BENEFIT CORPORATIONS. Chintan Panchal. Founder, RPCK Rastegar Panchal

Transcription

1 BENEFIT CORPORATIONS Chintan Panchal Founder, RPCK Rastegar Panchal

2 Benefit Corporations Purpose: create a general public benefit Director Duties: benefit corporations expand the purview of the board to take other stakeholders (e.g. employees, customers, society) into consideration beyond maximizing financial returns to shareholders Legal Form: Form of benefit corporations dependent on legislation passed by each state Reporting requirements vary by state law Clarifying common misconceptions: Benefit corporations are not non-profit Do not get state or federal tax benefits No third party certification Examples: Patagonia, Kickstarter

3 Heat Map of States with Benefit Corporation Legislation Source: benefitcorp.net

4 B Corps A B Corp is a certification administered by B Lab - - similar to a Fair Trade or No Animal Testing seal of approval No separate legal framework Companies across the world get B corp certified Examples: Warby Parker, Etsy 2,147 B Corps in 50+ countries across 130 industries

5 B Lab Network Source: bcorporation.net

6 Thank You

7 ISRAEL S PUBLIC BENEFIT CORPORATIONS Impact Investment Legal Working Group May 2017 Janet Pahima

8 Public Benefit Corporations Section 345(A GG) of the Companies Law A. A public benefit corporation is a company the by laws of which prescribe only public purposes and also forbid any distribution of profits or any other distribution to its shareholders. Public Benefit Corporations are designated PBC after their name.

9 Public Benefit Corporations Purposes Purposes do not need to include making profits, as is required in Israeli public and private companies generally. Change in purposes: to add, delete, or replace: Must be approved by the General Meeting If proximate purpose, the Registrar of Endowments can object. If not proximate purpose: requires Court approval. Any digression from public purposes requires approval of the general meeting and approval of the Court.

10 Current List of Public Purposes 1. quality of the environment, protection of the environment or knowledge of nature and of the environment; 2. health or life saving; 3. religion, tradition or commemoration; 4. protection of animals and concern for their welfare; 5. human rights; 6. education, vocational training, culture and art; 7. science, research or higher education;

11 Current List of Public Purposes (cont d) 8. sports; 9. immigration, immigrant absorption or settlement; 10. charity or welfare; 11. community welfare or community, social or national activity 12. the rule of Law, government or public administration; 13. the establishment of funds or organizations for the encouragement or support of entities for one or more of the purposes enumerated above

12 Corporate Governance Audit committee required (like in public companies; note audit committees are not required in private limited companies) Extensive oversight responsibilities If turnover is more than NIS 10 million (about $2.8 million), PBC needs an internal auditor Reports to the Registrar track both reports required by private limited companies and reports required by non profit societies.

13 Corporate Governance Related Party Transactions: approvals required mirror requirements for public companies and in some cases also require Court approval Actions that deceive a person can result in the officers or shareholders being charged with payment of a debt of the PBC. Foreign qualifying companies can be registered as Foreign Public Benefit Companies

14 Corporate Governance Directors, Officers and Audit Committee members have a Duty of Caution Indemnification for breach of duty of caution is prohibited.

15 Share Transfers Requires approval of Court and notice to the Registrar but transfers for a minimal amount require only notice to the Registrar. No transfer by inheritance, death or bankruptcy

16 Mergers and Creditor Arrangements With approval of the Court, a PBC can merge with another PBC. Creditors arrangements (Section 350 of the Companies Law) also require Court approval ensuring that the rules for PBCs are respected, including regarding changing the purposes of the PBC and liquidation.

17 Appointing an Investigator Shareholders holding at least 25%, the Audit Committee, the Attorney General or the Registrar can request the appointment of an Investigator if there is suspicion that a PBC is not complying with the Companies Law.

18 Liquidation After satisfying debts and costs, the remainder of the assets will be distributed as set out in the by laws. In a Court supervised liquidation, the assets cannot go to purposes that are not proximate to the purposes of the PBC. Voluntary: Registrar must approve transfer of assets. If the by laws cannot be followed, the Court can approve transfer to a proximate purpose. Involuntary: assets must be distributed to another entity with a public purpose.

19 Liquidation continued Court must approve the liquidation. The Court can institute liquidation if the activities of the PBC violate the law or if an investigator recommends liquidation The shareholders are not entitled to receive anything on liquidation of a PBC. Exception: an asset given on condition that it is returned on liquidation or given to a specific other person will be allowed.

20 Thank you

21 Mapping of EU Social Section x: Enterprise Legislation May 23, 2017

22 What are the main legal systems in Europe?

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25 Social Enterprise in Europe Social Business Initiative (SBI): SBI launched in 2011 Mapping study commissioned in April 2013 Mapping study published in November 2014 Legal summary published by ESELA in October 2015

26 Definition of Social Enterprise in Europe : 5 characteristics

27 SE laws published since 2014

28 Promoting Impact Investing + Social Enterprise in Europe GECES meeting on April 27, 2017: 5 pillars to be developed for First pillar : Access to finance - Revision of Eusef Regulation (2013) / EuVeCap Regulation (2013) - EaSI Guarantee Instrument / establishing a debt finance window ( EaSI funded instruments ) - Implementing blended instruments under the European Funds for Strategic Investments (EFSI) Equity - Stimulating support for SE Financial Markets under EaSI such as EaSI Capacity Building (for institutional capacity of micro-credit and social finance providers) and grants to reduce transaction costs of financial intermediaries for small investments As well as: - Social Impact Accelerator (fund of funds managed by EIF): fund invests in social impact funds which target social enterprises (243M euros in 2015)

29 Please visit and contact us at to join our network!

30 IILWG Conference Panel Impact Beyond Borders: International Practice Perspectives from Lawyers with Social Entrepreneurship and Impact Investment Practices Wednesday, May 24 10:30am 12:00pm Marcelo Coimbra 1

31 BRAZILIAN IMPACT INVESTING SCENE No specific regulation for impacting investments in Brazil Sectors: financial inclusion, education, healthcare, renewable energy, housing, waste management and water and sanitation Half of active impacting investors in Brazil are Brazilians and half are foreigners* 330 million in 7 impacting investment funds* *Source: Revista Capital Aberto, April derecursos/investimento de impacto conquista espaco/#.wsmnc8zv_iw and Mapping the impact investing sector in Brazil, Summary of Findings /docs/pubs/impactinvestingstudy_final_version_english.pdf

32 SPECIAL CHALLENGES FOR BRAZIL Less than 1.0% of global impacting investing assets in 2016, a lot still to grow* Brazil s continental scale presents a challenge The country is too big and very different within its self Frontier regions in the Northeast are starting to be explored Success cases should attract a diverse range of investors *Source: Mapping the impact investing sector in Brazil, Summary of Findings ION_ENGLISH.pdf

33 FINANCING IMPACTING INVESTMENT Funds: Kaeté, Move, Pipa, Artemisia, GRID Investments, Bamboo Finance, Vox Capital, Yunus Social business, Virtuose, OIKO Credit* 40% of the investors are closed end funds; 10% business accelerators; 5% family offices; the rest are philanthropic and/or angels* For 54% of the investors, the social positive impact is as important as the financial return* The investment landscape in Brazil is still concentrated in the Southeast (95% have preference to this area of the country)* *Source: Mapping the impact investing sector in Brazil, Summary of Findings ION_ENGLISH.pdf

34 BENEFIT CORP There is no specific regulation for B corp in Brazil Brazilian study group presented a law project based on the American LawofthestateofMaryland Corporate purpose must provide specifications about the social and/or environmental impacts Impacting obligations are biding to the managers Periodic measurement and publication of a report on the benefit generated

35 ANGEL INVESTORS Complementary Law No. 155/2016 new legal framework to angel investment is inside the norms to simplify the taxation on micro business Remuneration of the angel investor should never exceed 50% of the invested company s net income The problem of becoming a quota holder in a country with so unsafe institutions (labor and tax liabilities issues)

36 CROWD FUNDING It started in Brazil in 2011, with Catarse* 2 million Reais were invested in 2016 by online platforms in Brazil* Brazilian Securities and Exchange Commission is working on a regulation which will provide definitions for crowdfunding in Brazil The new regulation will discharge from Brazilian Securities and Exchange Commission investments up to 5 millions *Source: Revista Capital Aberto, April derecursos/investimento de impacto conquista espaco/#.wsmnc8zv_iw indiegogo of brazil candice pascoal andkickante/#780dce6aeb0a

37 MICROFINANCE On the contrary from the other type of investments, microfinance grew more in quantity and quality in the poorest part of Brazil* Brazil is well behind most other countries in Latin America in the development of its microfinance industry* Friendly regulations (Law No. 10,194/01 and Central Bank resolution No. 2,874/01) focused in small informal enterprise and microenterprise, absence of guarantees Microfinance providers are not part of the financial system Credi Amigo, União do Nordeste, Vivacred and Banco da Mulher* *Source: Advancing financial inclusion to improve the lives of the poor, in Microcredit & Microfinance in Brazil, FGV Study and brasil

38 TAXATION The Brazilian Tax system is one of the most complex on the planet no VAT tax system available yet Tax exemption for dividends Specifics tax incentives for funds Friendly tax regime for small companies (Simples Nacional) Tax exemptions for non profit organizations Tax incentives for companies to invest in cultural and social projects

39 Thank you! Marcelo Coimbra Fleury Coimbra & Rhomberg Advogados FCR LAW São Paulo, Brazil 10