[CCWG-Accountability] Regarding Non-profit and public-benefit legal structure

[Greg Shatan]

What Bruce has set forth is close to correct.  However, I can't help but do
a little legal nit-picking.

"Public benefit corporation" is a term used in California (among other
places) as a term for non-profit corporations generally.  (In New York
State, we use the term "not-for-profit corporation" to mean basically the
same thing as a California "public benefit corporation" (and we use the
term "public benefit corporation" to mean something quite different -- a
quasi-public corporation like the Metropolitan Transport Authority).)
 California public benefit corporations are not really "chartered by the
state" (though New York ones like the MTA are chartered by the state).
 [Wikipedia isn't always a great source....]

In California, public benefit corporations may be created with or without
members, or may convert from member to non-member and vice versa.  However,
a public benefit corporation with members is still a public benefit
corporation.
(California also has "mutual benefit corporations" which are non-profit but
never charitable (and are also not tax-exempt).  Mutual benefit
corporations are run for the benefit of their members, and not for the
benefit of the general public.)

The term "member" can also be used to mean people (or organizations) who
aren't really members.  For instance, when you become a "member" of a
museum, you are not becoming a member of the corporation (i.e., what some
in ICANN-land have termed a "statutory member").  These non-statutory
"memberships" are more for marketing purposes and have no governance role.
 "Statutory members" on the other hand, have a role in governance (which
can vary markedly depending on the by-laws of the particular corporation.

Hope this helps.


Best regards,

Greg Shatan
(Speaking for myself, and not giving legal advice as I am not a member of
the California Bar)

On Tue, Jan 6, 2015 at 6:54 PM, Bruce Tonkin <
Bruce.Tonkin at melbourneit.com.au> wrote:

> Hello Phil,
>
>
> >>   I would envisage the Board having to be compliance with all Corporate
> Governance Codes specific to Companies Law in the country of incorporation,
> subject to a community consensus override. But what is its corporate status
> - not for profit or for profit - as different codes would  apply ?
>
> The legal status  of ICANN is as specified in its articles of
> incorporation:
>
> https://www.icann.org/resources/pages/articles-2012-02-25-en
>
> "This Corporation is a non-profit public benefit corporation and is not
> organized for the private gain of any person. It is organized under the
> California Non-profit Public Benefit Corporation Law for charitable and
> public purposes. The Corporation is organized, and will be operated,
> exclusively for charitable, educational, and scientific purposes within the
> meaning of § 501 (c)(3) of the Internal Revenue Code of 1986, as amended
> (the "Code"), or the corresponding provision of any future United States
> tax code. Any reference in these Articles to the Code shall include the
> corresponding provisions of any further United States tax code."
>
> Also from:
>
> http://en.wikipedia.org/wiki/Public-benefit_nonprofit_corporation
>
> "A public-benefit non-profit corporation  is a type of non-profit
> corporation chartered by a state government, and organized primarily or
> exclusively for social, educational, recreational or charitable purposes by
> like-minded citizens.  Public-benefit nonprofit corporations are distinct
> in the law from mutual-benefit nonprofit corporations in that they are
> organized for the general public benefit, rather than for the interest of
> its members."
>
> I believe it was deliberately set up as public benefit rather than a
> member organization - to avoid the situation where the members become
> limited to say gTLD registries and registrars and hence it ends up
> operating primarily for the benefit of the domain name registration
> industry.
>
> Any move away from a public-benefit corporation to a membership
> corporation - would need to carefully consider how to ensure that the
> members are reflective of the broader Internet community and don't become
> limited to a few members as interest in "ICANN" drops over time.   I.e. a
> failure scenario of membership organisation is what happens to the
> membership base over time and how it can be protected from capture.    I
> have seen some membership based ccTLDs get into problems when their
> membership becomes dominated by domain name investors for example.
>
> Regards,
> Bruce Tonkin
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>
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