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consuming and costly. Without this IRS letter ruling, there is a risk that the IRS may later
determine that the investment does not meet the legal criteria for PRIs. In such cases, the

foundation would be unable to count that investment toward the 5% distribution requirement
78
for maintaining its tax-exempt status. Furthermore, some legal experts argue that traditional
limited liability companies (LLCs) can already accommodate PRI investments by amending their
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purpose statements to meet statutory requirements. For this reason, some states, such as North
Carolina, which had previously enacted legislation recognizing L3Cs, chose to repeal their L3C
laws in 2014. Lawmakers concluded that the conventional LLC structure was sufficient to meet
the same objectives without the need for a separate L3C designation.

3.4 Social Enterprises in the Republic of Korea

The Republic of Korea, or South Korea, was the first country in Asia to enact legislation promoting

social enterprises. It is widely recognized by scholars as having a more advanced role and
development in the social enterprise sector compared to other countries. The most frequently
cited legislation is the Social Enterprise Promotion Act (2007). However, South Korea also has
other laws that support the growth of the social and solidarity economy, including social
enterprises. This section will briefly discuss the core content of the key relevant laws.

3.4.1 The Social Enterprise Promotion Act (SEPA), 2007
South Korea enacted this law in 2007 and amended it six times up to the year 2012. Article 1

states the objective of the law as follows:

"To promote social cohesion and enhance the quality of life for citizens by expanding social
services, which remain insufficient to meet public demand, and to promote employment by
supporting the establishment and operation of social enterprises."

In implementing the law, the following responsibilities are assigned to various sectors:

(1) The state is responsible for formulating policies and necessary measures to support social
enterprises, with the aim of expanding social services and creating employment opportunities.
(2) Local governments are responsible for developing policies and implementing support

measures for social enterprises, in alignment with the characteristics and conditions specific to
their localities.

78 Sue Woodrow and Steve Davis, The L3C: A New Business Model for Socially Responsible Investing, Federal
Reserve Bank of St. Louis, January 1, 2010. Source: https://www.stlouisfed.org/publications/bridges/winter-
20092010/the-l3c-a-new-business-model-for-socially-responsible-investing
79 Ibid,
83