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AMERICAN UNIVERSITY BUSINESS LAW REVIEW
Vol. 2:1
California and Washington have each created their own unique statutory solutions. In addition to passing a benefit corporation statute, California passed the Corporate Flexibility Act of 2011 to facilitate the formation of flexible purpose corporations ( “FPCs ”).105 According to the California law, the articles of an FPC must include one or more of the following in its statement of corporate purpose: One or more charitable purpose activities that a nonprofit public benefit corporation is authorized to carry out . . . [or] promoting positive shortterm or long-term effects of, or minimizing adverse short-term or longterm effects of, the flexible purpose corporation ’s activities upon any of the following: (i) The flexible purpose corporation ’s employees, suppliers, customers, and creditors. (ii) The community and society. (iii) The environment.106
As their name suggests, FPCs are much more flexible than benefit corporations. Unlike benefit corporations, FPCs are not required to pursue the “general public benefit, ” are not required to consider the various stakeholders listed in the benefit corporation statute, and are not required to be assessed against a third-party standard.107 The State of Washington passed a statute allowing the formation of “social purpose corporations ” ( “SPCs ”), effective June 7, 2012.108 Consideration of social purposes is permissive for directors of SPCs, which distinguishes the SPC statute from the mandatory consideration required by the benefit corporation statutes.109 presence. ”); Daniel S. Kleinberger, A Myth Deconstructed: The “Emperor ’s New Clothes ” on the Low-Profit Limited Liability Company, 35 DEL. J. CORP. L. 879, 880 (2010) [hereinafter Kleinberger, A Myth Deconstructed] (calling the L3C “a snare and a delusion ”); Murray & Hwang, supra note 9, at 49 –51 (offering a more optimistic view of L3Cs but noting governance and financing issues in need of reform); see also Daniel S. Kleinberger, ABA Business Law Section, on Behalf of Its Committees on LLCs and Nonprofit Organizations, Opposes Legislation for Low-Profit Limited Liability Companies (L3Cs) (Wm. Mitchell Coll. of Law 2012), available at http://open.wmitchell.edu/facsch/228 (including a letter and attachment sent to Minnesota Representative Steve Simon on April 19, 2012 arguing against L3C legislation). See generally Callison & Vestal, supra note 81. 105. CAL. CORP. CODE § 2500 et seq. 106. Id. § 2602(B)(2)(A) –(B). In addition, California ’s Corporate Flexibility Act also requires that the corporations be operated for the “benefit of the long-term and the short-term interests of the flexible purpose corporation and its shareholders. ” Id. § 2602(b)(1)(A) –(B). 107. See Dana Brakman Reiser, Benefit Corporations —A Sustainable Form of Organization?, 46 WAKE FOREST L. REV. 591, 594 n.22 (2011) (explaining some of the differences between benefit corporations and FPCs). Compare CAL CORP. CODE § 2500, with MODEL BENEFIT CORP. LEGIS. Some may suggest that the flexibility of FPC statutes will make flexible purpose corporations more susceptible to greenwashing than benefit corporations. 108. WASH. REV. CODE § 23B.25.005 –150. 109. Compare id. § 23B.20.050(2) ( “[Directors] may consider and give weight to one or more of the social purposes of the corporation as the director deems relevant. ”) (emphasis added), with MODEL BENEFIT CORP. LEGIS. § 301(a) ( “[Directors] shall