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Q&A on Social Enterprises and Social Entrepreneurship Funds

Last update: 20.1​1.2018


1. What is meant by investment in social entrepreneurship?
Investment in social entrepreneurship means the application of capital in companies or other entities that develop sustainable solutions to social problems, with the objective of achieving a return on investment measured in social impact for the benefit of the community (for example and depending on the objectives, level of literacy achieved in a given group, reducing unemployment, recovery of certain buildings or neighbourhoods, ecological rebalancing of a certain ecosystem, reducing drop-out levels in a particular group or school), in parallel with the generation of financial returns for the investors. These solutions may also cover environmental protection measures focussing on the social aspect, namely concerning the fight against pollution, recycling and renewable energies.

​2. What is the origin and specificities of the investment in social entrepreneurship?
Based on the perception of the insufficiency and inade​quacy of traditional financing models of initiatives and social enterprises that are based essentially on mechanisms of public financing and private financing of a charitable nature, investment in social entrepreneurship was conceived as an alternative model of private financing initiatives and social enterprises.
This alternative financing model aims to combine talent, business consistency and innovative business perspectives with ethical and social objectives, based on three fundamental pillars: professional management, transparency and measurability of the social impact of investment.
3. How can a person invest in social entrepreneurship?
This type of investment can be carried out by acquiring shares in social enterprises or acquiring investment units in social entrepreneurship funds.

4. What are social entrepreneurship funds?
These are assets made up of sums collected from the public aimed at investment in social entrepreneurship by acquiring shares, bonds or other instruments issued or related to entities that develop adequate solutions to social problems according to the defined investment policy for each fund. The fund manager then invests the total amount collected from various investors, with risks and financial returns being distributed among all in the social projects targeted, as with all other collective investment entities.

5. What are social enterprises?
These are companies whose main purpose is to invest in social entrepreneurship, as defined above. Like funds, these companies channel the amounts collected for investment in entities that develop adequate solutions to social problems, with investors sharing risks and the return on investment. In addition, they can, cumulatively, manage social entrepreneurship funds.

6. What is the difference between social entrepreneurship funds and other collective investment funds?
Social entrepreneurship funds mobilize resources for the financing of initiatives that aim to produce quantifiable and positive social impacts, reconciling the objectives of profitability for the investor, associated with traditional collective investment funds, with contributions for the generation of positive and sustainable impacts to benefit society. These funds thus constitute a unique and innovative instrument that aim, in its essence, at contributing to a more equitable and solidary society.

7. Which legal framework is applicable?
The legal framework for venture capital, social entrepreneurship and specialized investment, approved by Law no. 18/2015 of 4 March, as amended by Decree-Law No. 56/2018 of 9 July and CMVM Regulation No. 3/2015 of 3 November.

8. Who can manage social entrepreneurship funds?
Social entrepreneurship funds can be managed by social enterprises, venture capital companies and fund management companies. All these entities are subject to supervision and operational requirements to ensure the professional management of these funds in the interest of investors.

9. What are the requirements in terms of company capital and social entrepreneurship funds?
The minimum share capital of social enterprises, represented by shares, is 125 000 Euros.
Social entrepreneurship funds have a minimum subscribed capital of 1 000 000 Euros, represented by investment units.

10. Who can invest in social enterprises and social entrepreneurship funds?
Anyone can invest in social enterprises and social entrepreneurship funds, but the amounts they can invest in, depend on whether they are professional investors or not.
Professional investors include, inter alia, governments, central banks, financial intermediaries and large corporations, as well as persons who have been given treatment as such at their request (provided that certain requirements envisaged via regulation, are met). The remainder are retail investors.

As to social entrepreneurship funds, the:​

i) professional investors are subject to a minimum subscription of 50 000 Euros per investor; and

(ii) retail investors are subject to a maximum investment limit of 5 000 Euros per investor and shall also state in writing, that they are aware of the risks associated with the investment.​

11. What is the role of the CMVM in regulating and supervising these funds?
The CMVM is the competent authority for granting pre-registration for the commencement of the activity of social enterprises and for the constitution of social entrepreneurship funds and is responsible for the supervision of the subsequent activity of these investment vehicles. When social entrepreneurship funds are aimed exclusively to professional investors, they are subject to mere communication to the CMVM. 

​12. What are the investor information duties?
The management entity shall provide the participants of the social entrepreneurship funds, in particular at their meetings, with complete, true, current, objective and lawful information on the issues subject to their examination or resolution, in order to form a reasoned opinion.
The unit value of the investment units held and the breakdown of the fund's portfolio shall be communicated to the participants according to the terms established in the management regulations and may not exceed 12 months.
Before investing, investors should obtain information to enable them to make a reasoned decision on the investment proposal submitted to them.