The Asset Lock: Its Role in the Governance of Social Enterprises

What the paper says

The asset lock is one of the most important organisational mechanisms for social enterprises to fulfil their social purpose and enable them to maintain a balance between financial sustainability and social mission. Asset locking rules are not directly applicable to those forms of business that intend to distribute profits for shareholders or members within the traditional corporate law framework. Instead, the asset lock is predominantly observed in non-profit organisations, where profit distribution is inherently restricted. The social enterprise is one of the organisation forms with hybrid structures that combines both for-profit and non-profit characteristics, connecting the private and public sector with organisational diversity and social purposes. By comparing corporate social enterprises, social cooperatives and other forms of social enterprises with legal frameworks, this article discusses the application of the asset lock in the field of social enterprises from a globalised horizon, and in the combination of the role and impact indicated in the articles of association and the theory of asset partitioning when formulating the frame of the asset lock. The article concludes that incorporating the regulation of an asset lock should consider the nuanced structure of social enterprises especially from dimensions of legal forms and purposes while upholding their fundamental social objectives to ensure sustained viability.