Social entrepreneurship: legal dimension

Abstract

Social entrepreneurship has emerged as one of the most significant hybrid phenomena at the intersection of commercial activity, civil society, and public policy, yet its legal regulation remains fragmented, conceptually contested, and structurally inadequate across most jurisdictions. This article conducts a comparative legal analysis of the principal models of legal and regulatory treatment of social enterprises, examining the social cooperative model as exemplified by Italy and Belgium, the special law model as implemented in Malta and Cyprus, and the integration model characteristic of Spain and France. Particular attention is devoted to two of the most influential common law constructs, the British Community Interest Company and the American benefit corporation, whose contrasting approaches to the balance between entrepreneurial freedom and the credibility of social identity reveal a fundamental regulatory choice that legislators worldwide are compelled to confront. The article further examines the OECD’s 2022 Guide on designing legal frameworks for social enterprises and the EU Social Economy Action Plan (2021) as the principal international benchmarks against which national regulatory systems are assessed, identifying the systemic obstacles to effective regulation identified in the comparative literature: definitional vagueness, competing regulatory requirements, absence of standardized social impact assessment, and the risk of “purpose-washing.”

Against this comparative background, the article analyses the current state of Ukrainian legislation on social enterprises, including the Law of Ukraine “On Social Enterprises” (No. 2710-IX of 2022), and assesses its conformity with EU standards and the obligations arising from Ukraine’s candidate status and the Association Agreement. The study argues that the most appropriate regulatory model for Ukraine is the legal qualification model, which enables organizations of any existing form to acquire social enterprise status upon meeting established criteria, without requiring reorganization into a new legal entity. Drawing on the CIC experience, the article contends that the effectiveness of such a model depends critically on the introduction of mandatory annual reporting, an independent supervisory mechanism, and a prior public interest test — instruments that significantly reduce the risk of purpose-washing and enhance institutional legitimacy. The adoption of a dedicated law on social enterprises incorporating these elements is identified as a priority task of Ukraine’s economic and legal reform agenda.