

1. Exemption for gains on SEIS investment if income tax relief claimed.

1. Hold-over relief.

2. Exemption for gains on SITR investment if income tax claimed.

100% relief on capital gains

Type of investment

Shares.

Shares.

Shares and debt.

Shares and debt

Investment vehicle: key

criteria

Must: Be unquoted when the investment is made.

Must: Be unquoted when the investment is made.

Must: Be a charity, community interest company (CIC), community benefit society or accredited social impact contractor.

Security listed on recognised investment exchange (Securities of PLC) for example, London, Luxembourg

Investment: key criteria

Full risk ordinary shares, no preference or redeemable shares

Full risk ordinary shares, no preference or redeemable shares

1. Full risk ordinary shares.

2. Unsecured debentures.

3. Shares and debt may not offer more than a reasonable commercial rate of return.

Securities not repayable within 5 years

Permitted activities

Must carry on a trade on a commercial basis with a view to profit. Some activities are not permitted:

Must carry on a trade on a commercial basis with a view to profit. The same activities as EIS are not permitted for SEIS.

Must be a charity or carry on a trade on a commercial basis with a view to profit. Some activities are not permitted:

Any activities

http://uk.practicallaw.thomsonreuters.com/7-506-5262?originationContext=document&vr=3.0&rs=PLUK1.0&transitionType=DocumentItem&contextData=(sc.Default)

http://uk.practicallaw.thomsonreuters.com/7-384-0835?originationContext=document&vr=3.0&rs=PLUK1.0&transitionType=DocumentItem&contextData=(sc.Default)

Società Benefit in Italy


Società Benefit (SB) Law of 28 December 2015

Key features

Commercial Companies

•Commercial companies including cooperatives, partnerships, and mutual company…

SB Company

• Pursue general social purpose + specific purpose(s)

• Directors must take into consideration stakeholder interests

• No limitation on profit and asset distribution or governance requirement,

• Publish an annual “benefit” report

• Independent 3rd party certification to verify achievement of specific purposes

• No limitation of liability clause


Società Benefit (SB) Law of 28 December 2015

Main advantages


SB Company

No tax or legal advantages…

ESUS Company in France “Entreprise Solidaire d’Uitilité Sociale”

ESUS Company in France

Entreprise Solidaire d’Utilité Sociale (ESUS) Law n. 2014-856 of 31 July 2014

Key features

SSE Companies

• “Traditional” SSE Companies: associations, foundations, mutual companies, cooperatives); &

• Commercial companies with the following statutory provisions: • Primary social aim (social utility),

• Democratic governance, and

• Limits on distribution of profits

Social Utility and Solidarity Enterprise

• Primary social aim (social utility),

• Limitation on compensation,

• Activity has a significant impact on financial returns or expenses,

• Shares cannot be traded on regulated market,

• Renewable every 2 or 5 years

ESUS Company in France

Entreprise Solidaire d’Utilité Sociale (ESUS) Law n. 2014-856 of 31 July 2014

Main advantages

SSE Companies

• Image / Communication

• Visibility / Funding

• Subsidized employment contracts (in some regions)

Social Utility and Solidarity Enterprise

• 90/10 Funds

• Tax advantages on investment (tax reduction on investment)

• Subsidized employment contracts (in some cases)

• Civil service volunteers

SIS Company in Luxembourg


Société d’Impact Sociétal (SIS) Law n. 255 of 12 December 2016

Key features


• Commercial and Cooperative Companies (SA, SARL, SC only)

SIS Company

• Primary social aim (social utility),

• Autonomous management,

• Limitation on profit and asset distribution,

• Annual impact report + KPIs to measure performance of social impact,

• Annual audit


Société d’Impact Sociétal (SIS) Law n. 255 of 12 December 2016

Main advantages


SIS Company

SIS companies with 100% of impact shares:

• Exempt from corporate tax,

• Income tax deduction for donations (cash) granted to SIS (same as FRUP and ASBL),

• Public funding.

Any SIS company: - Visibility, - Grants, - Public tenders (marché publique)

SIS companies with min. 50% of impact shares: Subject to corporate tax, Allows commercial activities, Enable hybrid financing

(impact/standard shares).

Share Capital: 100% impact shares

Donor

Social Impact

Company

Tax Administration

Total net

income

Donations

DEDUCTION

CIT MBT

NWT

EXEMPTION


Comparison Chart – Examples of Social Enterprise Legal Statuses

Main criteria

European SE

ESS-ESUS Enterprise

(Fr)

SIS (Lux)

Societa Benefit (It)

CIC (Uk)

Economic Activity

✔ ✔ ✔ ✔ ✔

Primary Social Aim

✔ ✔ ✔ ✔ ✔

Asset and Profit

Limitation

✔ ✔ ✔ ✔

Inclusive governance

✔ ✔

Organizational Autonomy

✔ ✔ ✔ ✔

Compensation Limit

✔ ✔ ✔ (reasonable)

Impact Reporting and Measurement

✔ ✔ ✔

Merci !

For more information: [email protected]

mailto:[email protected]

EU recommendations on Social Enterprise development in EU countries

Julie Wynne, Board member, ESELA

Agenda

1. What is the EU definition of a social enterprise?

2. Reports and initiatives

1. Social Business Initiative

2. Mapping study

3. GECES report

4. Study of Prof. Fici

3. Recommendations

1. What is the EU definition of a Social Enterprise?

1. EU Definition of Social Enterprise

1. EU Definition of Social Enterprise

■ Three key dimensions of a Social Enterprise:

an entrepreneurial dimension: engagement in continuous economic activity;

a social dimension: a primary and explicit social purpose; and,

a governance dimension: the existence of governance mechanisms to ensure

prioritisation of the social purpose and which demonstrate sensitivity to different

stakeholder interests

■ Core criteria = minimum conditions that an organisation must meet in order to be

categorised as a Social Enterprise under the EU definition.

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.

2. Reports and initiatives

■ The Social Business Initiative (SBI), launched in 2011, aims to:

introduce a short-term action plan to support the development of social

enterprises, key stakeholders in the social economy and social innovation

prompt a debate on the avenues to be explored in the medium/long term.

■ The initiative is implemented in close partnership with stakeholders in the sector

and EU countries.

■ The plan contains 11 priority measures, organised around three themes:

Theme 1: Making it easier for social enterprises to obtain funding

Theme 2: Increasing the visibility of social entrepreneurship

Theme 3: Making the legal environment friendlier for social enterprises

2. Reports and initiatives – Social Business Initiative

■ Mapping study commissioned in April

2013 and published in November 2014

■ Outlines national policy and legal

frameworks for social enterprises,

including best practices to accelerate the

growth of the social enterprise ecosystem

in 29 European countries (EU 28 + CH).

■ Not an assessment of social enterprise

eco-systems or policies but a description

of current characteristics and trends to

support future research and policy

making.

■ Report published by ESELA in October

2015 with recommendations on how the

law can be used to recognise and support

the development of Social Enterprise

2. Reports and initiatives – Mapping study

• 16 European countries have some form of legislation that recognises and regulates

social enterprise activity. There are 3 approaches to social enterprise legislation

Adaptation of existing legal forms to take account of the specific features of social

enterprises.

Creation of a social legal status

Recognition of specific types of non-profit organisations

• Lack of legal recognition of Social enterprise in many countries makes it difficult for

governments to design and target specialist support or fiscal incentives for Social

Enterprises, inhibiting the development of Social Enterprise.

• Barriers faced by social enterprises:

poor visibility and recognition of the sector,

the constraints of current legal and regulatory frameworks,

limited financial resources,

difficult access to markets,

and the lack of business support and development

structures, training, and workforce development.

2. Reports and initiatives – Mapping study

• Report on “Social enterprises and the

social economy going forward: A call

for action from the Commission Expert

Group on Social Entrepreneurship

(GECES)”

• Published in October 2016

• Recommendations to further develop

European policies in favour of social

enterprises

• Addressed to the European

Commission, EU Member States (incl.

their local and regional authorities) and

third party countries, as well as the

social enterprise community.

2. Reports and initiatives – GECES report

• Four thematic areas

Increase the visibility and recognition of social enterprises

Development of a European economic environment that enables the social economy and social enterprises to access finance

Legal and regulatory frameworks to encourage the creation and development of the social economy and social enterprises

Measures to help to social economy and social enterprises reach their potential as key drivers of equitable and socially-inclusive economic growth

• Improving the legal environment

The EU Commission should propose a soft legal measure which could help Member States design an adequate framework to support the flourishing and expansion of social enterprises.

The EU Commission and the Member States should stimulate cross-border operations for mutuals and cooperatives to enable them to use the full potential of the Internal Market in order to expand their activities.

Public buyers should make the best use of the new public procurement rules and insert social considerations in their tendering procedures.

The EU Commission and the Member States should increase awareness of state aid rules and their impact on social enterprises providing a service of general economic interest (SGEI).

2. Reports and initiatives – GECES report

• Study for the Juri Committee by Prof. Antonio Fici (IT)

• Published in February 2017

• Requested by the European Parliament’s Committee on Legal Affairs and published by the Policy Department for Citizens’ Rights and Constitutional Affairs.

• It explains why tailor-made legislation on SE is essential for the development of this unconventional form of business organization.

• It describes and compares existing models of SE regulation and discusses the core elements of an SE’s legal identity, with the aim of providing recommendations on the potential forms and contents of an EU legal statute on this subject.

2. Reports and initiatives – Fici Study

• Recommendations of Prof. Fici

Introduce an EU legal qualification (or status): “European Social Enterprise” (ESE)

Legal requirements for acquiring (and maintaining) the ESE status should be

identified by EU legislators in accordance with the common core of EU SE law,

and in particular:

– Entity established under private law (in any of the available legal forms) and independent of the state and other public administrations

– Exclusive or at least a prevalent purpose of community or general interest

– Be subject to a total or at least partial constraint on profit distribution and more generally to specific rules on the allocation of profits and assets during its entire life, including at dissolution

– Conduct a socially useful activity, as determined by law either ex ante or through a general clause

– Obligated to issue a social report, to involve its various stakeholders in the management of the enterprise, and to provide fair and equitable treatment to its workers, notably the disadvantaged ones

– If established as a company, subject to specific governance requirements, in order to resolve the potential contradictions between the company form and the ESE status.

– Subject to an effective system of public control, which is necessary to protect the legal label of ESE and preserve its intrinsic value.

2. Reports and initiatives – Fici Study

3. Recommendations on Social enterprise

development for EU Member States

• Ad hoc legislation on Social Enterprise offers several advantages to social entrepreneurs and fosters the growth and development of this particular type of business organization:

It permits the reservation of the use of the legal denomination of Social Enteprise for real Social Enterprises,

It allows social entrepreneurs to signal the terms and conditions that their organizations offer to stakeholders and to make credible their commitment not to change such terms and conditions.

• A distinct legal identity of Social Enterprises is beneficial as it allows:

Social Enterprises to be specifically considered for additional purposes, such as tax, public procurement, or competition law;

the design of specific public policies in support of Social Enterprises, and, more particularly, the justification of these policies under EU competition and state aid law;

the establishment of clearer boundaries between Social Enterprise and different or more general concepts (such as those of “entities or enterprises of the social economy” and of “corporate social responsibility”);

the protection of the stakeholders of the Social Enterprises;

the prevention of the establishment and operation of “false” SEs;

and the collection of more reliable official statistics on SEs, also in order to improve their visibility.

3. Recommendations

Thank you for your attention.

Julie Wynne, [email protected]

A new era for Social Entrepreneurship in Italy?

Emiliano Giovine – R&P Legal

The Third Sector in Italy

ITALY

Click to add text 1942: The Civil Code encompasses the law of “social entities” (articles from 14 to 42).

• The regime regarded the third sector as a nuisance, not as a valuable asset.

• It provides a minimal set of rules even if the situation of the third sector was more elaborated and multi-faceted.

1948: Italy became a Republic

• Ratification of the Constitution, which expressly nominates nonprofit entities in par. 2 and 18.

The Third Sector

Despite the Constitution’s provisions, the Civil Code was not modified by it.

Starting from the 80s: Flourishing of special laws introducing new entities, expressing all the possible ways people are willing to associate for the realization of the common good.

Social needs/General interest driven

Non distribution constraint

Purpose must not be contrary to criminal law

Their common features are:

The Civil Code

Associations (recognized and not-recognized)

Foundations

Committes

“Enti senza scopo di lucro” are:

The non distribution constraint is the main common aspect for all of them!

Special Laws

The Civil Law does not contain all the answers to the current needs.

NEW NEEDS NEW ANSWERS SPECIAL LAWS

Stay on the same level of ordinary laws

Regulate a subject that was not regulated by the ordinary law

Derogate ordinary law following the criterium: lex specialis derogat

generali

Index

Voluntary Organizations - Law 266/1991

Social Cooperatives - Law 381/1991

Non Governmental Organizations - Law 125/14

Onlus - D.Lgs. 460/1997

Social Enterprise - D.Lgs.115/2006

Social Enterprise – D.Lgs. 155/06

Under D.Lgs.155/06 a social enterprise is as any

kind of private organization that “permanently

and principally carries out an economic activity

aimed at the production and distribution of

social benefit goods and services and pursues

general-interest goals”.


It is not a new legal entity but a label attached to existing entities >

organizations who wants to obtain the status of SE must first be constituted

in one of the allowed types:

• Association

• Foundations

• Committees

Non-enterprise types:

• companies, etc.

Enterprise types:


Democratic governance: workers’ participation in the management

Users and costumers contribute to the SE’s results evaluations

The balance sheet is public

For profits and public administrations can not control it or direct it

70% of its profits must come from its main activity

MAIN CHARACTERISTICS:


MAIN

CHARACTERISTICS:

Profits and surplus must be reinvest only in the SE’s activity or in increasing its assets.

Non distribution constraint

Capped salaries for board members and employees

Capped returns for loans or bonds (around 6%)

The object of its main activity must be the supply of goods and services having social and ethic value for the society, such as welfare and health assistance, education, environmental care, culture, …

Social Enterprise – Italian Overview

Reform of the Third Sector

1

2

3

Code of the Third Sector d.lgs. 117/2017

Social Enterprise d.lgs. 112/2017

5 x 1000 d.lgs. 111/2017

Code of the Third Sector

Among the others..

1.Introduction of a new category: «Entities of the third sector» («Enti del terzo settore»)

2.Creation of a «Unique National Register» («Registro unico nazionale»)

3.Facilitation of recognition for associations

4.Extension of sectors of activies under which the «entities of the third sector» can operate

5.Tax treatment reform

6.Introduction of social bonus

7.Introduction of «Solidarity titles» («Titoli di solidarietà»)

8.etc.

d.lgs. 117/2017

Is it a NEW Social Enterprise?

Among the others..

1. Extension of fields of activities

2. Possibility of (limited) distibution of profits

3. Tax advanteges for investors

4. Gaining capital through equity based crowdfunding platform

5. Remuneration limits

d.lgs. 112/2017

Thank you!

Emiliano Giovine

[email protected]

Georgian Bill on Social Entrepreneurship

Julie Wynne, Board member, ESELA

1. Process

■ Project implemented by Arbeiter-Samariter-Bund Georgia, Centre for Strategic

Research and Development of Georgia and Education Development and

Employment Centre.

■ Study tour in Poland and in the UK with members of Georgian Delegation to learn

more on social entrepreneurship in these countries and hear about the success,

challenges and experience achieved in terms of social enterprise development.

■ Development of a Bill on social entrepreneurship and meetings with the Parliament,

as well as with the governmental bodies of Georgia.

1. Process

■ International conference on state to social enterprise support mechanisms in Tbilisi,

Georgian, on September 22nd, 2017:

Presentation on International and Georgian best practices as well as the findings

of the international study tour.

Organized in the framework of the EU funded project “Social Enterprise-

Innovative Approach for Economic and Social Changes”.

Representatives of organizations working on SE development in Georgia,

Government of Georgia, EU delegation in Georgia, UK Embassy in Georgia and

concerned international NGOs.

International experts on social entrepreneurship.

Outcome: policy recommendations for SE state support mechanisms in Georgia

that will be further finalized, published and handed over to the governmental

bodies.

• Purpose: create legal basis for the institutionalization and support for the

development of social entrepreneurship.

• Social entrepreneurship: organized entrepreneurial activity that aims to achieve

social goals in the field of social care, social adaptation, poverty reduction and

alleviation, support to and/or employment of vulnerable groups in the community,

education, healthcare, culture, sports and environmental protection.

• Social enterprise: a legal entity established in accordance with the Georgian

legislation, which:

– Is established to achieve social goals in the areas of - social care, social

adaptation, poverty reduction and alleviation, promotion of employment of

vulnerable groups in the community, education, healthcare, culture, sports and

environmental protection;

– Engages in entrepreneurial activity and the major part of its revenues is

generated from the entrepreneurial activity;

– Reinvests not less than 70% of its profits in the activities targeted at achieving

social objectives envisaged by the Charter;

– Is governed by democratic principles and the change of charter and statutory

goals shall be allowed by at least 80% of vote;

– Is not directly or indirectly connected or subordinated to the state or local self-

government body.

2. The Bill

• Limited Liability Company, Joint Stock Company and Cooperative are

eligible to acquire the status of social enterprise if:

a) The Charter of an enterprise declares the priority of social objectives

over the purpose of generating and distributing income and provides

an exhaustive list of social entrepreneurship activities;

b) Not less than 30% of profit of an enterprise can be subject to

distribution;

c) Decision-making process in the enterprise does not depend on the

amount of shares or stocks.

• What happens in case of non-compliance with the social enterprise

requirements?

• Nonprofit organisation can also apply to the social enterprise status.

2. The Bill

• Articles of association shall include the following provisions:

a) Priority of social goals over the purpose of generating and distributing profit;

b) Areas and concrete list of activities related to the sphere of social entrepreneurship;

c) The rule of distribution of profit and its amount that shall not exceed 30%

d) Decisions on the issues referred to in subparagraphs "a" - "c" of this paragraph, as well as procedures of making decision on liquidation, bankruptcy, reorganization, division or accession of an enterprise by not less than 80% of the vote of partners, shareholders or stockholders.

• Supportive measures by the State:

a) Development of social entrepreneurship support projects and programs and participation in them;

b) Ensuring social enterprises with the opportunity of receiving preferential credit resources and grants;

c) Granting priority to social enterprises, products or services produced by them in equal conditions.

2. The Bill

Thank you for your attention.

Julie Wynne, [email protected]

Panel 'Developing Social Enterprise Ecosystems'

Panel

■ Marc Elvinger, partner, Elvinger Hoss (Luxembourg)

■ Emiliano Giovine, senior associate, R&P Legal (Italy)

■ Julie Wynne, partner, Froriep (Switzerland)

Agenda

■ Introduction

■ Discussion among panelists

New legal developments in the field of social entrepreneurship in their jurisdiction

How the priorities have been set in the development of a supporting SE

ecosystem

Key recommendations for an efficient collaboration with the State

■ Q&A

The Spread of B Corps and New Models

Co-chaired by David Davies and Niamh Callaghan


Agenda

- Introduction to the Session - Niamh Callaghan, Partner, Mason Hayes & Curran, Ireland [8 minutes]

- Overview – David Davies, Partner, Bates Wells Braithwaite, UK [15 minutes]

- Reminder of what a B Corp is and what are the legal requirements to establish a B Corp

- B Lab Europe - Nathan Gilbert, Co-Executive Director, B Lab Europe [5-7 minutes]

- Presentation about B Lab Europe; it's relationship with B Lab as a global network; and observations and activities that are taking place around the world that are related to B Lab’s work with B Lawyers


Agenda (contd.)

- Panel Discussion [27 minutes]

Discussion among panellists moderated by David Davies – Panellists: - Anka Hakert, Winheller (Germany) - Marleen Denef, Curia (Belgium) - Remedios Garcia Gomez de Zamora, Gómez-Acebo & Pombo (Spain) - Luke Fletcher, Bates Wells Braithwaite (UK)

Questions the panellists will address: - Do B Corps currently exist within your jurisdiction? - If so, was it necessary to amend your national legislation to permit the implementation of the B Corp legal requirements? - If not, does your existing legislation permit the establishment of a B Corp? - If your existing legislation does not permit the establishment of a B Corp, why not and what changes are required to your legislation?


Agenda (contd.)

- Question Time [11mins]

- Summary by David Davies [2 minutes] The objectives of this Session were to: - Ensure every attendee knows what a B Corp is. - Ensure every attendee knows what the legal requirement of a B Corp is. - Give examples of jurisdictions of where the B Corp legal requirement fits, or integrates, within an existing company legislation and those where it does not fit and how to address this. - Suggest how the ESELA B Lawyers Group might assist in an EU-wide approach to B Corp recognition.

Request: We seek additional law firms to join the ESELA B Lawyers Group and non- lawyers who would be interested in assisting in the spread of B Corps.

Overview – David Davies, Partner, Bates Wells Braithwaite, UK [15 minutes]

Reminder of what a B Corp is and what are the legal requirements to

establish a B Corp

WHAT?

Business used as a force for good, having a purpose that solves social

and environmental problems in addition to creating financial return.

WHY?

To address deficiencies in the current, mainstream capitalist business

model by redefining success in business.

WHO?

For-profit businesses.

- Overview (cont.) – David Davies, Partner, Bates Wells Braithwaite, UK

WHERE?

Currently:

over 2,100 B Corps;

from more than 50 countries;

in over 130 industries.

HOW?

Must meet performance requirement: B Impact Assessment

(≥80/200 points)


HOW (cont.)?

Constitutional documents must meet legal requirement:

Contain commitment to a “triple bottom line”: business for

benefit of shareholders but also to have a material positive

impact on society and the environment

Require decision-makers to consider the interests of all

stakeholders on an equal footing, not primarily the creation of

value for shareholders


Key legal considerations for each jurisdiction:

Does the law currently allow/require/prevent businesses from

complying with both limbs of the legal requirement?

Who has a right to hold decision-makers to account? If their

liability is increased, can those rights be restricted?

An Historic Global

Culture Shift is underway to harness the power

of business to help address society’s

greatest challenges and to build a more

inclusive economy.

B Lab’s integrated approach to systems change

makes an alternative viable and scalable.

Start

Develop market

infrastructure

Step 2

Create tools

to make it easy

for millions of other

businesses to follow

Step 3

Inspire billions of consumers,

workers, investors and others

to support businesses

who are a force for good

Step 1

Build a community

of thousands of credible

leaders -- B Corps

End

Shared & Durable

Prosperity

Building a movement of leaders

Creating paths for others to follow

A Shared & Durable Prosperity

Certified B Corporations

Building Collective Voice

Mission-Aligned Governance

Measure What Matters

BUILDING A GLOBAL COMMUNITY OF

LEADERS

Certified B Corporations are a new type of

corporation which use the power of business to

create a better world by solving social and

environmental problems.

B Corps are unlike traditional businesses

because they:

a) Meet verified transparent social and

environmental performance standards;

b) Build a business constituency for good

business by making a legal commitment

to all stakeholders.

2300+ CERTIFIED B CORPS

50 COUNTRIES

130 INDUSTRIES

1 UNIFYING GOAL

144,858 EMPLOYEES

30$ Bn REVENUE

20th Century Shareholder

Value

Stakeholder

Value

21st Century

IMPACT GOVERNANCE A key barrier to high-road business practices around the globe is an entrenched view that the legal duty of corporations is to maximize short-term financial returns at the expense of long-term, durable prosperity for all. This expectation, while often a cultural challenge, is also in many countries an actual problem of corporate law. Countries with corporate laws that require shareholder primacy (with liability for consideration of other stakeholders) create an operating impediment for companies who are seeking to make money and make a difference. These laws also make it difficult for policymakers to create policy incentives that encourage companies to focus on creating value for society. B Lab promotes new legal structures like the Benefit corporation that align the interests of business with those of society and help high impact businesses be built to last. B Lab collaborates with the capital markets and policy makers to drive adoption. When companies and investors adopt legal structures that expand fiduciary duty, like the benefit corporation, system change is possible.

• Knits the values of the company

into its legal DNA

• Gives protection and permission

to consider non-financial

stakeholders

• Ensures that mission can survive

over time

Benefits of the Legal Requirement

• Depends on country and type of

incorporation

• Amendment to governing

documents or adoption of new

corporate form

• Expanded purpose statement and

duties of directors

What does this look like?

Benefit Corporation Passage

“GREAT BUSINESSES ARE PLACES WHERE PROBLEMS ARE SOLVED AND LIVES ARE IMPROVED ”

Sir Richard Branson

“WE JOIN FORCES WITH THE B CORP MOVEMENT”

“ “Benefit Corporation Legislation creates the

framework to enable mission-driven

companies like Patagonia to stay mission-

driven through succession, capital raises,

and even changes in ownership, by

institutionalizing the values, culture,

processes and high standards put in place by

founding entrepreneurs.”

- Patagonia,

Yvonne Chouinard

"In 10 years time, people will say it’s

inconceivable that business was done any other

way. The notion that a company can only care

about profit will be seen as old-fashioned and

irresponsible.”

- Lorna Davis, CEO DanoneWave

Reporting Tool A network of leaders

• Analysis on how B Corp legal requirement

interacts with existing corporate law

• Guides to understand implications and

process

• Legislation/Lobby

• Case Studies

• Network of experts and practitioners

B Lawyers

The Companies Act - s172(1)

(1)A director of a company must act in the way he considers, in good faith, would

be most likely to promote the success of the company for the benefit of its

members as a whole, and in doing so have regard (amongst other matters) to—

(a)the likely consequences of any decision in the long term,

(b)the interests of the company's employees,

(c)the need to foster the company's business relationships with suppliers,

customers and others,

(d)the impact of the company's operations on the community and the

environment,

(e)the desirability of the company maintaining a reputation for high standards of

business conduct, and

(f)the need to act fairly as between members of the company.

Companies with Other Purposes – s172(2)

Where or to the extent that the purposes of the company consist of or include

purposes other than the benefit of its members, subsection (1) has effect as if the

reference to promoting the success of the company for the benefit of its members

were to achieving those purposes.

Expressing Purpose – B Corps

(1) The objects of the Company are to promote the success of the Company for

the benefit of its members as a whole and, through its business and operations,

to have a material positive impact on society and the environment, taken as a

whole.

(2) A Director must act in the way he or she considers, in good faith, most likely

to promote the success of the Company in achieving the objects set out in

paragraph (1) above, and in doing so shall have regard (amongst other matters)

to [the Stakeholder Interests set out in s172(1)].

(3) For the purposes of a Director’s duty to act in the way he or she considers, in

good faith, most likely to promote the success of the Company, a Director shall

not be required to regard the benefit of any particular Stakeholder Interest or

group of Stakeholder Interests as more important than any other.

Remedios García Gómez de Zamora

Gómez-Acebo & Pombo

Spain

B Corp - Spain

Do B Corps currently exist within Spain?

Although not expressly allowed, neither the Spanish Commerce Code nor the Capital Companies

Act prevent capital companies from having the triple bottom line purpose of being financially

profitable while also seeking to have a positive impact on society and the environment.

The Spanish corporation laws and regulations are moving towards the triple bottom purpose with

various initiatives implemented in these last years. Some examples:

The Solid Waste Act foresees the existence of

capital companies with a corporate purpose

consisting of the recycling of the products

manufactured by their shareholders for the

benefit of the environment but without the aim

of obtaining any gains for the shareholders.

Listed companies who, following the

recommendations of the Corporate

Governance Code, must have a

corporate social responsibility policy on

matters related to social,

environmental and diversity matters

which must be disclosed in a yearly

report.

Big-sized companies can also follow

and apply the Corporate Governance

Code and the recommendations of the

Corporate Social Responsibility Public

Counsel and have a corporate social

responsibility policy on matters related

to social, environmental and diversity

matters.

B Corp - Spain

In Spain, there is not a specific regulation for B Corp, but the current

legislation does not prevent capital companies from implementing it.

For such purposes, an amendment of the company’s object and Directors’

duties should be included in the company’s By-law in order to foresee the

positive social and environmental impact as relevant aspects.

B Corp - Spain

Spanish current legislation and possible amendments to permit the whole

implementation of the B Corps legal requirement:

Triple bottom line as an enforceable

obligation

Directors are subject to first satisfying the best interest of

the company.

Incorporation of a clear definition of “best interest of the company” including the social responsabilty.

Directors duties are owed to shareholders

The directors are allowed but not required neither prevented from taking into consideration

stakeholders’ interests.

Put in a more relevant position the interests of other stakeholders to make them as important as the

shareholders´ interest.

Actions against directors´duties

Shareholders, creditors or third parties can file individual claims for damages against

the directors if directly damaged by their acts or

omissions.

The liability of the directors vis-à-vis stakeholders will not necessarily be increased by

the adoption of the legal requirement so an amendment in relation to a higher responsibility

could be taken into account.

Current law Possible amendments

B Corps in Belgium: a slow spread ?

Marleen Denef Founding partner Curia

Prof KU Leuven – campus Brussels

Presentatie Curia

Why are Belgian Bcorps so rare ?

1. Legal context

• Current Company Code

– Art. 1, para 1 : purpose of the company =

o “providing shareholders with a direct or indirect pecuniary

advantage/asset return”

No explicit shareholder’s wealth maximalisation

But an implicit duty for BoD to aim for return for shareholders

– Art. 1, para 3 : exception =

o Company with Social Purpose (artt. 661)

• Future Company Code ?

– Purpose of the company = similar ?

– Company with Social Purpose = to become “social enterprise”

157 Presentatie Curia

Presentatie Curia

Why are Belgian Bcorps so rare ?

2. Impact of “welfare state” ?

– Not for profit = state funding

– For profit = market funding

– Hybrid = between state & market, only just emerging

3. CSR is still considered a valid alternative

4. Perception of BCorp as an “anglo-saxon invention”

5. Perception of BLab as a “private initiative”

158 Presentatie Curia


Legal Situation in Germany

WINHELLER Attorneys of Law, Germany

Atty. Anka Hakert, LL.M. (Tax), Certified tax lawyer

24. October 2017

24.10.2017

ESELA B Corps in Germany

160


1. B Corps within the jurisdiction in Germany

Existence of certified B Corps in Germany

Company form usually “GmbH”

2. Longstanding legal situation in Germany

German Law on Limited Liability Companies (GmbHG)

Section 29 GmbHG:

• Shareholders’ right to claim annual net profit, but:

• Company Articles of Association: Limitations possible

• Different regulation on profit appropriation permitted

Section 1 GmbHG:

• Permitted: Any legally permissible purpose

• Even nonprofit/charitable purpose permitted

24.10.2017


161


3. Nonprofit Corporations

gGmbH

• Tax-privileged (nonprofit/charitable NPO)

• No distributions of annual net profit among shareholders at all

• Restrictions regarding e.g. remuneration of managing director (no “hidden

distributions”)

• No special legal form; company form: GmbH

4. Social Business Corporation

B Corps

• Purpose and distributions depend on the regulations of the Articles of

Association of the Company

• No special legal form; (usual) company form: GmbH

• Name must involve the company form “GmbH”

24.10.2017


162

esela members event luxembourg 24 october 2017 · 2019. 6. 5. · 1. management must act for...

Documents