The social enterprise in Malta : implications and applicability

Abstract

Purpose: The main objective of this study is to assess the social, financial and corporate governance (CG) implications of the proposed legislation. In light of such implications, the study also assesses the applicability of the social enterprise (SE) under such legislation. Design: A mixed methodology was adopted. Fifteen interviews were held with experts proficient in the area of study. Such data was supplemented by 52 valid responses to a questionnaire sent both to co-operatives and voluntary organisations (VOs) in Malta. Findings: The study indicates the need for such SE-specific legislation, the SE being a unique business structure prioritising social aims. The promotion of SEs is projected to consolidate social cohesion whilst reducing social costs. The proposed provisions are also expected to help towards the achievement of SE economic viability, subject to incentives being inserted in statute in due course. The CG dimension was also observed to require much more emphasis, such as a code of good CG. Further details were called for as regards the type of regulatory structure, the case also being made for the addition of a mandatory social audit. Conclusion: The study concludes that the proposed legislation has various positive social, financial and CG implications and that the SE, as being proposed, is applicable and filling a void within the Maltese environment. Although such legislation offers both a new legal form and a label, its reference to the Companies Act which ignores SEs’ unique social dimension is questionable. Alternatively, a holistic SE regulatory framework may be developed. Furthermore, statutory thresholds, such as for dividend distribution and trade income, are to be possibly rendered more flexible. Value: This study aspires to raise awareness about the implications of the proposed regulatory framework in Malta, hence hopefully promoting the application of the concept through the recommendations made.