The Rise of the Social Enterprise: How Social Enterprises are Changing Company Law Worldwide
THE LAW OF THE FUTURE: A COLLECTION OF 'THINK PIECES,' S. Muller, ed., Torkel Opsahl Academic ePublisher, 2011
9 Pages Posted: 26 Mar 2011
Date Written: March 24, 2011
This paper explains the increasing popularity of social entrepreneurship and analyzes its company law consequences. Faced with tight budgets, governments are looking to the private sector to develop businesses that serve the interests of the public. Social entrepreneurship is gaining momentum as it enables people to make a living while pursuing an objective that adds meaning to their lives. Social enterprises are confronting two key challenges. First is the need for funding. The emergence of a social investment sector requires a long-term commitment from government agencies. Second, social enterprises must balance the interests of investors with the social mission.
Legislators in many countries are creating specific legal entities to cater to the need for legal entities in which the dual purpose of social enterprises is regulated. A worldwide trend is for company law to provide a means of addressing problems relating to the dual purpose by defining the rights and obligations of directors and shareholders. Furthermore, a sufficiently flexible ‘new company-law product’ offering a pre-negotiated set of rules tailored for social enterprises can reduce incorporation costs for entrepreneurs structuring their businesses. A special legal entity for social enterprises also enables entrepreneurs to carry out their mission by giving them their own legal entity and allowing them to use their legal entity as a marketing tool and a competitive advantage. Accordingly, new legal entities improve the options open to entrepreneurs structuring their social businesses.
Keywords: Community Interest Company, Social Entrepreneurship, L3C, Low-profit Limited Liability Company, CIC, B Corporation
JEL Classification: K22, L21, L30, L31, L32, L33, M13, M14
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