How to give your company or business project a societal impact?

Societal Impact ING

Societal Impact ING

In order to promote a favourable climate for developing social and solidarity economy companies, the Grand-Duchy of Luxembourg has introduced with the Law of 12 December 2016 a new legal framework: the societal impact company (société d’impact societal or SIS). Every natural or legal person who wishes to create a commercial company with a social or societal purpose may be accredited as an SIS. Why is this accreditation so useful? Which procedure to follow and who can apply?  

Any public limited company (société anonyme), limited liability company (société à responsabilité limitée), simplified limited liability company (société à responsabilité limitée simplifiée) or cooperative company (société coopérative) can opt for the SIS status and be approved as such by the Ministry of Labour, Employment and Social and Solidarity Economy. If you are a project promoter who wishes to start an economic activity with a social or societal purpose, you can also apply.

What are the conditions?

To be accredited as an SIS, your company must comply with several conditions. Firstly, the corporate purpose must be clear and specific. The scope is quite broad. It can be:

-       supporting vulnerable people due to their economic, social or personal situation;

-       or contributing to the preservation and development of specific issues such as social cohesion, fight against exclusion and inequality, gender parity, environmental protection, cultural and creative activities, initial or vocational training.

Secondly, SIS accreditation requires financial and extra-financial transparency. Half of the potential benefits (impact shares) must remain in the company and be reinvested to maintain and develop the corporate purpose. The maximum annual remuneration of employees may not exceed six times the amount of the social minimum wage[1]. A certified and independent auditor must audit the account. Your company must prove its social impact by complying with key performance indicators (KPIs) indicated in the articles of association and allowing the effective and verifiable verification of the achievement of the corporate purpose. There are strict obligations in managerial structure: an autonomous management model and participative democratic governance for the various players your company works with (suppliers, customers, partners and even employees). Your company must also draw up an extra-financial impact report for submission to the meeting of partners of shareholders, setting out the implementation of the performance indicators. 

Which advantages?

Starting an SIS has many advantages. If you are a non-profit association, SIS accreditation provides you a better-suited legal framework that focuses on the specificities of the social and solidarity economy (SSE) companies and encourages you to carry out economic activities. If you run a commercial business, you have the means to show your social impact too. As a young company, having SIS accreditation makes you more credible and gives more confidence to potential partners, customers and suppliers. It shows that your activity is genuine, honest, serious and socially engaged.

Societal impact companies benefit from more visibility and more support through actors engaged in the SSE ecosystem such as MeSIS (Maison de l’économie sociale et de l’innovation sociale), ULESS (Union luxembourgeoise de l’économie sociale et solidaire) or the Impuls programme of Nyuko.

Like any conventional business, you can choose, as a social impact company, from several possibilities for your funding sources (shareholders, associates, external partners, third-party resources), but, in addition, you can apply for state aids. Since 2019, the Oeuvre Nationale de Secours Grande-Duchesse Charlotte has been supporting projects headed by SIS companies. You can also have access to national and European public markets. In other words, you can take part in official public tenders published by the state, communes, national and European public institutions.

Are there tax exemptions?

Like any other commercial company, an SIS is generally a fully taxable company, but there is one exception. Your capital share must be composed exclusively of impact shares, which do not entitle their holders to participate in the profits of the SIS. In this case, your company is fully exempt from corporate tax, business tax and wealth tax. Like for recognized public-utility bodies (non-profit associations and foundations), cash donations are deductible as special expenses from the total net income of the donors.

If you already own an SIS, you can participate in the ING Solidarity Awards organized each year. The aim is to reward and support the charitable community in Luxembourg through a competition. All non-profit associations, foundations and societal impact companies registered and established in Luxembourg are invited to participate. The associations may participate from 20 April to 20 May included. More information here.

[1] EUR 2,201.93 (as of 1 January 2021)