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Legal Framework for social entrepreneurship in Europe


Social entrepreneurship seems to be affecting people, today more than ever. Anyone who wants to become anyone in the world of business today knows that entrepreneurship is a strong part of the labor market and that they should probably want to give that particular option a thought.

However, entrepreneurship is not able to stand on its own nowadays. It needs a social impact and without one, most entrepreneurial businesses fail. This is why social entrepreneurship is growing more and more popular as time progresses.

Every country in Europe has a framework for social entrepreneurship. The actors in the social entrepreneurship arena are all but a homogenous group, independent of being described by the Government, Academia, Institutions or different support structures.

Moreover, there is currently no overarching legal definition of social entrepreneurship or social enterprises. Nevertheless, social enterprises do have a range of different legal forms including joint-stock companies (Aktiebolag), cooperative economic associations (Ekonomiska föreningar), trading companies (Handelsbolag), not-for-profit associations (Ideella föreningar) and foundations (Stiftelser). Joint-stock companies are owned by shareholders who own a portion of the company in proportion to his or her ownership of the company´s shares.

Cooperative economic associations, as legal entities, conduct economic activities to the mutual benefit of their members. Trading companies refer to an association of persons or an unincorporated company where the company together with the individual owners are co-responsible for any legal liability procured by the company. Not-for-profit associations use surplus revenues to achieve their goals rather than distributing them as profit through social entrepreneurship.

 Foundations are the legal categorization of not-for-profit organizations sustained by donated funds, which are used to support causes, individuals or other organizations. A new addition is joint-stock companies with a limited distribution of profits (aktiebolag med särskild vinstutdelningsbegränsning, SVB).

This latest addition has not been very successful and is only applied by a limited amount of social enterprises. At the present time, a majority of the social enterprises are conducted as not-for-profit associations. As such, they do not aim to make a profit and are as a result exempted from paying income tax.

In Greece In 1999, the government established legislation that supported the creation of social enterprises with limited liability to provide employment for people with mental health problems. These social enterprises, known as Koi.S.P.E.s, were allowed to own public property and exempted from corporate taxes (except VAT); also, those who work for Koi.S.P.E.s were allowed to earn a wage without losing their social benefits. This legislation was widely regarded as a success.

In 2011, a broader legal framework for social enterprises was introduced – this, however, has been more contentious and slower to take effect. It has been criticized in particular for failing to provide a clear definition of a social enterprise, for failing to account for certain kinds of social enterprise, and for making the process of registering and acting as a social enterprise too bureaucratic. Its moves to support the social economy have also been slowed and hampered by the financial crisis and austerity that have plagued Greece in the past decade. Fiscal advantages previously available to social enterprises have even been abolished as part of the across-the-board cuts under Greece’s fiscal adjustment program.

For more information on the Legal framework for Social Entrepreneurship in Europe, you can check out the SEYW programme.

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