On Thursday, 15 December, the Saeima adopted in the first reading a proposal for the Social Entrepreneurship Law, aimed at promoting social entrepreneurship in Latvia.

So far there has been no legal framework for separating social enterprises from regular enterprises or NGOs. Likewise, there have been no specialised state aid instruments to support the establishment or expansion of social entrepreneurship.

The draft law was developed by an ad hoc working group under the Social and Employment Matters Committee in order to improve the society’s quality of life and promote employment among the social groups at risk of social exclusion. The proposed draft law would provide for a legal framework setting criteria for acquiring the status of a social enterprise, as well as procedures for receiving state aid.

The status of a social enterprise will be granted to enterprises that comply with the criteria defined in the new law.  The state will provide specific support to social enterprises on a condition that they do not distribute profit to owners. That is, profit is to be invested in attaining the goals defined in the articles of incorporation of each social enterprise or for creation of public good.

One group of support instruments is defined as measures that social enterprises are entitled to receive through an application procedure; they include the following support: corporate income tax relief, the right to accept donations and to attract volunteers for attaining the goals defined in social enterprises’ articles of incorporation. 

The other group of support instruments is defined as a right rather than an obligation of the state and municipalities to  allow financial contributions and donations in kind, grant real estate tax relief and allow public entities to provide social enterprises with their property to be used free of charge.

The Ministry of Welfare is responsible for promoting and developing social entrepreneurship.

The authors of the draft law indicated that currently there are approximately 60 enterprises and associations that would qualify for the status of a social enterprise. They expect the law to expand the number of social enterprises up to 200 in the medium term.

In Europe, the concept of social entrepreneurship emerged in 1990s in response to the difficult social challenges that were beyond the capacity of the state and NGOs, as well as outside the commercial interests of conventional entrepreneurs.

Over the past 30 years, the concept of social entrepreneurship has considerably evolved and grown, enabling social enterprises to address socially important issues in such areas as environment, culture and education, while providing protection and employment to socially vulnerable groups. Social enterprises apply business methods and approaches, as well as make targeted investments that are aimed at securing sustainable solutions to social challenges.

For instance, in the United Kingdom, social enterprises currently account for 5% or 70 000 of all business entities.

The draft law will be further considered by the Social and Employment Matters Committee and the Saeima in the second and third reading.

Saeima Press Service