The concept of a Social Purpose Corporation (SPC) is a game-changer for businesses looking to make a positive impact. An SPC is a type of for-profit company that prioritizes social and environmental goals alongside its financial performance.
In the United States, SPCs are recognized as a distinct corporate form, with Delaware being the first state to enact legislation in 2013. This move marked a significant shift in the way businesses are structured and operated.
SPCs are not charities, but rather a new model for businesses that want to create value for both shareholders and society. They are designed to be sustainable and financially viable, while also addressing pressing social and environmental issues.
By combining the benefits of for-profit and non-profit structures, SPCs offer a unique opportunity for businesses to drive social impact and create a better future for all.
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What is a Social Purpose Corporation?
A social purpose corporation is formed to pursue or create one or more specific public benefits. These benefits can include protecting the environment, improving human health, or promoting the arts and sciences.
The primary purpose of a social purpose corporation is to allow directors and officers to pursue the twin goals of public benefit and profit maximization. This means they can balance making a profit with making a positive impact.
Social purpose corporations are distinguishable from charities and not-for-profits because they are formed to make and retain profit. This sets them apart from organizations that rely solely on donations or grants to operate.
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History and Legislation
The Flexible Purpose Corporation was introduced in California on January 1, 2012, as a hybrid corporate form. It was designed as an alternative to traditional corporations and benefit corporations.
This unique corporate form was created by a working group of California attorneys who aimed to hardwire a social purpose into a for-profit corporate structure. The Flexible Purpose Corporation offered more flexibility in balancing profitability and social purposes.
The name "Flexible Purpose Corporation" was changed to "Social Purpose Corporation" (SPC) in 2015, thanks to the amendment S.B. 1301. This change better reflected the social-purpose motivations intended.
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Prior to S.B. 1301, directors of Flexible Purpose Corporations were not required to factor in social purposes when making decisions. However, the amendment now requires directors to take into account factors such as overall prospects and social purposes in their decision-making.
S.B. 1301 also eliminated an exemption for FPCs with under 100 shareholders that followed certain procedures. This exemption allowed them to avoid preparing special-purpose annual reports and special-purpose current reports.
Here are the key changes introduced by S.B. 1301:
- The name "Flexible Purpose Corporation" was changed to "Social Purpose Corporation" (SPC).
- Directors are now required to consider social purposes in their decision-making.
- The exemption for FPCs with under 100 shareholders was eliminated.
Formation and Structure
Social purpose corporations are formed with a specific structure in mind. They are created by filing articles of incorporation with the state, which outlines the company's purpose, powers, and duration.
The structure of a social purpose corporation is designed to balance the interests of shareholders, employees, and the community. This is achieved through a governance framework that includes a board of directors, officers, and shareholders.
Shareholders of a social purpose corporation play a key role in the decision-making process, but their interests are not the only consideration. The corporation's articles of incorporation and bylaws outline the rights and responsibilities of shareholders, directors, and officers.
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Key Characteristics
Formation and Structure is a complex topic, but I'll break it down for you.
Key characteristics of the process include a high level of energy release, which can be measured in terms of temperature and pressure.
The formation of the structure is a slow and gradual process that occurs over millions of years.
This process involves the movement of tectonic plates, which can cause the Earth's surface to buckle and fold.
The resulting structure can be a mountain range, a valley, or a series of hills.
The structure's shape and size are determined by the forces acting upon it, such as gravity and erosion.
The forces acting on the structure can cause it to change shape over time, creating new landforms.
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Articles of Incorporation
Articles of Incorporation are a crucial document in the formation of a corporation. They are typically filed with the state and outline the corporation's structure and bylaws.
The Articles of Incorporation must include the corporation's name, which must be unique and distinguishable from other business names. This helps prevent confusion and ensures the corporation's identity.
The Articles of Incorporation also specify the purpose or business of the corporation. This can be a broad statement, but it should give a general idea of what the corporation will be doing.
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The Legal Framework
Certified B Corporations are legally required to consider the impact of their decisions on all their stakeholders. This means they must update their Articles of Association, reincorporate as benefit companies and benefit corporations, or make other structural changes to comply with the B Corp legal framework.
In California, certified B Corps have two options to meet B Lab's legal requirements: become a Benefit Corporation or a Social Purpose Corporation within two years of certification. LOACOM chose to become a Social Purpose Corporation due to its seamless integration with their business model.
A Social Purpose Corporation (SPC) is one of the two options available in California to satisfy B Lab's mandates. LOACOM's seamless integration with their business model made SPC status the right choice for them.
As of December 2020, LOACOM's Articles of Incorporation and associated business documents reflect their new name: LOACOM, Social Purpose Corporation, doing business as LOACOM.
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Benefits and Impact
As a social purpose corporation, LOACOM is committed to making a positive impact through its work. This is reflected in its commitment to the B-Economy, where it aims to work with other B Corps and 1% for the Planet members as often as possible.
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LOACOM's work principles are designed to drive meaningful change. It works strictly with companies and organizations that align with its mission and values. This approach ensures that its efforts are focused on creating a positive impact.
One way LOACOM measures its impact is through its commitment to diversity, equity, inclusion, and justice. It continuously works to improve its internal and external approaches to these issues, both in the workplace and in the community.
Here are some key ways LOACOM puts its values into action:
- Work as often as possible within the ‘B-Economy’
- Work as often as possible with both business and nonprofit members of 1% for the Planet
- Work strictly with mission and values-aligned companies and organizations
- Work to build and/or support the ‘movements’ that its clients care deeply about
- Work continuously to improve its internal and external approaches to diversity, equity, inclusion, and justice
- Commit 1% of annual revenues to 1% for the Planet members
- Commit funding to social justice and BIPOC-led organizations and initiatives
Frequently Asked Questions
What is the downside of benefit corporations?
Limitations of benefit corporations include not being available in every state, requiring out-of-state registration in some cases
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