A couple of events surrounding social enterprise legislation in Italy and the UK have brought the profit distribution debate back on the table.
In mid-December, the Italian Parliament caught the social enterprise sector by surprise as it announced an amendment to a draft proposal of the financial law, which would allow social enterprises to redistribute up to 50 percent of its profit to shareholders. Currently, Italian social enterprises cannot redistribute profit.
According to the Euclid Network, the proposed amendment caused outrage and immediate criticism among the social sector, particularly because it lacked consultation with civil society organizations.
The move has been compared to the UK’s new legal definition of a social enterprise passed in January, which allows an organization to distribute less than 50 percent of its profit to shareholders.
Advocates of the move argue that it allows social enterprises to compete with private companies. But opponents believe that the Italian government is replicating UK’s model without considering cultural and contextual differences. Others believe that profits should be strictly reinvested in the company, limiting profit-maximizing behaviour.
Just 24 hours after the amendment was announced, and in light of the backlash, Italian Forum Terzo Settore announced that it had been withdrawn (in Italian).
Countries with legislation on social enterprise are divided on their views of profit distribution. In Latvia, profit distribution is not allowed at all. In Belgium, profit distribution is allowed but limited with a cap on dividends. And in Finland, there is no limit at all.
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