Social entrepreneurship
Important regulations by the Cabinet of Ministers:
- Regulations on the groups of the population at risk of social exclusion and the procedure for granting, registering and supervising the status of a social enterprise
- Regulations on the Commission for Social Enterprises
- Regulations on the conditions for granting business support to social enterprises and the procedure for granting support
How to get the status of a social enterprise?
Social enterprise status is open to limited liability companies that carry out creative economic activities with a positive social impact, such as providing social services, building an inclusive civil society, promoting education, supporting science, working to protect and preserve the environment, protecting animals or promoting cultural diversity.
Whether a newly established or existing, whether a small or a fully-fledged limited company, a social enterprise must meet five criteria set out in the Social Enterprise Act in order to qualify as a social enterprise:
When setting up a new LLC, compliance with these criteria must be incorporated in the incorporation documents before going to the Companies Registry. An existing LLC will need to make changes to its Articles of Association and register them with the Register of Companies, as well as provide other documents confirming compliance with the criteria.
For more information on setting up an LLC, preparing the necessary documents, state fees and other issues, please visit the Register of Enterprises website.
The Ministry of Welfare is responsible for the promotion and development of social entrepreneurship. Therefore, once the LLC has been established and/or its Articles of Association and documents have been adapted to the criteria for social enterprise status, the application form for social enterprise status must be completed, all required documents attached and submitted to the Ministry of Welfare for evaluation. For a sample application form and detailed information on how to fill it in, click here. A special Social Enterprise Committee assesses the applications and awards the social enterprise status. The Ministry of Welfare maintains a Register of Social Enterprises on its website.
The law provides a number of support measures for social enterprises. A company that has obtained this status may exclude a number of expenses from its corporate tax base, such as the cost of rehabilitation and social inclusion measures for employees, expenses for the integration of persons into the labour market, the acquisition of assets that serve to achieve the objectives set out in the statutes, and donations to public benefit organisations.
The other part of the support instruments are formulated as the right of the state and local governments to grant certain benefits and support – the right to donate movable property, to grant real estate tax discounts, to transfer owned property for gratuitous use.
A social enterprise may use volunteers for activities that are not related to the administration, accounting or core functions of the enterprise.
The status of a social enterprise in Latvia can be obtained by a trader who meets the criteria laid down by law. The State provides certain support to social enterprises, but they are not allowed to distribute profits among the owners of the enterprise. It must be invested to achieve the objectives set out in the statutes – the creation of public benefit. In addition, there are certain areas in which a social enterprise is not allowed to operate, such as the production and sale of arms and ammunition, alcoholic beverages, tobacco products, gambling and betting, and the financial and insurance sectors.
