More information here.
HHS MANDATE AND SOCIAL ENTERPRISE LEGAL FORMS
Here, Professor Bainbridge kindly asks for my thoughts on Keith Paul Bishop’s article Would Hobby Lobby Stores, Inc. Have A Stronger Case As A Flexible Purpose Corporation?
I agree with Bishop’s conclusion that the question is still open. Both the Flexible Purpose Corporation (“FPC“) and the Benefit Corporation version of social enterprise legal forms are quite new and each became available in California as of January 1, 2012. The FPC is only available in California (though Washington state’s social purpose corporation is similar in many respects) and the Benefit Corporation legislation has passed in 20 U.S. jurisdictions (19 states and Washington D.C.), starting with Maryland in 2010. As the name suggests, the FPC allows managers more flexibility in choosing their particular corporate purpose(s), whereas most of the Benefit Corporation statutes require a “general public benefit purpose” to benefit “society and the environment” when “taken as a whole” but also allow additional “specific public benefit purpose(s).” Delaware’s version of the benefit corporation law (called a “public benefit corporation”) requires the choosing of one or more specific public benefit purposes.
Converting to an FPC or a Benefit Corporation, without more, likely would not be much help to companies fighting the HHS mandate. The statutes are simply too broad, and I think courts would want more evidence regarding the corporation’s stance on the issue. Obviously, people would disagree on whether a “socially focused” corporation would oppose certain types of contraceptives. And it seems that the majority (though certainly not all) of those in the social enterprise area lean left of the political center. But, if an FPC or Benefit Corporation made its particular social/religious purpose(s) clear in its articles of incorporation, including enough information to determine a stance against certain types of contraceptives, I think the entity’s argument could be strengthened.
In some states, like Oregon and Texas, relatively recent amendments to their state corporation statutes make clear that a social purpose can be included in the articles of incorporation of a traditional corporation. In other states, whether such a social purpose would be acceptable in a traditional corporation is a debatable question, and thus social enterprise legal forms would clear the way toward including a social/religious purpose that would suggest (or clearly state) opposition to the mandate.
In short, the social enterprise forms, without customization, are likely insufficient, but use of a social enterprise form, with language in the articles of incorporation that suggest that the corporation would be opposed to the mandate, could strengthen the argument of those fighting the HHS mandate. In some states, as mentioned above, a social enterprise form would likely be unnecessary, and a traditional corporation with customized language could be used.
I think the question posed by Keith Paul Bishop and Professor Bainbridge is an interesting one and would love to hear additional thoughts from others, especially any Constitutional Law scholars.
Cross-posted at Business Law Prof Blog.
ESPOSITO ON THE SOCIAL ENTERPRISE REVOLUTION
Robert T. Esposito’s article The Social Enterprise Revolution in Corporate Law: A Primer on Emerging Corporate Entities in Europe and the United States and the Case for the Benefit Corporation is available here.
Next month, Robert will begin his time at NYU Law as a recipient of the Jacobson Fellowship in Social Entrepreneurship.
His article is well worth reading. The abstract is below:
Remarkably, in the face of a global recession, the social enterprise sector continued to experience extraordinary growth in both financial support and the number of newly authorized corporate entities aimed at social entrepreneurs who seek to use the power of business to simultaneously achieve profit and social or environmental benefits. This Article highlights recent developments in the social enterprise movement in Europe and the United States and focuses on the emergence of a surprisingly broad range of newly authorized corporate entities on both continents in response to the needs of social entrepreneurs. These include social cooperatives and the community interest company in Europe, as well as the L3C, the flexible purpose corporation, the social purpose corporation, and the benefit corporation in the United States. In so doing, this Article emphasizes the truly international scope of the social enterprise movement and explains the growing divergence in approaches to social enterprise between continental Europe and the United States. This Article suggests that the benefit corporation, which imposes a new duty to consider stakeholder interests, is currently the most effective vehicle through which social entrepreneurs can ensure their blended value goals are being considered and achieved. This Article concludes by responding to critiques of profit-distribution in social enterprise, making the case for the benefit corporation, and suggesting some statutory and tax reforms to further foster the social enterprise revolution.
LAW & SOCIETY │ 5/31/13 │ BOSTON, MA
A few days ago, Kyle Westaway asked: When will law schools start taking [social enterprise] seriously?
Well, on Friday May 31, 2013 at the Boston Sheraton Hotel (Room 05) from 4:30 p.m. until 6:15 p.m. the Law and Society Association will host a roundtable discussion at its annual meeting on corporate and tax law issues in the social enterprise space.
The participants in the Law & Society roundtable include the following law professors:
The abstract from our proposal reads:
We propose a roundtable discussion session that will focus on corporate and tax law’s expansion to accommodate for-profit businesses’ pursuit of the social good. This session ties to the conference’s theme of investigating the economic downturn’s effect on law and society by exploring the ways in which the downturn has promoted a rapid acceleration of the social enterprise movement and an increased commitment to corporate sustainability methods. Sustainability is a complex goal that requires a multidisciplinary approach that necessarily involves economic actors—businesses. Social entrepreneurs as well as corporate leaders are considering some of the most pressing economic issues of our time related to sustainability. How will businesses operate given the increased global demand for natural resources, gross economic disparity and inequality, and climate change of the twenty-first century?
Our panel will discuss the ways in which corporate and tax law are being reconceived to address social and environmental problems. We will discuss the proliferation of so-called social enterprise legislation (i.e., the benefit corporation, L3C, flexible purpose corporation, etc.) that has been hailed as an innovative step forward in business, while also criticized as being untested, unnecessary, and even irresponsible. In addition to introducing the audience to the new social enterprise legislation, the panelists will debate the various criticisms of social enterprise generally, and the legislation specifically, and discuss social enterprise in the larger context of the social and environmental pressures on the global economy. We will also offer our thoughts on the future of the social enterprise movement.
This is the only one of many panels, symposia, and conferences over the past few years that has had focused on social enterprise law. That said, I agree with Kyle that law schools are still lagging behind business schools in the social enterprise space. As I mentioned in the comments to his post, some of this lag is due to the fact that the U.S. social enterprise statutes are only 5 or fewer years old and, to my knowledge, there has not been any litigation involving these new forms. This semester, I am teaching a social enterprise law course at Regent University School of Law, and it has been a wonderful class to teach. I know a number of my co-bloggers have also taught social enterprise law classes, including Cass Brewer (Georgia State), Alicia Plerhoples (Georgetown), Deborah Burand (Michigan), and even Kyle Westaway – who asked the opening question – has co-taught a short course in social enterprise law at Harvard Law School. I am sure there are additional social enterprise law courses being offered, and I do think law schools will start taking social enterprise more seriously as the space evolves.
HYBRID STRUCTURES WEBINAR │ 1/29/13 │ ONLINE
Jonathan Ng, the Global Legal Director for Ashoka, recently sent me information about a webinar that Morrison & Foerster, Jones Day, and Adler & Colvin are putting on specifically for Ashoka staff, Ashoka Fellows, and Ashoka’s contacts and partners. Jonathan said I could post information about the webinar on this blog. You must preregister for the webinar here.
The webinar is described as “a workshop on legal ‘hybrid’ structures – where social, environmental, and economic missions are embedded in one or more legal forms. . . . [The presenters will] provide detail on important corporate, governance, and tax issues – as well as operational challenges – and discuss how the various models may or may not be effective in maximizing social and environmental goals through company operations.”
THE NEXT BIG THING: FLEXIBLE PURPOSE CORPORATIONS
Over the past few years, jurisdictions across the country have enacted specialized organizational forms to house social enterprises. Social enterprises are entities dedicated to a blended mission of earning profits for owners and promoting social good. They are neither typical businesses, concentrated on the bottom line of profit, nor traditional charities, geared toward achieving some mission of good for society. Their founders instead see value in blending both goals. This article examines the latest specialized form to take shape: the flexible purpose corporation (FPC). After explaining the genesis of FPC enabling legislation, the article critiques its major provisions and compares them with relevant aspects of other specialized forms for social enterprise.
INTRODUCING PROFESSOR ALICIA PLERHOPLES
We are thrilled to welcome Professor Alicia Plerhoples to socentlaw.com. Professor Plerhoples joined Georgetown Law Center as an associate professor of law in 2012. She is a graduate of Princeton University’s Woodrow Wilson School of International and Public Policy and Yale Law School where she served as senior editor of the Yale Law Journal and articles editor of the Yale Journal of Law & Feminism. Professor Plerhoples practiced real estate finance and corporate finance law in both New York City and Silicon Valley prior to entering academia. She has completed two post-graduate fellowships, the first at Stanford Law School as the Orrick, Herrington & Sutcliffe Clinical Teaching Fellow with the Organizations & Transactions Clinic, and the second at the University of California Hastings College of the Law as a Visiting Assistant Professor in business law and clinical education.
Professor Plerhoples’ scholarship, which will be quite valuable to our readers, explores hybrid business entities and their governance. Her recent article Can an Old Dog Learn New Tricks?, 13 Transactions: Tenn. J. Bus. L. 221 (2012), examines traditional corporate law principles and how they might be adapted and applied to the flexible purpose corporation. Currently, she is developing a Social Enterprise and Nonprofit Clinic at Georgetown that is scheduled to open in the fall of 2013.
Professor Plerhoples facilitated my participation in UC Hastings’ social enterprise symposium last week, where I was able to meet her in person and hear about her academic interests. She has already become a thought leader in the social enterprise space and is a valuable addition to this blog.
HOW TO STRUCTURE SOCIAL ENTERPRISE FOR IMPACT
This is a full two-hour lecture at Harvard’s iLab on how to structure your social enterprise for impact. The lecture addresses the three types of social enterprise business models, then compares and contrasts seven legal structures including:
- B Corp Certification
- Benefit Corporation
- Flexible Purpose Corporation
INCORPORATING CHANGE: HOW SOCIAL BENEFIT LEGISLATION IS RESHAPING THE CORPORATE OUTLOOK | 10/19 | SAN FRANCISCO, CA
The UC Hastings Business Law Journal is proud to host a symposium exploring the new legislation recently passed in California that allows corporations to promote the public good. The symposium will feature representatives from B Lab, the legislation drafters, professors, practitioners in the field, and business advisors.
DATE / TIME:
October 19th, 9am – 4pm
Alumni Reception Center, UC Hastings,
200 McAllister St. San Francisco, CA
The opening speaker will introduce the legislation’s background and describe benefit corporations, as well as flexible purpose corporations, benefit limited liability companies, and low-profit limited liability companies (L3Cs). The morning panel will compare social benefit corporations to their counterparts, and explore why a corporation would elect to organize as one type of corporation over the other.
In the afternoon, speakers will shift their focus toward the practical aspects of running these corporations-How can social and environmental impacts be quantified? How should a board adequately consider their new stakeholders? The afternoon panel will then present the partisan viewpoints surrounding the legislation, arguing both for and against its need and expansion. Finally, our closing speaker will address the future of these entities-Will the legislation expand? What type of lawsuits can we expect?
Students, professors, practitioners, and business owners are welcome to join the event. Lunch and reception graciously hosted by DLA Piper, and a reception will follow the event. MCLE Credit will be available.
RSVP to: email@example.com
PROFIT + PURPOSE
Over the last year, I’ve been lecturing at Harvard Law and Stanford Law about structuring social enterprises for impact. I always have people asking me to see the slides, but have never publicly shared the slides. Today I’m releasing those slides to the public.
This is meant to be an introductory presentation that touches on the possible legal structures for social entrepreneurs. The presentation discusses Corporation, B Corp Certification, Benefit Corporation, Flexible Purpose Corporation, L3C and Nonprofit legal structures. Within each legal structure, the presentation touches on Formation, Management, Taxation and Capital.
Click below to access the presentation. Leave your feedback in the comments section. Thanks!