IMPCT will incorporate as a normal business in Taiwan with a standard ownership structure at least at the beginning. The team believes Taiwan and Asia have a lot of potential investors and there is too much competition in the U.S. and Europe. Taylor, Annung and JD will stay in Taipei looking for investors and Andres will be in charge of operations in Latin America.
However there are some legal structures that the team is interested in especially L3C.
L3C
Many social entrepreneurs have been faced with choosing between traditional non-profit and for-profit legal structures, neither of which perfectly fit the myriad their organization’s goals and needs. The L3C has become an increasingly popular legal structure for social
entrepreneurs that want to put mission first and profits second. According to Americans for Community Development, "the L3C is a new form of limited liability company (LLC) which combines the best features of a for-profit LLC with the socially beneficial aspects of a
nonprofit. It is the for-profit with a nonprofit soul".
L3Cs are for-profit organizations that pay tax on profits and cannot receive traditional grants or tax-deductible charitable contributions. However, L3Cs are designed to receive private foundation support, government funding, and traditional investment capital. This is accomplished by:
“The low-profit, limited liability company, or L3C, is a hybrid of a nonprofit and for-profit organization. More specifically, it is a new type of limited liability company (LLC) designed to attract private investments and philanthropic capital in ventures designed to provide a social benefit. Unlike a standard LLC, the L3C has an explicit primary charitable mission and only a secondary profit concern. But unlike a charity, the L3C is free to distribute the profits, after taxes, to owners or investors”. (Americans for Community Development, 2014)
‧
“[The L3C] also facilitates tranched investing with the PRI usually taking first risk position thereby taking much of the risk out of the venture for other investors in lower tranches. The rest of the investment levels or tranches become more attractive to commercial investment by improving the credit rating and thereby lowering the cost of capital. It is particularly
favorable to equity investment. Because the foundations take the highest risk at little or no return, it essentially turns the venture capital model on its head and gives many social enterprises a low enough cost of capital that they are able to be self sustainable.”
However, there are some difficulties. A simple internet search on the L3C will quickly reveal how popular the concept has become with social entrepreneurs, non-profit bloggers and organizations, some politicians and many attorneys. However, there are a number of cautious voices as well.
First, attorneys Daniel Kleinberger and J. William point to the failure of L3C lobbyists to convince the federal government to view L3C investments as automatically qualifying as PRIs.
Second, attorneys raise concerns over the “tranched investment” structure of the L3C and note the potential of non-charitable investors receiving non-profit tax exempt privileges if the L3C is not structured carefully.
Third, the authors question the branding capacity of the L3C in light of the first two concerns that the L3C has no legal or market substance.
Finally, and most importantly, the authors question how the required L3C language providing that “no significant purpose of the company can be the production of income or the
appreciation of property” can work with tranched investing.
It is prudent and understandable to be hesitant regarding jumping on the L3C bandwagon just because it is the newest and most exciting legal structure to come along in a decade. However, the momentum behind the L3C movement is such that it has gained substantial lobbying
‧
power and will be able to continue pressuring the IRS to designate L3C investments as PRIs.
As it gains more widespread acceptance, the L3C will likely help social ventures access billions of dollars from private investors looking for social return and foundations looking to invest their five-percent charitable minimum through PRIs. While the L3C is not the right structure for every social venture, it is a powerful and innovative legal solution that will be an important part of social entrepreneurship achieving more rapid growth and widespread
recognition.
3.2. Governance
The team believes a holistic corporate governance needs to fulfill these principles:
Rights and equitable treatment of shareholders: the rights of shareholders will be respected. The IMPCT team will help shareholders exercise their rights by openly and effectively communicating information and by encouraging shareholders to participate in general meetings.
Interests of other stakeholders: it is recognized that IMPCT has legal, contractual, social, and market driven obligations to non-shareholder stakeholders, including employees, investors, creditors, suppliers, local communities, customers, and policy makers.
Role and responsibilities of the board: The board needs sufficient relevant skills and understanding to review and challenge management performance. It also needs adequate size and appropriate levels of independence and commitment.
Integrity and ethical behavior: Integrity will be a fundamental requirement in choosing corporate officers and board members. IMPCT will develop a code of conduct for their directors and executives that promotes ethical and responsible decision making.
Disclosure and transparency: IMPCT will clarify and make publicly known the roles and responsibilities of board and management to provide stakeholders with a level of accountability. The team will also implement procedures to independently verify and safeguard the integrity of the company's financial reporting.
Responsibilities of the board of directors
‧
Board members should be informed and act ethically and in good faith, with due diligence and care, in the best interest of the company and the shareholders.
Review and guide corporate strategy, objective setting, major plans of action, risk policy, capital plans, and annual budgets.
Select, compensate, monitor and replace key executives and oversee succession planning.
Ensure a formal and transparent board member nomination and election process.
Ensure the integrity of the corporations accounting and financial reporting systems.
‧
國
立 政 治 大 學