Lately, there has been conducted a conversation in the ЗMIN IN format with invited lawyers. The conversation was focused on legal and efficient mechanisms of social entrepreneurship in a legal field on the example of specific current stories of the Foundation's partners.
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We offer a short synopsis of the meeting.

In ЗMIN, since the very beginning, we have introduced a separate direction of the support of social entrepreneurship into our strategy. We see it as a chance to solve the issue of public organizations and non-governmental initiatives being dependent on donor assistance. As a result, the autonomy, efficiency, and the teams' focusing on exactly those topics and issues that they can expertly address without the influence of donor politics. Results of the research "Index of civil society stability" show that the weakest spot of the civil society in Ukraine is its financial side. The third sector often depends on the international donors. As a result, it is quite weak. Social entrepreneurship may become both a tool and a chance of the financial independence for non-profit organizations. This conversation was initiated for subject analysis of stories and problems faced by our partners, and joint discussion of possible decision scenarios. - Khrystyna Boyko, director of ЗMIN

Social entrepreneurship is the entrepreneurial activity that, regardless of its organizational or legal form, solves social or ecological issues, and is currently divided into 3 categories in Ukraine:

• Organizations that employ vulnerable population groups.
• Organizations that redirect part or all their profit to the implementation of the statutory activities of the
  public and charitable organizations.
• Organizations that redirect part of their profit to the third organizations, which solve social and/or
  ecological issues.

There is also a notion of CSR – corporative social responsibility, which outlines the situation when the business directs 10-15% of their profit to social goals.

The main theses of the meeting

• Social entrepreneurship as a valuable business model.

Social entrepreneurship should follow the way of an efficient business model, and the fact that it is social should change nothing. It should function according to the same rules as the rest of the business. The quality of the product should not be lower or worse than that offered by a business with a similar service or product in the
market.

• Adaptation and flexibility of the tax law.

Social entrepreneurs work in the same tax and legal field as the commercial sector, but, in addition to the burden of all standard taxes, they also have an additional responsibility, which is the external communication about their social aim, and addressing a specific issue. Probably, a different tax model could be developed for social
business.

• The lack of a regulator as an opportunity and a threat.

As of now, there exists no separate law, that would regulate and specifically define what the social entrepreneurship is and what rules it follows. This is an advantage, as it provides the opportunity to maneuver within the given framework and look for various options suitable for each separate model. But at the same time, it is a disadvantage because different interpretations of the law can pose a risk.

• Development of a dialogue with tax inspectors.

If a social enterprise works within the framework of a public organization, there is a risk to lose their status of being non-profit, as the tax office sometimes does not understand, how PO can earn money. Still, PO also has a right to engage in entrepreneurial activities. The issue lies in the fact that a tax officer has a power to remove PO from the register of non-profit organizations, and it is possible to be renewed only via court. There are renewal precedents, though, which is important. The more precedents like that, the more understandable this system will become for the tax officers. Just 10 years ago, it was discussed if POs must receive profit, and now it is more of a rhetorical question.

• Perspectives of a dialogue between the business and the third sector.

We have public organizations with fantastic expertise in their sector, but they lack understanding of how the business works. And vice versa: we have a good business that is looking for models of social impact, but it often lacks expertise in this context. It has been observed that they lack connection. If the business and the third sector (public organizations, funds, initiatives) had more chances for a dialogue, such exchange of the expertise would be mutually beneficial. Meanwhile, over the last years the distance between the business and social sphere has been shrinking. It is a good tendency, as people from the third sector start to think in a business way, while the business itself more and more often speaks of the social responsibility.

• Social business as a startup.

It is interesting to view the social business as a form of a startup. In fact, the idea of a startup is to offer some highly successful innovative solution for a specific problem. It would be interesting to found a "social valley", that could organize a contest among social enterprises. Over the years, this can become an engine of qualitative changes.

• The value of building an ecosystem.

It is both important and necessary to build a competitive ecosystem of donor organizations and develop a specific roadmap for its support of efficient social entrepreneurship.

• Trust as a social glue.

The society lacks trust. The state does not trust the business, the business does not trust the third sector etc. This trust must be developed. However, it cannot be built on empty phrases or good intentions. The partnership should be equal, and the trust – mutual, responsible and documented within legal norms.

Decisions

The conversation was based on the story of a partner organization Starist na radist ("Old age with joy") and their social project Vbrani.
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The project encourages elderly people, who live in geriatric nursing homes, to make accessories. The elderly people have many years of knitting experience and can realize their potential, while the young help them sell the products, made by experienced hands.
From the legal side, the most suitable forms of a safe and legitimate work for the social enterprise Vbrani, included:

• Civil-law contracts (which cannot be systematic),
• A format of hired employees.
• Individual entrepreneurs – as an optimal option, offered by a general framework of our law (individual
  entrepreneurs of retirement age are exempt from paying Unified Social Tax).
• Granting scholarship to the craftswomen (cannot be on a regular basis; Unified Social Tax is not paid).
• Signing contracts and cooperating with geriatric institutions.

*ЗMIN IN – a format of a substantive, professional and honest conversation, a platform for dialogue, joining efforts for the sake of collaboration between the public sector, business, managers, philanthropists, and government structures. It is a chance to meet in the format of a conversation, discussion, expert presentation with the foundations' partners on the topics and issues we see in our work.

Experts:
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Anna Lysko – lawyer, Lawyers' Association "LI Partners", Lviv Mediation Center
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Lidiya Klymkiv – lawyer, Lawyers' Association "Axon Partners"
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Participants:
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Oksana Bryndzak, Nataliya Duban, Mariya Orynchak, Serhiy Matkivskyy – PO "Starist na radist" and the project "Vbrani"
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Tetiana Fedoruk, PO "Jam Factory"
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Svitlana Tymkiv, City Museum
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Taras Levytskyy, social furniture workshop "WoodLuck"
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Anna Ivanicheva, PO "Workshop of the Dream"
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Anzhelika Zozulia, PO "Plato"

Anna Hlova, "Emmaus Center"
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Sofiya Holub, Institute of Leadership and Management UCU
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Khrystyna Boyko, Khrystyna Rutar, Daryna Shutiak, Vira Matviyiv – ЗMIN Foundation
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Iryna Shymon, moderator of the meeting
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Notes taken by Iryna Shymon
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Photo: Taras Bovt