Public-benefit corporation

Public-benefit corporations (PBC) are a specific type of corporation that allow for public benefit to be a charter purpose in addition to the traditional corporate goal of maximizing profit for shareholders.[1][2] Depending on the country they may also be known as crown corporations, statutory corporations, or government owned corporations having monopoly over a specific service or market..

The Public Utility Vehicle Modernization Program may be given as an example of public benefit, coming from a governmental organization. Secondly, the model of a public utility corporation shall represent an example for the private sector of the economy.

A public authority is a type of public-benefit corporation that takes on a more bureaucratic role, such as the maintenance of public infrastructure, that often has broad powers to regulate or maintain public property. These agencies are known in some countries as statutory authorities, statutory boards, government owned corporations, regulatory agencies, QUANGO or independent government agencies.

Authorities borrow from both municipal corporation law (that is, the laws responsible for the creation of cities, towns, and other forms of local government) and private corporations law. Other public-benefit corporations resemble private non-profit organizations, and take on roles that private corporations might otherwise perform. These corporations often operate in heavily regulated industries, such as broadcasting and transportation.

Corporations such as these are often found in common law jurisdictions such as the Commonwealth countries and the United States.

Origins

Although corporations are now typically associated with private business, historically corporations began as means to serve defined and limited public purposes. Corporation history has roots primarily in government subdivisions and religious institutions, where the institution itself is identifiable independently of its membership's mortality. For example, if the Pope dies, the Catholic Church continues to exist, just as it continues to exist as generations pass on and get replaced by new members.

Public-benefit corporations likely have their direct roots in mercantile capitalism. In the early days of European exploration and colonization, a government or monarch would sometimes grant a charter to an entity defining a legal body ("corporation") and make potentially risky investments. While certainly not public-benefit corporations by today's standards, entities such as the Massachusetts Bay Company, Hudson's Bay Company, and the Dutch East India Company arguably are prototypical examples of publicly chartered (in this case, crown-chartered) corporations successfully undertaking defined activities with the support of privately contributed investments.

History

The modern era of delegation of government authority to a chartered corporation is marked by the United Kingdom Port of London Authority, established 1908. According to the Port of London Acts The Authority is a public trust established to "administer, preserve and improve the Port of London." The goal was to create an entity that would be run self-sufficiently like a private company yet remain under the control of the government. The name Authority is derived from the founding act of Parliament which repeatedly stated that "Authority is hereby given...." The special status of this entity and the fact that it remained subject to administrative law was established by the UK courts in R v Port of London Authority: ex parte Kynoch [1919] 1 KB 176.

Incorporation and powers

Public-benefit corporations are generally governed by boards of directors, which are appointed, rather than elected, and, internally, reflect bureaucratic forms. The corporation is government-owned and performs a specific, narrow function for the public good.

Public-benefit corporations are most often created by statute. In many Commonwealth countries, public-benefit corporations continue to receive charters from the British monarchy. In the United States, they receive their charters usually from states, but possibly from the federal government.

Public authorities are usually created with a specific mandate, such as the construction of bridges, mass transit, etc. Unlike departments or ministries of the state, these corporations usually are enabled by statute to raise revenues through bond issues.

For more information, read below about individual jurisdictions.

By location

United Kingdom

The first reference to public-benefit corporations in United Kingdom law is in the Health and Social Care (Community Health and Standards) Act 2003, which established NHS Foundation Trusts as public-benefit corporations. Schedule 1 of the Act sets out the requirements for a public-benefit corporation which include a membership made up of individuals living in a specific area, employees of the corporation and service users, and a board of governors some of whom are elected by the members based on "constituencies" such as staff, users or public. British authorities have used other terms with similar functions to public-benefit corporations such as statutory authority, QUANGO and crown corporation.

Public-benefit corporations are distinguishable from public authorities in that the latter do not have a membership.

Examples of other bodies which have a similar role to, whilst not being formally called, public-benefit corporations include the BBC, which is incorporated by royal charter. Many universities have charters going back centuries, and so are also chartered corporations.

Canada

Via Rail in Canada is an independent crown corporation offering intercity passenger rail services in Canada. The Canadian Broadcasting Corporation is another example.

The Province of Ontario shares two international public-benefit corporations with the U.S. state of New York:

  • Buffalo and Fort Erie Public Bridge Authority (also known as the Peace Bridge Authority) — international authority that maintains the Peace Bridge link between Buffalo, New York, and Fort Erie, Ontario.
  • Niagara Falls Bridge Commission — international public authority controlling various bridges in the Niagara Falls. The Board of Commissioners has eight members — four appointed by the Ontario Premier, and four by the Governor of New York State.

Russia

In Russia the law "On Noncommercial Organizations" describes the status state corporations. It is a special form of noncommercial partnership founded by the state to fulfill socially significant tasks. The activities of each corporation are described in a special federal law. Assets transferred to a state corporation are not state property from the legal point of view. Under the law "On Noncommercial Organizations", property transferred to as the investment in a partnership is the property of the partnership. The partnership itself is no one's property. It manages its assets as described in its charter. The rights of the founder are considerable in the partnership, but they are still not ownership rights. There is only one founder in a state corporation, and it is the Russian Federation. That is why the state corporation is independent. It is a set of assets that are managed for purposes established in its charter by managers appointed by the founder. State corporations, as a rule, are subordinate not to the government, but to the Russian president, and act to accomplish some important goal. The state corporations can manage those assets as demanded by the sketchily described goals and tasks of the charters and as allowed by the supervisory council, on which there is no one the president does not trust.

United States
Main article: Benefit corporation

The U.S. Constitution is silent about the federal government's creation of corporations; the power to define and create corporations (other than as agencies of the U.S. government) is mostly reserved to the individual states. The interstate commerce clause of the constitution gives implicit authority to create private federally-chartered commercial corporations; the most numerous of these are federally chartered banks and similar financial institutions. The federal government has established certain corporations by act of Congress, mostly non-profit organizations serving the public interest, such as the Civil Air Patrol, as well as various charitable, fraternal, and veterans' organizations. In addition, certain parastatals, which are for-profit, but may exercise unique powers, such as Fannie Mae and Freddie Mac, have federal charters.

Private corporations were not common in the early United States, and were created by act in early state legislatures. This was typically done for a public purpose, such as for the building and maintenance of a toll bridge or toll road, or a water utility. Today private corporations may be created by simply filing appropriate documents with the appropriate department one of the states.

Public benefit corporations of the federal government are often Independent agencies of the United States government as a form of government-owned corporation. Examples of federal public-benefit corporations created, owned and operated by the U.S. government include Amtrak, the United States Postal Service and the Corporation for Public Broadcasting. Many public authorities in the United States are interstate compacts or local and regional entities spanning multiple municipalities on the county or state level.

California

California corporation law designates three types of non-profit corporations – religious corporations , such as religious orders; mutual benefit corporations, such as a condominium associations; and public benefit corporations, including entities such as hospitals or colleges. The assets of a public benefit corporations are irrevocably dedicated to its public or charitable purpose.[3]

Under California law a public benefit corporation may be created by a public entity – as the two examples above suggest, but the definition in the California Codes is very specific.

Colorado

The Colorado General Assembly in House Bill 13-1138[4] allows for public benefit corporations. Section 7-101-503(2), C.R.S., defines public benefit as "one or more positive effects or reduction of negative effects on one or more categories of persons, entities, communities, or interests other than shareholders in their capacities as shareholders, including effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific, or technological nature."

The Fourth Estate[5] is an example of a Colorado Public Benefit Cooperative chartered under the state's public benefit corporation statutes.

Delaware

In July 2013, Governor Markell signed into law a new type of public benefit corporation.[1]

The Delaware General Corporation Law (Title 8, Chapter 1 of the Delaware Code) was recently amended by Senate Bill No. 47, effective August 1, 2013, adding a new subchapter XV, which authorizes the creation of public benefits corporations. As defined in the GCL, a PBC is a for-profit corporation intended to produce a public benefit and operate in a responsible and sustainable manner. The PBC is to be managed in a manner that balances stockholders' pecuniary interests, the best interests of those materially affected by the corporation's conduct, and the public benefit for which the PBC is formed.

In June 2015, Senate Bill No. 75 amended Delaware PBC rules to make it easier to form, operate or convert into a PBC, by facilitating the naming of PBCs, simplifying the issuance of stock options in PBCs and reducing the voting threshold for conversion from 90 percent to two-thirds of stockholders.[6]

Kickstarter is also a public benefit corporation chartered in Delaware.[7]

Florida

Georgia

As of February 2016, the Georgia legislature is considering House Bill 1052, which would add benefit corporations to Georgia's existing for-profit corporate code.[9]

Illinois

The Bi-State Development Agency is a bi-state agency managing public transportation between southern Illinois and Missouri. It serves the St. Louis metropolitan area.

The Regional Transportation Authority (RTA) oversees funding and operation of public transit in the Illinois portion of the Chicago metropolitan area.

Another public benefit corporation is the Illinois State Toll Highway Authority.

Maryland

Massachusetts

Some examples of public benefit corporations in Massachusetts are as follows:

Effective December 1, 2012, the Commonwealth of Massachusetts allows for the charter of public benefit corporations that may make profits, but which may put social goals on par with profits, unlike traditional for-profit corporations. Public benefit corporations are incorporated under Chapter 156A or 156D and may choose to prioritize environmental and social aims over profit. [10]

Minnesota

The state of Minnesota has enacted a Public Benefit Corporation Act,[11] effective January 2015. A Minnesota public benefit corporation is defined as an entity created under the state's business corporation statute, which "elects in its articles to pursue general public benefit...."[12] "General public benefit," in turn, is defined as "a net material positive impact from the business and operations...on society, the environment, and the well-being of present and future generations."

Missouri

An example of a public benefit corporation which Missouri authorized is the Bi-State Development Agency.

New Jersey

The New Jersey Turnpike Authority (NJTA) is a public-benefit corporation in New Jersey, created by the New Jersey Turnpike Authority Act of 1948.

The Delaware River and Bay Authority controls the Delaware Memorial Bridge between Delaware and New Jersey, and is a bi-state agency. The Delaware River Port Authority is a bi-state agency of New Jersey and Pennsylvania. The Port Authority of New York and New Jersey is a bi-state agency shared with New York.

NJ Transit, formed in 1979 operates bus, light rail and passenger rail service in New Jersey and in neighboring states as well as funding and planning of bus and rail services and programs.

Although "Public Benefit Corporation" is not a statutorily defined term under State laws (New Jersey Statutes or the New Jersey Administrative Code), such corporations are among those included within the statutorily defined term "State Agency".

New Hampshire

An example of a public benefit corporation in New Hampshire is as follows:

New York
Main article: New York state public-benefit corporations

The widespread use of public authorities in the United States was pioneered in New York state by Robert Moses. New York likely has the most extensive number of public-benefit corporations in the country. The approval of the New York State Public Authorities Control Board is required in some cases when creating an authority. An authority may at times levy taxes and tolls; this means that they are not part of the usual state budgetary process, and gives them a certain independence.

In particular, public benefit corporations, or authorities are able to circumvent strict public debt limits in the New York State Constitution, effectively bypassing the constitution. Furthermore, they may make contracts; because of public authorities' corporate status, there is generally no remedy against the chartering State for the breach of such contracts.[13] On the other hand, as agents of the state, public authorities are not subject to many laws governing private corporations, and are not subject to municipal regulation. Employees of public authorities usually are not state employees, but are employees of the authority.[14] Public authorities can also often condemn property.[15]

Among the major public-benefit corporations in New York state are the Port Authority of New York and New Jersey, a bistate authority; and the Metropolitan Transportation Authority, which manages most of the public transportation in and around New York City.

North Carolina

Some examples of public benefit corporations in North Carolina are as follows:

Oregon

Articles of incorporation may be filed listing the new entity as a Public Benefit company. Existing companies may be converted to Public Benefit. A checklist of requirements can be found at the Oregon Secretary of State, Public Benefit Corporation Page.[16]

Tennessee

Tennessee is arguably the banner state for the Tennessee Valley Authority's (TVA's) operations, which span a region extending into seven states (most of Tennessee and parts of six others), but the TVA is actually a federally owned public authority. The TVA has been key in aiding the region's economic development, most notably in the 1930s during the Great Depression.[17]

Texas

Some examples of public benefit corporations in Texas are as follows:

Vermont

Like Maine, the state of Vermont defines public-benefit corporations broadly. They include public-benefit corporations founded by the state and by private entities. The Vermont Economic Development Authority is an example of a state-owned public-benefit corporation.

Washington

Some examples of public benefit corporations in Washington are as follows:

Other meanings

More broadly, a public-benefit corporation could be any corporation that exists for a charitable purpose, though these are generally called non-profit corporations if they are not founded by a government. Some jurisdictions (the U.S. State of Maine, for instance) might define a public-benefit corporation broadly. In California, public-benefit corporations are one of several types of non-profit corporations.

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See also

References
  1. Markell, Gov Jack (2013-07-22). "A New Kind of Corporation to Harness the Power of Private Enterprise for Public Benefit". The Huffington Post. Retrieved 2017-03-03.
  2. "California creates new corporation types that reward doing good (FAQ)". VentureBeat. Retrieved 2017-03-03.
  3. Generally beginning in California Corporation Code at §5100 — https://web.archive.org/web/20120120002651/http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=05001-06000&file=5110-5111 Need reference to current, complete code (at ca.gov) not just descriptive headers, that have been archived.
  4. "Archived copy". Archived from the original on 2015-10-18. Retrieved 2013-11-09.CS1 maint: archived copy as title (link)
  5. "Fourth Estate | Journalism Association". www.fourthestate.org. Retrieved 2017-03-03.
  6. "Important amendments made to Delaware General Corporation Law". Delaware Government. 2015-06-29. Retrieved 2018-02-24.
  7. Isaac, Mike; Gelles, David (2015-09-20). "Kickstarter Focuses Its Mission on Altruism Over Profit". The New York Times. ISSN 0362-4331. Retrieved 2017-03-03.
  8. www.thirdwavedigital.com, Third Wave Digital -. "Georgia Military College - A Liberal Arts Junior College". www.gmc.cc.ga.us. Retrieved 2017-03-03.
  9. "HB 1052 2015-2016 Regular Session". www.legis.ga.gov. Retrieved 26 March 2018.
  10. https://www.sec.state.ma.us/cor/corpdf/Notice%20regarding%20Benefit%20Corporations.pdf
  11. "304A - 2016 Minnesota Statutes". www.revisor.mn.gov. Retrieved 2017-03-03.
  12. "304A - 2016 Minnesota Statutes". www.revisor.mn.gov. Retrieved 2017-03-03.
  13. John Grace & Co. v. State University Constr. Fund, 44 N.Y.2d 84, 375 N.E.2d 377; 404 N.Y.S.2d 316 (1978).
  14. Ciulla v. State, 191 Misc. 528; 77 N.Y.S.2d 545; (NY Court of Claims, 1948)
  15. 87 NY Jur PUBLIC AUTHORITIES Section 1 et seq.
  16. "Oregon Secretary of State: File to Become a Benefit Company". sos.oregon.gov. Retrieved 2017-03-03.
  17. "Rollin' on the river". Arkansas Online. 2018-12-09. Retrieved 2018-12-09.
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