Information and regulations on Social Enterprises
"The concept of "social economy" goes back to the 19th century when various new types of organisations and enterprises were formed collectively by groups of people in response to problems they were facing due to deep transformations of the economic system: co-operative ocieties, friendly (mutual benefit) societies, and other forms of undertakings which aimed at organizing production, consumption, access to credit, access to health care and other services on a more equitable and democratic basis. In today terms, the social economy gathers enterprises of the co-operative movements, mutual benefit and insurance societies, foundations and all other types of non-profit organizations which all share some principles making them correspond to the "third sector" of modern economies. Indeed, social economy organisations differ from the private for-profit sector as their primary goal is to serve members’ needs or a broader public interest instead of maximizing and distributing profits to shareholders or members. They are also clearly distinct from the public sector although non-profit organisations may receive public subsidies to fulfil their mission: they are self-governed private organisations with the rule "one member, one vote" in their general assembly." (by Jacques Defourny, 2001)
The earliest reference in Greek legislation relating to the broader spectrum of social enterprise and cooperatives is the 11th article of the 1864 constitution, which gave Greek citizens the “right to associate”, a clause that is still in force today. One of the most important and recent pieces of legislation is law 4019/2011, which defined social economy and social cooperative enterprises in Greece for the first time. This law established the social cooperative enterprise (Koin.S.Ep.) as a new legal form in 2011, giving citizens of and residents in Greece the possibility to create cooperative enterprises with a social purpose. There are three types of social cooperative enterprises prescribed by this law, depending on the pursued objective, the social cooperative enterprises for integration, the social services’ social cooperative enterprises and the social cooperative enterprises with a collective and productive purpose whilst raising the profile of the SSE, this legislation did receive some criticism for its focus and scope, and for being excessively bureaucratic. An important aspect of L.4019/2011 was the creation and introduction of the MoL (Ministry of Labour, Social Security and Social Solidarity) Registry for Social Cooperative Enterprises (Koin.S.Ep) and Social Cooperatives of Limited Liability (Koi.S.P.E) wherein all organisations were recorded.
In October 2016, the law 4430/2016 came into effect, which elaborated on the “Social and Solidarity Economy and the Development of its Actors”. This legislation offered a new framework for diverse types of organisations or enterprises that have a clear collective and social impact, while also addressing a social need. This aimed to supersede and improve on previous legislation, including law 4019/2011, which is no longer in force. With L.4430/2016 a number of issues have been addressed, especially with regards to the spirit of the law. In particular, SSE organisations are no longer defined in terms of their legal form, but by their legal status, (i.e., any legal form may qualify as an SSE organisation, as long as it satisfies the criteria set forth by the law). In short, these criteria concern entrepreneurial activity in the private market (revenues from public bodies should not exceed 65 per cent of total turnover within a three-year period), democratic governance (one member – one vote), and a well-defined social purpose with profit allocated to collective and social benefit (up to 95 per cent of yearly profits). Furthermore, the idea of ‘social impact’, in terms of collective and social benefit, has been defined and operationalised, something that was missing from previous legislation. Lastly, the MoL registry of SSE organisations was opened up to all legal forms that obtain the status of an SSE organisation.
Links for further reading
https://kalo.gov.gr/ https://www.apko.gov.gr/en/pages/default.aspx
https://ec.europa.eu/social/BlobServlet?docId=21741&langId=en
https://www.socialeconomynews.eu/en/towards-a-european-action-plan-for-the-social-economy/
https://www.bep.gr/assets/files/12047_koinsep_fek.pdf
https://www.startyouup.gr/el/a/50-koinwnikh-synetairistikh-epixeirhsh-koinsep
https://kalo.gov.gr/wp-content/uploads/2018/05/KALO_ETHSIAEKTHESI.pdf
Steps for setting up a Social Enterprise in Greece \\ Development of social cooperative enterprises
So what is a "Social Cooperative Enterprise" (Koin.S.Ep.)?
The Social Cooperative Enterprise (Koin.S.Ep.), is a new body of the aforementioned Social Economy and appeared with the recent Law 4430/2016. In essence, it is a civil partnership with a social purpose and has the commercial status by law.
The members of "Koin.S.Ep." can be ordinary citizens but also legal entities (businesses). Simply, the participation of the legal entities in the Social Cooperative Enterprise cannot exceed the percentage of 1/3 of its members, while the participation of the Local Self-Government Organizations (OTA) and the legal entities of public law is not allowed (N.P.D.D..) belonging to them. In Koin.S.Ep. Integration can participate N.P.D.D. with the approval of the body supervising them. Its members participate in it with one vote, regardless of the number of cooperative shares they hold. The capital of the company is divided into cooperative shares. The number of shares and their nominal value, which is the same for each share, are determined in the company's articles of association.
The members of Koin.S.Ep. have at least one mandatory cooperative share, as a minimum financial participation in the capital of the company, the amount of which is freely defined by the articles of association and is equal for all members. The acquisition of cooperative shares is carried out by cash payment.
What are the categories of Social Cooperative Enterprises (Koin.S.Ep.)?
Depending on their specific purpose, Social Cooperative Enterprises are divided into the following categories:
a) "Social Cooperative Integration Enterprises", which refer to the integration in the economic and social life of individuals belonging to Vulnerable Population Groups, ie those groups of the population whose integration into social and economic life is hindered by physical and mental causes or due to delinquent behavior. These include people with disabilities (physical or mental or mental or sensory), substance abusers or substance abusers, HIV-positive, incarcerated / released, juvenile offenders. At least 40% of the employees in these Companies necessarily belong to the Vulnerable Population Groups.
b) "Social Cooperative Social Care Enterprises", which relate to the production and provision of social welfare products and services to specific groups of the population, such as the elderly, infants, children, people with disabilities and people with chronic diseases.
c) Social Cooperative Enterprises of Collective and Productive Purpose, which concern the production of products and the provision of services to meet the needs of collectivity (culture, environment, ecology, education, services of general interest, utilization of local products, preservation of traditional activities and professions etc. a.) which promote local and collective interest, the promotion of employment, the strengthening of social cohesion and the strengthening of local or regional development.
What is the process of setting up these companies?
For the establishment of Koin.S.Ep. the process of establishing a civil cooperative is followed. The articles of association must be signed by at least seven persons, if it is a Coin.S.Ep. Integration, and by at least five persons if it is a Coin.S.Ep. Social Care or Collective Purpose. Indicative standard statute is available in electronic form from the website of the Ministry of Labor and Social Security.
The "Koin.S.Ep." are registered in the Register of Social Entrepreneurship. The Coin.S.Ep. are obliged before the start of their activity to submit, for their registration in this Register, an application as well as the supporting documents required for the registration. The submission of the application and the supporting documents can also be done electronically.
The submission of the declaration of starting a Koin.S.Ep. to the competent Public Financial Service is made after the issuance of the certificate of registration in the Register of Social Entrepreneurship. In the seal, in the forms, in the documents and in the contracts concluded by Koin.S.Ep. their registration number must be indicated in the Register. The annual program of Koin.S.Ep., as well as the report of its execution are obligatorily posted on the internet, on the electronic page of the Register.
How are these Social Cooperative Enterprises managed?
The Steering Committee consists of at least three members and consists of the Chairman and its members, while in case of a three-member committee the decisions are taken by a majority of two members. It must meet at least once a month.
The General Assembly of the members meets with a relevant decision of the Steering Committee of Koin.S.Ep. regularly, at least once a year, and within three months of the end of the financial year. The General Assembly of the members convenes extraordinarily if a relevant request is submitted with a specific issue to the Steering Committee of Koin.S.Ep. by 1/3 of the members.
What about the profits of Social Cooperative Enterprises? \\
What is the way to tax them and what are the incentives?
The profits of the Social Cooperative Enterprise are not distributed to its members, unless these members are also employees of it. Earnings are allocated annually at a rate of 5% for the formation of a reserve, at a rate of up to 35% are distributed to employees of the company as a productivity incentive according to their statutes and the rest is allocated for business activities and job creation.
It should be noted that the employees in the Social Cooperative Enterprises, who belong to the Vulnerable Population Groups and receive welfare or reintegration allowance or any kind of hospitalization or benefit, continue to receive these benefits at the same time as their remuneration from the Commonwealth.
Also the Koin.S.Ep. They can be part of entrepreneurship support programs, programs of the Labor Employment Organization (OAED) to support work and all kinds of active employment policies.
Are there insurance and tax liabilities or other liabilities to members who simply participate (and do not work) in these companies?
The mere participation of a natural person as a partner member in a Social Cooperative Enterprise does not give him commercial status and does not create insurance or tax liabilities.
In addition to the amount he pays for the acquisition of the cooperative share, the member of Koin.S.Ep. has no other liability to its creditors.
The Social Cooperatives of Limited Liability are the first institutionally recognized legal form of social enterprises in Greece.
Their aim is the socio-economic inclusion and professional (re)-integration of people with psychosocial difficulties, contributing to their therapeutic rehabilitation and, as far as possible, to their self-sufficiency. They were established by the Law Ν.2716/99, article 12, for the “development and modernization of mental health services”. They are considered legal entities of Private Law. They can develop any commercial activity. They constitute Mental Health Units.
Members of the Social Cooperative
The members of the Social Cooperative of Limited Liability (KoiSPE) are divided into three categories:
First category: individuals with psychosocial problems above 15 years of age. Members in the first category should constitute at least the 35% of the total.
Second category: mental health professionals/employees in the mental health sector, constituting up to the 45% of the total.
Third category: other individuals, community institutions, municipalities, other natural and legal persons of public or private law, forming up to the 20% of the total.
How is a Social Cooperative Managed?
The Supreme Body of the Cooperative is the General Assembly, which consists of all its members. The General Assembly monitors the cooperative’s function. Through the General Assembly, an Administration Board is elected. It is consisted by seven members.
Two (2) members of the Administration Board should be elected from the first category of members and five (5) others from the second and third category.
Τhe members of the second and third category should also elect a three member (3) Supervisory Council.
Activities
A Social Cooperative of Limited Liability (KoiSPE) can simultaneously be an enterprise producing products or providing services, a commercial enterprise, a supplier, etc. It can also develop activities of any kind: cultivation, animal breeding, tourism, services provision, etc., as well as cultural and educational activities.
Members’ participation in the Social Cooperative
In order to become a member, someone should purchase a mandatory cooperative share.
Who can participate in the production process?
Employees with mental health problems on full or part time basis. These employees continue to receive any pension or financial benefit they used to take.
Other employees.
Mental health professionals, who are moved from other organizations to the social cooperative personnel. Their wage is covered by their organizations or institutions.
Volunteers.
Why participate in a Social Cooperative?
The Social Cooperative is not only an enterprise of social economy, a new form of business activity. It attempts to offer a viable solution to the impasse of social and employment exclusion of people with psychosocial difficulties. It is based on the principles of equal participation, cooperation and solidarity among its members. All the members of the cooperative participate equally (with one vote) in the decision-making on matters that concern them. It develops activities to meet educational, cultural and social needs. It forms a new conception of collective action
List of Social Cooperatives in Greece
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Social Cooperative Archipelagos
Links for further reading
https://www.diaplous.eu/en/social-cooperatives-koispe/
https://www.startyouup.gr/el/a/50-koinwnikh-synetairistikh-epixeirhsh-koinsep
Aid and incentives, access to finance and markets
The “NSRF Executive Structure, Employment and Social Economy Sector, at the Ministry of Labor and Social Affairs” was created pursuant to paragraph 6.a of section 18 of Law 4314/2014 "on management, audit and implementation of development interventions for the 2014-2020 programming period”. According to Article 16 of the same Law, “an NSRF Executive Structure is to support the Ministry and its supervised bodies in reflecting, prioritizing and specializing needs across all policy areas of the relevant Ministry and enhancing its administrative capacity.
Following the aforementioned law provision a Joint Ministerial Decision of Establishment (58994 / EYTHY 97/04-06-2019 (Government Gazette 2343,B defines the precise responsibilities of the NSRF Executive Structure, Employment and Social Economy Sector, as follows: “…..supports the Ministry of Labour and Social Affairs in reflecting, prioritizing and specializing needs in the fields of "Active Employment Policies" and "Social Economy" , ….enhances the Ministry’s administrative capacity in relation to co-funded NSRF OPs and measures and programs funded by other resources.
In particular, it is responsible for the:
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designing active employment and social economy policies,
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planning, specialization, preparation and implementation of co- financed NSRF 2014-2020 programs, as well as any other co-financed programs by other EU financial mechanisms and / or in the framework of the European Economic Area (EEA, hereinafter),
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coordination and management of Programs co-financed by the European Globalisation Fund 2014-2020
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designing, planning, managing, monitoring, financing, implementing any action and / or program, actions and / or projects funded by national resources in the fields of active employment and social economy policies.
Historical Background
The “NSRF Executive Structure, Employment and Social Economy Sector, at the Ministry of Labor and Social Affairs” is a merger of three Special Services once belonging to the Ministry of Labor and having managed NSRF Operational Programs for at least three programming periods, as follows:
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Special Agency for the Implementation of Co-financed Actions by the European Social Fund (EYE-EKT).
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Special Service for Social Inclusion and Social Economy (EYKEKO), as a development of the Managing Authority of the Equal Community Initiative.
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Special Service "Planning and Organizing the Monitoring of the Implementation and Evaluation of Systemic Interventions" of the OP "Human Resources Development" (EY OF Systemic Interventions.
The resources of Koin.S.Ep. consist of the company's capital, third party donations, income from its business activity, grants from the Public Investment Program, the European Union, international or national organizations or local authorities, as well as any other income from the development of activities in accordance with its articles of association. They also have access to funding from the Social Economy Fund, which is established by a joint decision of the Ministers in Law 3912/11, as well as from the National Fund for Entrepreneurship and Development and the Development Law.
Links for further reading
https://www.apko.gov.gr/en/Pages/whoisApko.aspx
https://www.startyouup.gr/el/a/50-koinwnikh-synetairistikh-epixeirhsh-koinsep
EU support mechanism for Social Enterprises
The social economy is a crucial part of the EU socioeconomic landscape. The social economy accounts for 8% of the EU GDP, and there are 2.8 million social economy enterprises and organisations that provide 13.6 million jobs altogether. On a political level, work is currently underway towards a European Action Plan for Social Economy. In the context of the COVID-19 crisis, social economy actors have assisted the recovery by strengthening social services to complement government action. In the long term, social enterprises can reshape the post-crisis economy by promoting inclusive and sustainable economic models.
However, social economy and social economy actors still face some critical challenges that hold back their full potential. Actions aimed at boosting the sector are fragmented. There is a lack of dedicated funding and support services, e.g., training and incubators, dedicated to social enterprises. There is some confusion on the terminology and legal status of social enterprises in some regions. Accordingly, in order to foster the growth of the EU social economy, policy action is needed both on the union and region level. This is the context where the Interreg Europe projects come into play. They exchange good practices on tackling issues related to social enterprises' legal categorisation, lack of access to funding, and fragmentation of activities.
Social enterprises (SEs) come in various shapes and forms. There is no single legal form for social enterprises. The social economy can refer to a wide diversity of enterprises and organisations: cooperatives, mutuals, associations, foundations, charities, social enterprises, benefit corporations, voluntary organisations, etc. SEs can be micro-enterprises as well as large companies employing hundreds of people. SEs are not limited to a specific sector; they can be found in education, healthcare, social services, agri-food, banking, reuse and recycling, retail, housing, green industry, and so on.
The most important characteristic of social enterprises is that they combine societal goals with an entrepreneurial spirit. Unlike regular enterprises, social enterprises aim to achieve social impact rather than generate profit for owners and shareholders. Profits can still be earned and thus distinguishing it from non-profit organisations, but the social impact is more important than profits. Social enterprises are about inclusiveness, social cohesion, and addressing social and environmental needs. They often tackle pressing issues such as ecological problems, unemployment, (re)integration into society, gender inequality, problems related to aging societies, and so on, that are common among various regions in Europe. Therefore, SEs can benefit local development and alleviate socioeconomic imbalances while helping local communities.
The main characteristics of social enterprises are (Based on various literature, including EC Directorate-General for Employment, Social Affairs and Inclusion (2015) “A map of social enterprises and their ecosystems in Europe"; EC Directorate-General for Internal Market and Services (2015) “The Social Business Initiative of the European Commission”; Social Economy Europe (2019) “The Future of EU policies for the Social Economy: Towards a European Action Plan”; OECD (2020) “Social economy and the COVID-19 crisis: current and future roles):
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Social impact is more important than economic impact.
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Most of the profits are reinvested into the social goals of the enterprise.
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SE’s address social and environmental topics, i.e., they aim to improve communities or people's lives or the environment.
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SE’s often have inclusive or democratic governance structures.
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SE’s are often local community based and tackle a social issue in a specific area.
A more concrete way to conceptualize social enterprises is through three dimensions: a convergence of social, entrepreneurial, and governance dimensions.
EU financial support for the social economy
European Social Fund
The European Social Fund (ESF) is the EU’s main tool for promoting employment and social inclusion – helping people get a job (or a better job), integrating disadvantaged people into society and ensuring fairer life opportunities for all. In the period 2014-2020 the ESF provided around 80 billion euros of support funding to train people and help them get work, to promote social inclusion, to improve education and training and to improve the quality of public services. On a regional level, ESF funds are often used to also promote social entrepreneurship and related activities.
EaSI
The Programme for Employment and Social Innovation (EaSI) is a financing instrument at the EU level to promote a high level of quality and sustainable employment, guaranteeing adequate and decent social protection, combating social exclusion and poverty and improving working conditions. One of the main objectives of EaSI includes increasing the availability and accessibility of microfinance for vulnerable groups and micro-enterprises and to increase access to finance for social enterprises. EaSI is managed directly by the European Commission. It is built on three main axes out of which the "Microfinance and Social Entrepreneurship" axis is most relevant in the context of this policy brief (The other two are the PROGRESS axis and EURES axis). The overall budget for EaSI for the period 2014-2020 was over 900 million euros.
Through the EaSI Guarantee 96 million euros have been made available for interested microcredit providers and social enterprises. The Guarantee measure enables microcredit providers and social enterprise investors to reach out to entrepreneurs they would not have been able to finance otherwise for risk considerations. The Commission has selected the European Investment Fund as its entrusted entity to implement the EaSI Guarantee. Applications for the EaSI Guarantee can be submitted through the European Investment Fund website.
16 million euros are available through the EaSI Capacity Building Investments Window. It aims at building up the institutional capacity of selected financial intermediaries that have not yet reached sustainability or need risk capital to sustain their growth and development. It covers equity and, in exceptional cases, loans. The Commission has selected the European Investment Fund as its entrusted entity to implement the EaSI Capacity Building Investments Window.
Open calls for funding
EaSI often has calls for proposals. For example, in 2020 funds were made available for the development of finance markets for social enterprises across Europe as well as for establishing competence centres for social innovation. Open calls can be found here.
Links for further reading https://www.interregeurope.eu/fileadmin/user_upload/plp_uploads/policy_briefs/The_social_economy_and_support_to_social_enterprises_in_the_European_Union_Policy_brief.pdf