21 February 2019

Legal form for social entrepreneurship

Social entrepreneurship is developing strongly in the Netherlands. To reinforce this development, there are good arguments to create a social limited liability company (‘bv-m’), as a legal form. However, whether such a legal form should actually be introduced, including an adaptation in company law, depends on the expected uptake of entrepreneurs.

Bosma en studenten

This is one of the main conclusions of the report ‘Versnelling en verbreding van sociaal ondernemerschap. Een onderzoek naar de wenselijkheid van nieuwe juridische kaders’ (Accelerating and broadening social entrepreneurship. An investigation into the desirability of new legal frameworks). The study was conducted by the Utrecht University Social Entrepreneurship Initiative on behalf of the Ministry of Economic Affairs and Climate, which asked Utrecht University to conduct an 'exploratory study' into 'legal forms for social entrepreneurs'.

Social version

The report states that there are arguments to introduce a social variant of the current private limited liability company (besloten vennootschap: bv): the bv-m. With the introduction of the bv-m, the desire for awareness and recognition of social entrepreneurship is met, and the transaction costs currently associated with such a hybrid organizational form are reduced. At the same time, the bv-m contributes to maintaining a level playing field, because there are no direct advantages to the legal form in terms of tax, procurement or other advantages.

Confidence

The bv-m can also be used to effectively implement safeguards for the preservation of the social objective in subsequent management and share ownership. This serves in providing clients and stakeholders with more confidence and certainty that the social objectives of the social enterprise will be at the core of its business activities now and in the future, in subsequent shareholding and directorship.

Incentive

This new legal form could thus provide an incentive for more and more effective social entrepreneurial behaviour. It could also provide a further stimulus with regard to standards in society when it comes to how companies consciously contribute to social challenges.

The full report ‘Versnelling en verbreding van sociaal ondernemerschap’ can be found on the website of the Ministry of Economic Affairs and Climate. Please note that the report is in Dutch.