ACRC, “Social Enterprise that Voluntarily Reported Illicit Receipt of Subsidy and Returned the Total Amount should not Face Revocation of its Social Enterprise Certificate”

- The CAAC said that even with reasons for the revocation of social enterprise certificate, public interest gained and damaged interest to the persons involved should be weighed in the revocation decision -

(April 20, 2022, ACRC)

A ruling has been out that even if a social enterprise is subject to revocation of its social enterprise certificate for a reason specified under the relevant Act, the certificate should not be revoked if the disadvantages to those involved far outweigh the public interest.

The Central Administrative Appeals Commission (CAAC) under the Anti-Corruption and Civil Rights Commission (ACRC) has ruled that it is illegal and unfair to revoke the social enterprise certificate of a social enterprise that voluntarily reported its illicit receipt of Employ Retention Subsidy (hereinafter the Subsidy) and returned the total amount to the competent labor office.

Company A, a social enterprise, set up to provide jobs for the disabled and other vulnerable people, had temporarily suspended its business according to the recommendation by the head of the local government as COVID 19 response.

The company payed its employees compensation for the suspension and received the Subsidy. During the shutdown period, however, the company hired non-disabled workers and operated its business to supply promised products to public organizations.

Under the Employment Insurance Act, it is illegal for companies to receive the Subsidy after temporarily closed its business and hire new workers or operate its business during the shutdown period.

The social enterprise, upon learning that hiring new employees after receiving the Subsidy is illegal, reported the fact to the competent labor office and retuned the subsidy in full. The head of the labor office, however, revoked the company’s social enterprise certificate for reason of illegal receipt of the Subsidy.

The Social Enterprise Promotion Act stipulates that in case where a social enterprise obtains or tries to obtain financial support provided under the Act or other Acts by deceit or other fraudulent means, the certificate may be revoked.

The CAAC recognized the company’s illicit receipt of the Subsidy. However, the CAAC concluded that considering the purpose of the Act, the decision on revocation of the social enterprise certificate should take into account the public interest to be gained verses the private interest to be infringed, as well as the illegality in the receipt of the subsidy

Moreover, judging from Company A’s circumstances, it is hard to see that the company had an intension to illegally receive the Subsidy and got no benefit from the receipt. For this reason, the CAAC decided that the company’s actions were not construed as an illegal act severe enough for its certificate to be revoked.

In addition, if the certificate is revoked the company may have to close its business, which will do harm to its workers who are disabled. This is against the purpose and the goal of the social enterprise certification system.

For these reasons, the CAAC has ruled that the revocation of social enterprise certificate of Company A was an excessive execution of discretionary power.

Ms. Min Sung-sim, Director General for Administrative Appeals Bureau of the ACRC said, “I hope that the CAAC’s ruling could expand support for the establishment and operation of social enterprises designed to help the vulnerable.”