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Legal Framework for Social Entrepreneurship of Republika Srpska

The Social Entrepreneurship Law of Republika Srpska (hereinafter referred to as the "Law") was published In the "Official Gazette of Republika Srpska" No. 111 on December 9, 2021. The Law was adopted by the National Assembly at its session held on November 25, 2021, and it entered into force on the eighth day after its publication.

Article 1 determines the subject of the Law, so stipulates that this Law regulates the concept, goals and principles of social entrepreneurship, requirements and procedure for acquiring the status of Socially Owned Enterprise, maintaing the Register of Social Enterprises, tasks and manner of work of the Council for Social Entrepreneurship and other issues of importance for social entrepreneurship in Republika Srpska. The goal of the Law is to use the potential of social entrepreneurship for sustainable economic and social growth and development of Republika Srpska.

Generally speaking, the notion of social entrepreneurship refers to a situation when a legal entity operates with the idea and goal of directing the realized profit to a clear socially useful mission. Therefore, social entrepreneurship represents an organized activity based on market principles, in order to accomplish social goals, i.e. to create opportunities for solving social, health, cultural, economic, environmental or other social problems of certain groups of citizens, immediate or wider community, as well as prevention, the emergence and elimination of the consequences of social exclusion and the strengthening of social solidarity and cohesion. The social mission of a social enterprise can be accomplished in one of the following manners:

1) by employing categories of persons, who are otherwise more difficult to employ during their stated status,

2) performing activities that achieve social goals;

3) by financing projects which achieve social goals.

 

In connection with the above, the Law defines a Socially Owned Enterprise as a legal entity (company, foundation, association, cooperative, institution) that performs activities, and from which a special benefit is realized by the larger or smaller social community. Therefore, the idea is to employ a large number of socially and economically excluded people in Socially Owned Enterprises, which provides significant support to the economy and reduces the burden of social benefits. The status of a Socially Owned Enterprise is acquired on the basis of a request submitted to the Ministry of Economy and Entrepreneurship of Republika Srpska. In the event that it is determined in the conducted procedure that the applicant meets the requirements prescribed by this Law, the Minister shall issue a decision on acquiring the status of a Socially Owned Enterprise.

Paragraph 1 of Article 7 defines the requirements for acquiring the status of a Socially Owned Enterprise, and it includes:

1) that it is registered as a legal entity,

2) to have its seat on the territory of Republika Srpska,

3) that in relation to the total number of employees, there are at least 30% of persons belonging to the category of persons who are more difficult to employ in accordance with Article 5, paragraph 4, item 1) of the Law, if they achieve social mission on the basis of employment,

4) that it was established with the aim of achieving a social mission,

5) that the business is based on a restriction in the distribution of realized profit,

6) that its employees participate in the consideration of decisions for the adoption of which it is necessary to obtain their opinion in accordance with this Law,

7) that the social mission is clearly expressed.
 

The law further imposes two restrictions, stating that public sector entities can have up to 49% ownership in a Socially Owned Enterprise, while on the other hand, public enterprises and public institutions cannot acquire the status of a Socially Owned Enterprise. In addition, the law constitutes the obligation of the Minister to keep the Register of Socially Owned Enterprises. The said Register contains documents and data proving the fulfillment of requirements for acquiring the status of a Socially Owned Enterprise in accordance with the law, as well as any subsequent changes in documents and data.

When we talk about the termination of a legal entity, the law prescribes that the status of a Socially Owned Enterprise ceases to exist due to:

1) termination of the Socially Owned Enterprise,

2) by the decision of the Socially Owned Enterprise to cease performing activities for the purpose of achieving the social mission.

However, a Socially Owned Enterprise may make a decision on termination provided that it has realized all contracts, i.e. projects on the basis of which it has exercised its rights to monetary and non-monetary funds.

After the completion of the procedure, the Minister issues a decision on termination of status and deletion from the Register. Otherwise, in case the equiremetns are not fulfilled, the Minister issues a decision rejecting the request for termination of the status of a Socially Owned Enterprise.

Due to the need to monitor the situation in the field of social entrepreneurship to improve its development, the law provides for the establishment of the Council for the Development of Social Entrepreneurship of Republika Srpska, which is established as an advisory body to the Government of Republika Srpska.

Furthermore, the Socially Owned Enterprise is obliged to make all its financial and business reports and plans, as well as documents on organizational and ownership structure, then governing bodies in the enterprise, decisions and other internal regulations of the Socially Owned Enterprise, available to the public via its website, except those determined as a trade secret. The Socially Owned Enterprise submits to the Ministry all business and financial plans and reports, decisions on profit distribution, plan of reinvestment or financing from profit, decisions and reports on realization of the company's social mission and democratic participation in decision-making, but also other data important for monitoring the application of this law.

Considering that this Law introduced the concept and institute of social entrepreneurship for the first time, it is extremely significant to keep in mind the criteria for acquiring the status of a Socially Owned Enterprise as well as the way it functions, all with an aim to prevent possible abuse and use of the status. Therefore, given that the mandatory framework for the functioning of this type of entity has been created, for the adequate functioning of this novelty, its adequate application in practice is of great importance, as well as a quality connection with existing laws.

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Nikolina Zubac's picture

Nikolina Zubac is a Junior Associate employed by the Law Firm SAJIC since 2019. Nikolina graduated from the University of Belgrade, Faculty of Law in 2018.

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