10. Social Enterprises and the Role of Profit in Company Law

All over the world, social enterprises are actively contributing to solve societal problems. To ensure that these enterprises prioritise their ‘social purpose’ over other goals, these enterprises can make use of a variety of legal forms and legal structures. The chapter sets out that transparency requirements, rules on supervision, and enforcement mechanisms all play an important role in securing the social purpose of the social enterprise. Then, the chapter focuses on profit distributions and the possibilities to limit these as a very important mechanism for securing a social purpose. The chapter outlines the legal rules for profit distribution that apply to social enterprises in Europe with a focus on the Netherlands. Furthermore, it demonstrates that social enterprises have space within these legal rules to design their own limitations on profit distributions.

This may be helpful in securing their social purpose, not only because it leaves more reserves available for reinvestments in the social purpose, but also because it may be of influence to certain incentives in the enterprise such as involvement of employees and beneficiaries. Finally, the chapter points out that it is important for social enterprises to have access to sufficient financial resources, in particular to attract capital investors. An important question is how this can be combined with limiting profit distributions. All these topics will undoubtedly be central in company law discussions in Europe in the coming years. In the conclusion, some points for reflection are posed that may contribute to these discussions.