Legal Information ... in Germany

Legal information on Social Entrepreneurship

In Germany there is still no real acceptance of the concept of social enterprise, either from the government or from the public sphere.

Nevertheless the social economy (Sozialwirtschaft) is anchored in the German constitution, according to the principle of subsidiarity. This means that many social services paid for through social insurance charges are delivered by non-profit associations. These are federated in six national welfare associations (Verbände der Freien Wohlfahrtspflege). The types of social enterprise are:

  • Co-operatives (Genossenschaften – e.G.): there are some 7,500 co-operatives in the country, with the sectorial split being roughly as follows: 1,100 banks, 2,500 agricultural, 2,000 housing, 2,000 co-operatives of businesses, 200 consumer. Co-operatives have traditionally been strictly oriented towards member benefit rather than social impact. However in 2010 co-operative law was broadened to permit co-operatives with social and cultural objectives, and by some estimates there are something over 300 social co-operatives in the country. Another recent growth area is renewable energy: there are 650 energy co-operatives in Germany, mostly in solar energy, with 136,000 members.
  • Work integration enterprises (Integrationsfirmen) benefit from a relatively generous financial regime, financed under Sozialgesetzbuch (SGB) IX by a levy on enterprises which do not employ their legal quota of disabled people. The term soziales Unternehmen is also used to refer to integration firms.
  • Registered associations (eingetragene Vereine – e.V.) are the legal status for a registered voluntary association. While any group may be called a Verein, registration as an eingetragener Verein holds many legal benefits because a registered association may legally function as a corporate body (legal person) rather than just a group of individuals. Nevertheless, they are currently illegal under German banking law. (See )
  • Share companies trading in the public interest may seek registration as a gemeinnützige Gesellschaft mit beschränkte Haftung – gGmbH.
  • There are some 20,000 foundations (Stiftungen) in Germany, 96% of which are charitable. Some are donors, while others have significant non-profit operational activities. A number of large corporations are controlled by foundations, which apply their dividend income to charitable objects. The Deutscher Stiftungsverband represents 3,600 foundations with total assets of over EUR 100 billion.

In recent years the concepts of inclusive and social entrepreneurship have started to take off in Germany, and are for instance promoted by IQ consult in Berlin. In parallel, Grameen Creative Lab in Wiesbaden has started to promote the concept of 'social business' (although this term is also confusingly applied to businesses based on social networking technology). Following Muhammad Yunus's precepts, social businesses usually adopt a conventional commercial structure (Gesellschaft mit beschränkte Haftung – GmbH) but have a primary social objective and reinvest their profits rather than distributing them to financial investors.

Relevant laws that have an impact on the development of social enterprises include the following:

  • Sozialgesetzbuch (SGB) – Social Law
  • Verdingungsordnung für Leistungen (VOL) – regulations for public procurement
  • Umsatzsteuergesetz (USTG)/Abgabenordnung (AO) – tax law and regulations
  • since 2010 social criteria and not just price can be considered in public procurement (but this is not obligatory).