PROJECT MANAGEMENT

&
ENTREPRENEURSHIP

KHU-702
UNIT-5
CONTENTS
Social Entrepreneurship:
Social Sector Perspectives and Social
Entrepreneurship, Social Entrepreneurship
Opportunities and Successful Models, Social
Innovations and Sustainability, Marketing
Management for Social Ventures, Risk Management in
Social Enterprises, Legal Framework for Social
Ventures.
 Social Entrepreneur
The social entrepreneur is defined as someone who aims
for value in the form of transformational change that will
benefit society at large.
A social entrepreneur is someone who recognizes a social
problem and uses entrepreneurial principles to organize,
create, and manage a venture to make social change.
An understanding of Social Entrepreneurship history
reveals that the social Entrepreneur is usually a creative
individual who questions established norms and harness
entrepreneurial spirit and dynamism to enrich and help the
society rather than making themselves rich.
 Social Entrepreneur
According to Dees, a social entrepreneur changes
society by:
Adopting a mission to create and sustain social value
Searching for and pursuing new opportunities to
serve that mission
Continually innovating, adapting and learning, in
pursuit of the mission
Acting boldly without consideration of resources
current in hand
Being accountable for outcomes of activities
 Social Entrepreneur -
Examples
 Florence Nightingale (1820-1910) :- Founder of Modern Nursing
for improve Hospital condition
 Dr. Maria Montessori (1870-1952) :- Developed the Montessori
approach to early childhood education.
 Ela Bhatt (India) :- Founder of “Self-Employed Women’s
Association” (SEWA) and the SEWA Cooperative Bank in
Gujarat.
 Dr. Verghese Kurien (India) :- Founder of the AMUL Dairy
Project.
 Sri Sri Ravi Shankar (India) :- Founded Art of Living
Foundation and International Association for Human Values.
 Muhammad Yunus (Bangladesh) :- Founder of Microcredit and
the Grameen Bank. He was awarded the 2006 Nobel Peace Prize
 Social Entrepreneur -
Examples
Name Organization Description

Anshu Gupta Goonj Clothing, Disaster relief

Muhammad Yunus Grameen Bank Poverty, microfinance
Karthik Pawsh helped the needful connect with blood
Naralasetty donors through the means of facebook

Ria sharma Make Love Not supports victims of acid attacks

Scars (MLNS)
Aarushi Batra Robin Hood Army organization collect food from
restaurants and weddings
Dr Bindeshwar Sulabh Sanitation
Pathak International
 Social Entrepreneur -
Objectives
To create and maintain a stable level of employment.
Create jobs and provide support to socially vulnerable
groups.
Social Entrepreneurship promotes development of
entrepreneurial skills.
Compensating countries narrow place.
Social Entrepreneurs create social innovation and change
in various areas, including education, health, environment
and business development.
Social Entrepreneurship reduces poverty.
 Social Enterprise
A social enterprise is an organization that applies
commercial strategies to maximize improvements in human
and environmental well-being, rather than maximizing
profits for external shareholders.
Social enterprises can be structured as a for-profit or non-
profit, and may take the form of a co-operative, mutual
organization, a disregarded entity, a social business, or
a charity organization.
Many commercial enterprises would consider themselves to
have social objectives, but commitment to these objectives
is motivated by the perception that such commitment will
ultimately make the enterprise more financially valuable.
Social Enterprise
Social enterprises differ in that, inversely, they do
not aim to offer any benefit to their investors,
except where they believe that doing so will
ultimately further their capacity to realize their
social and environmental goals.
In the US, the term is associated with 'doing
charity by doing trade', rather than 'doing
charity while doing trade‘.
 Social Enterprise
In India the term "Social Enterprise" is not widely used, instead
terms like NGOs and NPOs (non-profit organizations) are used,
where these kind of organizations are legally allowed to raise
fund for non-business activities.
Child Rights and You (CRY) and Youth United are examples of
social enterprise, who raise funds through their services, fund-
raising activities (organizing events, donations, and grants) or
sometimes products, to further their social and environmental
goals.
However, there are social businesses with an aim for making
profit, although the primary aim is to alleviate poverty through a
sustainable business model.
 Social Entrepreneurship
 Social Entrepreneurship create innovative solutions to
immediate social problems and mobilizes the ideas,
Capacities, resources, and social arrangement required for
sustainable social transformation.
 Ashoka is the global association of the world’s leading
social entrepreneurs— men and women with system
changing solutions for the world’s most urgent social
problems
 Since 1981, Ashoka has elected over 1,800 leading social
entrepreneurs as Ashoka Fellows , providing them with
living stipends, professional support, and access to a global
network of peers in more than 60 countries.
Social Entrepreneurship
 Differentiate between
Commercial/Social Entrepreneurship
Commercial Entrepreneurship Social Entrepreneurship
Commercial Entrepreneurship represents Social Entrepreneurship refers to the
the identification, evolution, and identification, evolution, and exploitation
exploitation of opportunities that result in of opportunity that result in social value.
Profit.

Commercial Entrepreneur may create Social Entrepreneur may generate profit,

change in the society, but that is not the but for him/her that is not the primary
primary purpose of starting the venture. reason for starting the venture.

Another key difference between the Social For the Social Entrepreneur, however,
and the Commercial Entrepreneur is in the wealth also encompasses creation of the
meaning of wealth creation. For the social and environmental capital.
Commercial Entrepreneur, „wealth‟ is
same as profit.

Change the face of business Change the face of society

 Social Entrepreneurs
 What Challenges do Social Entrepreneurs tackle? Social
entrepreneurs typically address areas of unmet social need or
social opportunity creation that the public or private sectors
have failed to address
Health
Water/Sanitation
Education
Sustainable Infrastructure: Housing, Communications
Renewable Energy
Environmental Sustainability
Food and Nutrition
Women’s Issues
Sustainable Agriculture & Technology
SOCIAL ENTREPRENEURSHIP –
THE NEW MODEL
In order to understand social entrepreneurship better, a
model of social entrepreneurship was created as shown
in Figure .
Social entrepreneurship is categorized into two different
categories; non-profit and hybrid (an organization with
financial and social goals) organizations.
Traditional NGOs (non-governmental organization) is
categorized under non-profit. This is the kind of
organization that is neither a part of a government nor a
conventional profit oriented business.
SOCIAL ENTREPRENEURSHIP –
THE NEW MODEL ..
SOCIAL ENTREPRENEURSHIP – THE
NEW MODEL …
 The second category is further divided into social hybrid and
economy hybrid. Both are organizations with double bottom line
goals which have financial and social objectives.
 What differentiates these two is the primary objective, either more
inclined towards social or economy.
 For social hybrid organization, it focuses more on social missions,
while income generation is secondary objective.
 Usually the financial gains are being used for sustainability of the
organization.
 On the other hand, economy hybrid organization’s focal goal is profit.
 However, it is actively involved in social activities. In other words,
socially-responsible business organizations are grouped in this
category.
Integrating a social enterprise with a non-profit organization
 You can integrate a social enterprise with a non-profit organization
in the following ways:
• Embedded
• The social enterprise and the social program is one and the same
• The creation of the business has client service at its heart.
• Integrated
• The business activities overlap with the social programs
• The business acts as a funding mechanism and helps in the
expansion or enhancement of the mission of the organization
• External
• The business and social activities are separate. Further, they are
usually not related to the mission of the organization
• The business is created to fund and support the social activities
Identify a Social Entrepreneurship
Opportunity
Opportunities in social entrepreneurship are based on the
need to create social value which benefits the local
community.
Creating social value and not wealth is the main driver
for social entrepreneurs. Additionally, they need to
achieve financial stability to maintain value.
Types of Social Business Models
 The Social Enterprise business Models can be applied to
programs, institutions, or service delivery. they are designed
keeping in mind the social enterprises’ objectives (both financial
and social), marketplace dynamics, mission, the legal
environment, and client needs and/or capabilities. Usually,
business models are embedded within the organization.
Types of Social Business Models...
• Entrepreneur Support
• Market Intermediary
• Employment
• Free-for-Service
• Low-income Client
• Cooperative
• Market Linkage
• Service Subsidization
• Organizational Support
Types of Social Business Models...
Business Model
Entrepreneur Support
Name

How it works Sells business support to its target population.

Microfinance organizations, consulting, or

Examples
tech support

Key Success
Appropriate training for the entrepreneur
Factors
Types of Social Business Models..

Business Model
Market Intermediary
Name

Provide services to clients to help them

How it works
access markets.

Supply cooperatives like a fair trade,

Examples agriculture, and also handicraft
organizations

Key Success Low start-up costs, allows clients to stay

Factors and work in their community
Types of Social Business Models...
Business Model
Employment
Name

Provide employment opportunity and job

How it works training to clients and then sells its products or
services on the open market.

Disabilities or youth organizations providing

Examples work opportunities in landscape, cafes, printing, or
other business

Key Success Job training appropriateness and commercial

Factors viability
Types of Social Business Models...

Business Model
Free-for-service
Name

Selling social services directly to clients

How it works
or a third-party payer

Membership organizations, museums,

Examples
and also clinics

Key Success Establishing the appropriate fee

Factors structure vis a vis the benefits
Types of Social Business Models...
Business Model
Low-income client
Name
Similar to fee-for-service in terms of
offering services to clients but focuses
How it works
on providing access to those who
couldn’t otherwise afford it
Healthcare (prescriptions, eyeglasses),
Examples
utility programs
Creative distribution systems,
Key Success lower production and also
Factors marketing costs, high
operating efficiencies.
Types of Social Business Models...
Business Model
Cooperative
Name
Provides members with benefits through
How it works
collective services.
Bulk purchasing, collective bargaining
Examples (union), agricultural coops, credit
unions
Members have common interests/needs.
Key Success
Further, they are key stakeholders
Factors
and investors.
Types of Social Business Models...
Business Model
Market Linkage
Name

Facilitates trade relationships between

How it works
clients and the external market.

Import-export, market research, and

Examples
also broker services

Key Success Does not sell clients’ products but

Factors connects clients to markets
Types of Social Business Models...
Business Model
Service Subsidization
Name
Sells products or services to an external market
to help fund other social programs. This model
How it works is integrated with the non-profit organization.
Further, the business activities and
social programs overlap.
Consulting, counselling, employment
Examples
training, leasing, printing services, and so forth
Can leverage tangible assets (buildings,
Key Success land, employees) or
Factors intangible (expertise, methodologies,
or relationships)
 Types of Social Business Models...

Business Model Name Organizational Support

Similar to service subsidization, but

applying the external model. Further,
How it works
business activities are separate from
social programs
Similar to service subsidization–
Examples implement any type of business
that leverages its assets

Key Success Factors Similar to service subsidization.

Social Entrepreneurship Opportunities
Social Innovation and
Sustainability
Social entrepreneurship can be defined by three characteristics,
which are social innovation, accountability, and
sustainability.
Social innovation is a very wide term that includes ideas,
ways and means, strategies and even organizations that
works out innovative solutions to meet the demands of the
public, especially those who live at the bottom of the pyramid.
It may include innovative fields in a wide variety of setups like
education, healthcare, community development etc.
Social innovation refers to the design and implementation of
new solutions that imply conceptual, process, product, or
organisational change, which ultimately aim to improve the
welfare and wellbeing of individuals and communities.
Social Innovation and
Sustainability
Many initiatives undertaken by the social economy and by
the civil society have proven to be innovative in dealing with
socio-economic and environmental problems, while
contributing to economic development.
The micro credit scheme started by Mohammad Yunus in
Bangladesh is a very good example of social innovation.
Distance learning methodology similarly is a social
innovation that enables people in far fetched areas to have
access to quality education. The concept can still more be
extended to open source techniques used in software
development.
Organizations are globally being attracted to the idea of
creating and marketing products and services for those at the
bottom of the pyramid.
Social Innovation and Sustainability...
Many innovations create benefits for society, primarily
through increasing employment, productivity, and
economic growth. Some even generate social value above
and beyond their obvious economic impact.
A novel solution to a social problem that is more effective,
efficient, sustainable, or just than existing solutions and for
which the value created accrues primarily to society as a
whole rather than private individuals.
 Social Innovation and Sustainability...
Sustainable development as defined in the renown Brundtland
Report as ‘development that meets the needs of the present
without compromising the ability of future generations to meet
their own needs.
sustainable development comprises of various types of
economic and social developmental initiatives that protect and
enhances the natural environment and social equity.
In the context of social entrepreneurship, sustainability has
two facets. Firstly, it concerns the need for social enterprises to
survive and endure financially over time. Secondly,
sustainability can only be achieved after social enterprises
have established viability in running their businesses
Social entrepreneurial sustainability were centred on the
Social Innovation and Sustainability...
integration of three components which are social
sustainability, environmental sustainability, and economic
sustainability.
A key to long-term sustainability in social entrepreneurship
is to ensure proper management and control of our natural
resources. This goal can be achieved through community-
driven initiatives and improvement of operational
efficiencies.
Sustainability of social enterprises can be achieved by
maximising positive impact through the management of
healthy and mature ventures by incorporating social equity,
economic prosperity, and environmental integrity as part of
their business philosophy
 According to Martin and Osberg (2015), social
enterprises must learn to be financially sustainable
Social Innovation and Sustainability...

by avoiding the practice of receiving funds from

charitable organisations or through subsidies from
governmental institutions.
If, social enterprises ignore the importance of
sustainability, they will pay the price of a short-lived
business tenure
  The process of responding to a societal challenge by a social
Social Innovation and Sustainability...
enterprise consists of two crucial parts: first of all, the
development or adoption of a (partial) solution (i.e., the social
innovation) and secondly making sure that the solution is
accessible and available (i.e., scaling of social innovation) based
on a viable business mode
 social entrepreneurs develop and implement a solution by
working together with target constituencies. Collaboration during
innovation or scaling takes place within the social enterprise
itself as well as among organizations and stakeholders.
 The latter is most likely when social enterprises are involved in
broader institutional change, which may require close
collaboration between policy makers and practitioners or in the
case of public- private partnerships.
 Collaboration
Social is important because it helps enterprises in
Innovation and Sustainability...

reaching their mission, and in particular it helps social

enterprises accessing resources and funding, strengthen
legitimacy and access to capital (e.g., social and human
capital).
Social entrepreneurs and their entrepreneurial team operate
in a social and institutional context in which they identify a
problem and are motivated to find an entrepreneurial
solution.
By being organized in a social enterprise, they are able to
create micro effects for individual target constituents as well
as scaling their impact by reaching larger groups or
communities.
Social Innovation and Sustainability...
Sustainability innovators create new products and services
designed to solve the problems created by the collision of
economic growth, population growth, and natural systems.
They seek integrated solutions that offer financial
renumeration, ecological system protection, and improved
human health performance, all of which contribute to
community prosperity.
Marketing Management for Social Ventures
The role of Marketing in Social Entrepreneurship
Marketing for social entrepreneurship is a social and
managerial process in which individuals and groups
receive what they want and need through the exchange of
products and values.
The task of marketing is to identify and define specific
markets for specific products.
 Marketing Management for Social Ventures
 Current product/current market: Market penetration is a
strategy of increasing your share of existing markets. You might
achieve this by raising customers’ awareness of your products and
services or finding new customers. For further information on
planning effective marketing communications see the Related
Items section below for a link to the Factsheet: Planning
marketing communications.
 Current product/new market: Market development is a strategy
of finding and entering new markets with your current product or
service range. The new market could be a new region, a new
country or a new segment of the market. For further information
on selecting and entering new markets see the Related Items
section below for a link to the Factsheet: Entering new markets.
Marketing Management for Social
Ventures
New product/current market: Product development is
a strategy for enhancing benefits you deliver to
customers by improving your existing products and
services or developing new ones.
New product/new market: Diversification is a strategy
that usually carries high costs and high risks. It often
requires firms to adopt new ways of doing business and
so has consequences far beyond simply offering new
products/services in a new market. It is therefore
usually a strategy to be adopted when other options are
not feasible.
Risk Management in Social Enterprises…
 Being a social entrepreneur can be a truly fulfilling career.
You get to follow your dreams, change people’s lives, all
while obtaining financial freedom (hopefully).
 But there are definitely many risks and challenges associated
with becoming a fully-fledged social entrepreneur, and you
should be fully aware of them before embarking on this
journey.
Risk Management in Social Enterprises…
Obtaining finance
Backlash
Not focusing on profit
Burnout
Lack of public knowledge
Marketing
Not having a substantial support structure
Not many success cases
 Risk Management in Social Enterprises…
Obtaining finance
 Most entrepreneurs require some sort of funding when they start
their entrepreneurial projects. Whether they plan to obtain their
funding from a private lender or a bank, the fact of the matter is
that starting a business involves overcoming many costs. The
problem with social entrepreneurship is that the business models
don’t often turn over massive profits. This, coupled with the fact
that social entrepreneurship is widely misunderstood, makes
lenders wary of lending large amounts to social entrepreneurs.
 Being constantly rejected by lenders can be extremely
disheartening. That is why it is so important to have a solid
business plan and a dependable way in which you plan to turn
over profits.
Risk Management in Social Enterprises…
Backlash
 If you are fighting for a certain cause, in many cases, there will
be people fighting against it. The more controversial your
cause, the more backlash you can expect to get. Even though
social entrepreneurs are known for being selfless and aim to
help people and communities in need, they often experience
rather harsh backlash and criticism. In the day of social media,
backlash can be never-ceasing and can take a toll on your
mental health.
 It is essential to be aware of any existing social justice groups
and if you would be stepping on anyone’s toes with your
intended projects.
Risk Management in Social Enterprises…
Not focusing on profit
 Many social entrepreneurs are so caught up in their cause that
they do not focus on creating a profit. However, making a
profit is very important when it comes to satisfying your
investors, maintaining a successful business, as well as putting
food on your table. If the cause is really your main priority,
remember that the more profit you make, the more you will be
able to put back into your business and the more financial
freedom you’ll have.
 More profit also means that you’ll be able to hire employees,
and you know what they say; many hands make light work.
Risk Management in Social Enterprises…

Burnout
 Burnout is a genuine risk for social justice entrepreneurs.
Because they often put their heart and soul into their work,
social entrepreneurs work themselves to the bone and work
long hours. Like with all types of entrepreneurs, there are
no set working hours, so entrepreneurs find their personal
lives and their work lives amalgamating. It is very
important to ensure that you maintain a healthy work/life
balance to avoid burnout which can affect both your
physical and mental health.
Risk Management in Social Enterprises…
Lack of public knowledge
 Although social entrepreneurship is growing and expanding, the
majority of the general public do not have a clear idea of what
social entrepreneurship is exactly. This can make it difficult for
your cause to gain support, and support from the general public
and local communities is often imperative to your success as a
social entrepreneur. The lack of information both online and
offline can lead to misconceptions.
 Only through education and spreading information will the public
be knowledgeable about social entrepreneurs and the work that
they do.
Risk Management in Social
Enterprises…
Marketing
 Marketing a social business definitely comes with its challenges.
Unfortunately, many social entrepreneurs do not put enough emphasis
on effective marketing and may not have the resources, time or funds
to put into marketing, which could act as a massive risk and challenge.
Not having a substantial support structure
 Having a support structure and entities that you can turn to for help
and advice is very important for the success of any business. Because
social entrepreneurship is still relatively new, there are not many
support structures or even regulations in place for businesses that fall
into the social entrepreneurship sphere. Tax incentives in the UK are
not yet regulated, and this can definitely cause some confusion for
social entrepreneurs.
Risk Management in Social Enterprises…

Not many success cases

 Unfortunately, when looking for role models and success
cases in the field of social entrepreneurship, there are not
many to choose from, so you have minimal business models
to use as templates. This also affects your likeliness to get a
loan as lenders like to see examples of similar, successful
companies. This is why business models such as franchises
find it so easy to obtain loans, as there are many examples of
successful cases.
 Risk Management in Social Enterprises
 Social enterprises need to manage risk like any other business.
And while the risks that social enterprises face may be similar to
those of a traditional business, there might be differences due to
the activities in-hand or the service users. Risk management is a key
tool for protecting your social enterprise.
 Insurance is only one stage in the risk management process and
irrespective of insurance, risks still require careful and considered
management.
 The first stage in managing risk lies in identifying the risks that
reside within your social enterprise.
 What situations might stop your social enterprise from operating?
 What losses might create one-off costs which would stretch your
cash flow?
Risk Management in Social Enterprises…
 What liabilities have the potential to damage your social enterprise?
 In which circumstances might the interjection and support of an
insurer help your social enterprise?
 A good way to identify risks is to get your board or management
team to carry out a brainstorming exercise.
 Once you have reviewed the risks that your social enterprise faces,
you should set up a simple spreadsheet to serve as a risk register,
with a basic scoring or rating mechanism.
 This will be a fluid document that should be regularly reviewed,
critiqued and added to. The register identifies key areas of risk in
terms of their potential frequency and impact. This will help
highlight issues that require attention in order of priority and identify
factors which will help mitigate the risks.
Risk Management in Social Enterprises…
 Use the risk register to help create a Business Continuity Plan
(BCP).
 This should look at the major risks your social enterprise
could encounter and how you will react if any of them
materialise (including internal and external communication).
 The aim of the BCP is to keep your social enterprise running
smoothly if there’s a problem.
 The BCP will be specific to your organisation but should
identify responsibility for the Business Continuity Plan and a
crisis management hierarchy so it is clear who is in charge
when the BCP is triggered.
Risk Management in Social Enterprises…
 Your BCP should consider the impact on income and cashflow,
the impact on effectiveness, staff, customers and service users
and the impact on reputation and stakeholders that may arise
because of big risks. Don’t forget to consider the IT (both
software and hardware) implications of big risks!
 To remain up-to-date and relevant to your developing social
enterprise, your risk register and BCP should be regularly
reviewed at board and senior leadership level.
 When your risk register and BCP has been created, your
management team can consider and agree upon an insurance
purchasing plan. This allows you to match the insurances you
require to the risks you face and highlight any uninsured risks
to ensure they are dealt with appropriately.
How to eliminate risks as a social
entrepreneur
When you look at the risks involved in becoming a social
entrepreneur, it can be disheartening, but there are ways to
minimise these risks, including:
 Speak to any successful social entrepreneurs that you know of.
Their advice and guidance will be very valuable to you and may
guide you on the best route to take with your venture.
 Come up with a detailed business plan that covers everything
you plan to do with your project.
How to eliminate risks as a social
entrepreneur
 Focus on effective marketing that engages with the public and
informs them of your social business. The more public
knowledge out there, the better!
 Prioritise making profits.
 The more aware you are of the risk involved in social
entrepreneurship, the more likely you are to avoid these risks.
Legal Framework for Social Ventures
Social enterprises can choose from a variety of
legal identities detailed below to suit their unique
needs. Choosing the right form for your social
enterprise can help it grow and take advantages
of the benefits offered to different legal identities.
Sole Proprietorship
Partnership
Cooperative Society
Non Profit Organisation
Company Limited by Shares
Hybrid Approach
 Legal Framework for Social Ventures…
Sole Proprietorship
 A sole proprietorship is one of the simplest business forms for
operating a business.
 It refers to a single person who owns and operates the business,
and is personally responsible for its debts.
 Ideally suited to a small-scale enterprise, the sole proprietorship
form has minimal legal requirements which makes it easy and
inexpensive to set up.
 It has no distinct entity from the owner, which means that the
owner’s personal assets may be at risk, and the sole
proprietorship will cease to exist on the owner’s demise.
 Legal Framework for Social Ventures…
Sole Proprietorship
 However, sole proprietorships may face difficulty in accessing
capital from traditional sources such as equity or grant funding.
 If an individual wants to have partners involved in running the
social enterprise, or wishes to minimise his/her risk, this may not
be the ideal structure.
 Legal Framework for Social Ventures…
Partnership
 A partnership requires two or more partners, bound by a written
or oral agreement (ideally, a lawyer should help in drafting a
written agreement) who agree to enter into business together.
 A partnership can have a separate legal entity from the owners,
and in the event of demise of a partner, the procedure laid out in
the partnership agreement will be followed and the partnership
may continue to exist.
 Partnerships can be appealing because they allow for pooling of
resources and talent, and in some countries also enjoy lesser tax
levies. However, the partners bear an unlimited liability, thus
putting their personal assets at risk.
 Legal Framework for Social Ventures…
Cooperative Society
 Cooperatives are enterprises which are controlled and owned by
a group of people, and which work for their collective benefit
and satisfaction of their collective needs.
 The members have an equal say in how the enterprise is run and
how profit is divided.
 This is a very inclusive form as decisions are made collectively
by all members.
 If a social enterprise has or intends to have a compact
management team, it may not function most effectively as a
cooperative society.
 Legal Framework for Social Ventures…
Non Profit Organisation
 Non Profit Organisations or Non-Governmental Organisations are
organisations which are independent from the state and are typically
dedicated to furthering a particular social cause or advocating for a
particular point of view.
 They lack a profit motive and they often enjoy tax exemptions or
benefits.
 They usually have easier access to donor funding and grants in light of
their charitable/social objectives and governmental support in welfare
states.
 This structure is not conducive to all social enterprises because it
limits the ability of an enterprise to pursue profits.
 Some social entrepreneurs have made this form suit their needs by
running a parallel, for-profit entity, in what is known as the Hybrid
approach.
 Legal Framework for Social Ventures…
Company Limited by Shares
 A company is an association of persons with a profit motive, and
which enjoys a distinct legal identity.
 A company is recognised by law and enjoys many of the same
rights as individual persons, such as the right to own property in
its name and the right to sue other parties.
 This form has been widely adopted by social enterprises
worldwide because of the flexibility it allows to pursue revenue-
generating activities.
 It could also widen the pool of accessible funds for the enterprise,
such as equity or investment by venture capitalist firms.
 The liability of owners in this form is limited to the extent of their
investment, which can make it attractive.
 Legal Framework for Social Ventures…
 However, this structure is not legally required to have social
objectives in addition to profit-maximisation, so care must be
taken to safeguard the social mission of the enterprise.
 The management of such a company will be accountable to the
shareholders, so there must be a clear understanding regarding the
emphasis that the enterprise will be placing on its social
objectives and profit-maximisation objectives.
 Legal Framework for Social Ventures…
The Hybrid approach is where social entrepreneurs launch
twin organisations – one being for-profit and one being
non-profit – and register them accordingly.
While this can be cumbersome in terms of organisational
structure and documentation, it allows the enterprise to
capitalize on the benefits of both structures.
It usually applies to enterprises which have outgrown their
current legal form, and thus is unlikely to be the first form
a social enterprise will take.
Existing legal framework for social
enterprises in India
 Unlike many other countries, SEs in India have limited options in
terms of legal structures they can adopt.
 Typically, SEs in India can take either of the following legal forms:
1. Non-profits- or Charitable Organizations- can register
themselves under the Indian Trusts Act (1882); section 25 of
Companies Act (1956); State Society registration. E-g. Digital
Green, Teach for India, Akshaya Patra etc.
2. For-profits- Can adopt either of the structure; sole proprietorship,
partnership, limited liability partnership, private firm and co-
operative. E-g. Vaatsalya Healthcare, dLight etc.
3. Hybrid structures- incorporating features of both the above
structures simultaneously. E-g: Head Held High Foundation,
Fractal Foundation Etc.
Existing legal framework for
social enterprises in India…
 While each of the structures offers certain advantages, they are not
free from limitations as well.
 For eg while the traditional non-profit organisational model enables
the firms to get tax and foreign donation benefits under the Income
Tax Act (1961) and Foreign Contribution Regulation Act (2010)
respectively, the legal structure simultaneously makes them to raise
funds continuously. Therefore, they find hard to hire/retain top talents
or invest in state of the art infrastructure and technology.
 As a consequence, non-profits/ NGO‟s in India are increasingly
being found following the trend of conversion to for-profit mode or
adopting some profit generating avenues partially as a measure for
self-sustainability.
Existing legal framework for
social enterprises in India…
 For example; microfinance institutions like SKS and Spandana were
first created as non-profit models and now transformed into for-
profits (Asian Development Bank, ADB study report, 2012).
 Existing legal framework for
social enterprises in India…
 In absence of a legal framework in a country, SEs may find it hard
to get their dual (social and economic activities) recognized or
may be subjected to inappropriate legal and regulatory
frameworks.
 The range of regulatory challenges that restrict different players in
the SE ecosystem may include for e-g; the lack of legal structure,
equity investment regulations, restrictions on blended capital and
restrictive laws on foreign capital flow etc. (GIZ, 2012).
 A consolidated foundation for SEs in India would be met by
laying an appropriate legal framework, craved to suit the
contextual needs and specificities of Indian SE culture.
 Existing legal framework for
social enterprises in India…
 Such a legal framework at national and state levels would be useful
in many ways including; the ways to create a national social
entrepreneurial milieu especially in a context where one doesn’t
exist;
 in clarifying the SE definition and missions;
 in opening up opportunities for fiscal incentives/relief;
 in providing access to public resources and support;
 in developing measures for social impact evaluation etc. depending
upon their core activity, the stage of development as well as their
internal capacities.