Handling social enterprises that use mobilized grants for improper purposes

1. According to Clause 1, Article 2 of Decree 47/2021/ND-CP, regulations on social enterprises are as follows:

What kind of organization is a social enterprise?

A social enterprise is an enterprise that meets the criteria specified in Clause 1, Article 10 of the Enterprise Law enterprise.

Accordingly, those criteria include:

– Being an enterprise registered and established under the provisions of this Law;

– Operating objectives to solve social and environmental problems for the benefit of the community;

– Using at least 51% of the enterprise’s total annual after-tax profit to regenerate Invest to achieve registered goals.

2. Can social enterprises receive aid? How are the responsibilities of social enterprises regulated?

According to Article 4 of Decree 47/2021/ND-CP stipulating the receipt of aid by social enterprises as follows:

“Article 4. Receiving aid and sponsorship.

1. Social enterprises receive foreign non-governmental aid to implement The goal of solving social and environmental problems according to the provisions of law on receiving foreign non-governmental aid.

2. Social enterprises are allowed to receive funding in the form of assets, finance or technical support to implement the goal of solving social and environmental problems from individuals, agencies, domestic organizations and foreign organizations registered to operate in Vietnam such as following:

a) The enterprise prepares a Document to receive sponsorship including the following contents: Information about the sponsoring individual or organization, type of asset, value of the asset or sponsorship amount, time of sponsorship; requirements for the enterprise receiving sponsorship and full name and signature of the sponsor’s representative (if any).

b) Within 10 working days from the date of receipt. sponsorship, the enterprise must notify the aid and sponsorship management agency of the People’s Committee of the province or centrally run city where the enterprise is headquartered about receiving the sponsorship; the notification must include a copy of the sponsorship receipt.”

Accordingly, social enterprises have responsibilities during their operations according to Article 3 of Decree 47/2021/ND-CP as follows:

– Social enterprises must maintain social and environmental goals, retained profits for reinvestment and other content stated in the Commitment to implementing social and environmental goals throughout their operations. Except in the case of terminating social and environmental goals before the committed deadline, social enterprises must refund all incentives, aid, and sponsorship that the social enterprise has received to implement registered social and environmental goals if they fail to implement or incompletely implement the Commitment to implementing social and environmental goals and the level of retained profits for reinvestment.

– Owners of private enterprises, partners of public companies Partnership companies, members of limited liability companies and related entities such as shareholders of joint stock companies, members of the Board of Directors, Directors, General Directors in the relevant term or time are jointly liable for damages arising in cases where social enterprises violate Clause 1 of this Article.

According to the above regulations, we see that social enterprises are allowed to receive aid and from the following sources: foreign non-governmental aid from abroad and sponsored by assets, finance or technical support from individuals, agencies, domestic organizations and foreign organizations registered to operate in Vietnam according to regulations. During their operations, social enterprises must fully fulfill their responsibilities according to the provisions of law.

3. How should social enterprises handle mobilized funds for improper purposes?

Pursuant to point b, Clause 1, Article 60 of Decree 122/2021/ND-CP stipulating the handling of violations for social enterprises that use mobilized funds for improper purposes. The applicable fine is a fine from 20,000,000 VND to 30,000,000 VND.

Accordingly, this fine is the fine applied to the organization. For the same administrative violation, the fine for individuals is equal to 1/2 (one-half) of the fine for organizations based on the provisions in Clause 2, Article 4 of Decree 122/2021/ND-CP.

In addition to the above fine, businesses must also be subject to the remedial measure of being forced to return grants used for improper purposes according to the provisions of Point b, Clause 2, Article 60 of Decree 122/2021/ND-CP.

Thus, a social enterprise is an enterprise that meets the criteria prescribed by law. Social enterprises have the right to receive aid and funding from sources prescribed by law and must fulfill their responsibilities in using these funding sources. In case a social enterprise does not use the mobilized sponsorship funds for improper purposes, it will be handled according to the provisions of Decree 122/2021/ND-CP.