Asset Lock and Voluntary Loss of Social Enterprise’s Status: A Comparative Legal Analysis

Abstract

Legal architectures for asset dedication in social enterprises have proliferated across Europe, yet the durability of the asset lock at the point of voluntary exit remains insufficiently theorized. Existing scholarship focuses predominantly on formation and governance conditions, treating the asset lock as a static rule rather than a dynamic commitment subject to erosion when organizations seek to reorient or abandon their social purpose. This article develops a lifecycle-based analytical framework and examines the resilience of asset dedication upon voluntary loss of social enterprise status across four jurisdictions: the United Kingdom (the UK), Ireland, Luxembourg, and Italy. The study demonstrates that asset-lock resilience depends not merely on its nominal adoption, but on its legal inseparability from organizational identity and its enforceability at exit. The UK’s Community Interest Company (CIC) and the Italian social cooperative represent form-constitutive regimes where the asset lock is legally entrenched, and exit is structurally foreclosed. By contrast, Ireland’s policy-defined Company Limited by Guarantee (CLG) model and Luxembourg’s accreditation-dependent Société d’Impact Sociétal in cooperative form (SIS-SCOP) regime reveal vulnerabilities, particularly where voluntary derecognition lacks statutory guardrails and where internal voting structures permit mission drift. Italy illustrates a dual-track system: immutable dedication in ex lege social cooperatives versus reversible, sector-bounded dedication in non-social cooperatives with social enterprise status (CONSIS). The comparative findings suggest that where asset dedication is tied to discretionary membership decisions rather than immutable legal form, social value becomes susceptible to private recapture or sectoral reallocation. The article contends that exit regulations (i.e., in cases of voluntary relinquishment of social enterprise status), rather than entry criteria, constitute the fundamental normative element of social enterprise regulation. Legal frameworks for social enterprises must establish residual asset dedication, prevent unilateral mission reversal, and incorporate regulatory oversight at the point of voluntary exit to safeguard social commitments.