|
Goal |
Concerns |
Mission Anchor is Legally binding? |
Used for B Corp certification? |
Relevance for SEs |
Super-voting Stock
......................
|
Founder retains majority voting control, even after economic power is diluted below 50% |
Overbroad solution, raising investor fears of “rogue founder.” Highly disfavored by traditional investors. |
Yes |
Possibly |
High relevance, but creates friction for traditional investors. |
“Best interests” Clauses
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|
Include constituencies in company’s charter document |
No clarity on how courts would interpret such provisions; DE and CA may rule unenforceable. However, if included before investment, provides a basis for arguing social contract theory for binding nature of provisions. Might be resisted by investors |
Unclear, but potentially. |
Probably useful in making consideration of stakeholders mandatory, even in states with elective statutes |
Medium relevance, often used with other features such as founders’ preferred stock. |
Rules of Corporate Citizenship
...................... |
Include provisions in Bylaws relating to corporate behavior in areas such as philanthropic giving, living wage, income disparity, environmental stewardship, etc. |
No clarity on how courts would interpret such provisions, But if included before investment, provides basis for arguing social contract theory for binding nature of provisions. Might be resisted by investors. |
Until repealed by a Board, they are likely binding on the Board. Use of founders’ preferred stock to anchor makes for a potentially stronger argument. |
Probably useful in providing the Board with a standard for considering such topics. |
Medium relevance. Sometimes used, often with other features such as “best interests” clauses and founders’ preferred stock. |
Founders’ Preferred stock
....................... |
Provides a special class of stock to preserve the mission, for mission anchoring, B Corporation certification and for branding authenticity, in addition to its original purpose of providing a liquidity vehicle for founders. |
Negative control features (in the form of protective provisions tied to the founders’ preferred in the Articles/Certificate) might be resisted by investors, but often more acceptable than other design features or hybrid statutory forms. |
Yes |
Yes |
High relevance. Can also anchor the Rules of Corporate Citizenship in the Bylaws and the “Best Interests” clause in the Articles/Certificate/Certificate, among other things. |