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

[Phil Buckingham]

Hello Bruce,( & Greg),

Thanks for your sterling work here as Board liaison. 

What I can't get my head around is that ICANN is projecting / budgeting 15M
gTLD registrations ( down from an original 33M ) by the end of 2015 ( I
think ) , maybe 2016.
With each new registry(1400) paying $25000 pa + 25cents for each
registration over 50000 to ICANN + potential huge $M from auctions - how can
ICANN be called a "not for profit " anymore. Surely its tax and legal status
will have to change ( under Californian law). (This is where a UK accountant
bows out).

Perhaps I'm going too deep / off  topic now. 

Regards,

Phil



-----Original Message-----
From: accountability-cross-community-bounces at icann.org
[mailto:accountability-cross-community-bounces at icann.org] On Behalf Of Bruce
Tonkin
Sent: 06 January 2015 23:54
To: accountability-cross-community at icann.org
Subject: [CCWG-Accountability] Regarding Non-profit and public-benefit legal
structure

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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