4 Responses to What is a Flexible Purpose Corporation? by Keren Raz

  1. Jeff Mowatt says:

    Sounds like a P-CED business, as described in the 1996 founding paper.

    “The P-CED concept is to create new businesses that do things differently from their inception, and perhaps modify existing businesses that want to do it. This business model entails doing exactly the same things by which any business is set up and conducted in the free-market system of economics. The only difference is this: that at least fifty percent of profits go to stimulate a given local economy, instead of going to private hands. In effect, the business would operate in much the same manner as a non-profit organization. The only restrictions are the normal terms and conditions of free-enterprise. If a corporation wants to donate a portion of profits to its local community, it can do so, be it one percent, five percent, or even fifty percent. There is no one to protest or dictate otherwise, except a board of directors and stockholders. This is not a small consideration, since most boards and stockholders would object. But, if an arrangement has been made with said stockholders and directors such that this direction of profits is entirely the point, then no one will object. The corporate charter can require that these monies be directed into community development funds, such as a permanent, irrevocable trust fund. The trust fund, in turn, would be under the oversight of a board of directors made up of employees and community leaders.”

  2. [...] California's Flexible Purpose Corporation – Charity Lawyer Blog … [...]

  3. Mark Chasan says:

    The distinction between change and transformation is that “change” is just trying to fix the old system and make it better or different. Transformation looks at fresh new ideas, beliefs, behaviors and environments and creates new paradigms.

    What are the real financial, social and regulatory benefits of an FPC? Is it just lipstick on the pig? Is this change or transformation?

    Any company can agree to implement policies to engage in socially responsible and environmentally conscious behavior. What stands in the way of real transformation are laws and metrics currently in place. For example, securities regulations that prevent over 35 unaccredited investors from investing in an offering or an enterprise from having over 300 U.S. shareholders. If a group of 36 unaccredited people got together to invest in social or environmental for-profit enterprise and community, they would be in violation of Rule 501 and most blue sky laws.

    There needs to be a significant overhaul of the securities regulations both at the state and federal level and the metrics in the way companies are valued. Unless the new regulations allow socially responsible and environmental investing to be swept under EBITDA (e.g., EBITDASE – Earnings Before Taxes Depreciation Amortization, Social and Environmental), allow exchange of services for stock, ownership by more than 300 persons, unaccredited investors to voluntarily waive 501 and Blue Sky limits, so that people can participate in collaborative exchanges of goodness and consideration, it appears the FPC will be yet another attempt to do sustainable acts of goodness in a system based upon scarcity, greed, corruption, hoarding, poverty, war and stuff.

    So what can we do to make real transformation? I would love to collaborate in transformation together.

  4. […] on January 1, 2012, two new forms of corporation came to California, both similar to the L3C: the Flexible Purpose Corporation, and the Benefit Corporation. [The latter sounds like an attempt to make a hybrid between business […]

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