New initiative policy document in respect of a ‘new’ legal form – the so-called “BVm”

On the 24th day of September 2018, an initiative policy document (the “Initiative“) was submitted by a member of the Dutch House of Representatives to (i) fortify the position of social entrepreneurs by creating a legal form fitting for social enterprises, (ii) include the Social Enterprises Code (Code Sociale Ondernemingen) in Dutch law and (iii) alter the government policy on this subject.

The BVm
The Initiative proposes to implement a ‘modality’[1] on existing Dutch legal forms in order to tailor these to the practical needs of social entrepreneurs. As currently the BV is the most used legal form (46%) by social enterprises in the Netherlands, the Initiative specifically focusses on the modality of the ‘social BV’ (the “BVm“), The Initiative, however, does not exclude the possibility of modalities on other legal forms.

In line with the coalition agreement 2017-2021, the Initiative aims to stimulate companies with a social mission/goal. The Initiative can be seen as a retry of the bill ‘social enterprises(2009)’. This bill, however, only intended to implement a ‘modality’ on two merely Dutch non-profit type of legal forms, namely the association, and the foundation for social entrepreneurs, and was withdrawn in 2013.

Social Enterprise
According to the European Commission[2], a social enterprise is ‘an undertaking which main objective is to achieve a social impact, rather than generating profit and which reinvests its surplus mainly to achieve these social goals.‘ Social enterprises are undertakings producing a product, or providing a service in the public or semi-public domain, having a revenue model to secure its continuity without being dependent on (government) grants or donations.

Social enterprises are usually smaller companies or startups, which generally encounter the following issues:

  • Attracting capital: Due to the ratio between risk/return and the uncertain or long payback period of the investment;
  • The relation to the government (tendering): public contracts are usually awarded to the lowest offer. Due to their smaller size, these startups are generally unable to compete with the larger competing companies;
  • Recognizability: The currently used legal form of the BV is inherently commercial in nature, and is therefore not recognizable as an entity with a pure social purpose. Lack in recognizability is one of the main factors negatively impacting growth.

The proposals in the Initiative aim to, amongst other things, address these above-mentioned issues. With the BVm, an intermediate form between the BV and the foundation is created, giving content to the existing lacuna between the inherently commercial character of the BV and that of the non-profit foundation.

Current situation:
The parliamentary groups have taken note of the Initiative, and have submitted several questions regarding this Initiative in the period before the procedural session with a special committee consisting of representatives of all parliamentary groups on November 15th 2018. At this time, the initiator of the Initiative has not yet responded to these questions and it is unclear when a reaction hereto can be expected.

The full text of the Initiative can be found here. (available in Dutch only)

[1] Deriving from the Latin ‘Modus’, which translates to ‘mode‘, ‘way‘ or ‘variation of’.
[2] The Social Business Initiative of the European Commission (2014).

Martina Priekaar