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FLEXIBLE PURPOSE CORPORATIONS CHANGE THEIR NAME

As of January 1, 2015, California flexible purpose corporations will be deemed “social purpose corporations” to more appropriately reflect their purpose. The Corporate Flexibility Act of 2011 will be renamed the Social Purposes Corporation Act. The major substantive law change is that previously directors did not have to consider the social purpose of the corporation when making decisions. As I explained in my 2012 journal article on FPCs (Can an Old Dog Learn New Tricks? found here), consideration of the social purpose was permissive. The amendment now requires directors of FPCs/SPCs to consider the social purpose of the corporation in making decisions. The prior statute also exempted FPCs with less than 100 shareholders from providing a special purpose report; that exemption is now gone. The full amendment to the California FPC statute can be found here. Overall, these amendments make the new California social purpose corporations look a lot more like Delaware public benefit corporations. Indeed, Delaware public benefit corporations are now more similar to CA SPCs. Although not widely known, Delaware PBCs have a lot less in common with benefit corporation in other states (such as NY or DC).

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