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Flexible Purpose Corporation

1. What is a Flexible Purpose Corporation?
It is a corporation organized under the Corporate Flexibility Act of 2011, which became effective January 1, 2012. The Flexible Purpose Corporation is a subtype of a California for-profit stock corporation; it can pursue both economic and social objectives.
2. What are the purposes of FPC?
In addition to purposes of a traditional for-profit California corporation, a Flexible Purpose Corporation must have one or more of the following purposes:

  • One or more charitable or public purpose activities that a nonprofit public benefit corporation is authorized to carry out; or
  • The purpose of promoting positive short-term or long-term effects of, or minimizing adverse short-term or long-term effects of, the flexible purpose corporation’s activities upon any of the following:
    • The flexible purpose corporation’s employees, suppliers, customers, and creditors;
    • The community and society; or
    • The environment.

3. In addition to purposes, what are the other differences between a traditional corporation and a Flexible Purpose Corporation?
Some of the differences are:

    • There are extensive reporting requirements applicable to Flexible Purpose Corporations with more than 100 shareholders (these reporting requirements are not applicable to FPCs with fewer than 100 shareholders if the Flexible Purpose Corporation holds unrevoked waivers of such compliance from shareholders holding at least two-thirds of the outstanding shares of the FPC).
    • Directors of a Flexible Purpose Corporation have broader rights than Directors of a for-profit corporation. In discharging their duties, Directors of the Flexible Purpose Corporation may consider such factors as Directors deem relevant, including the short-term and long-term prospects of the corporation, the best interests of the corporation and its shareholders, and the purposes of the corporation as set forth in its articles.
    • Indemnification provisions for the “agents” (directors, employees, officers, or other agents) of the Flexible Purpose Corporation in many respects broader, and in some respects, narrower, then for the agents of a traditional corporation.
    • Special Purpose MD&A:  In its Annual Report to Shareholders, the Board of the Flexible Purpose Corporation shall provide a management discussion and analysis concerning the company’s stated purpose or purposes as set forth in its Articles. The FPC shall also made this “discussion and analysis” publicly available by posting it on the company’s Internet website or by providing it through similar electronic means.
    • Sale of Assets: The approval of at least two-thirds of the outstanding shares of each class is required for sale of all or substantially all of the assets of the Flexible Purpose Corporation, as opposed to the majority of the outstanding shares entitled to vote in a regular for-profit corporation.

4. May the Flexible Purpose Corporation be converted to a domestic corporation or to other forms of entity?
Yes, it may.
5. Is there any change in taxation?
No, Flexible Purpose Corporations will continue to be taxed as for-profit corporations, under both federal and California income tax law.
6. Where can I find help with organization of the Flexible Purpose Corporation?
Please contact the Law Offices of Oksana Van Rooy with any of your questions. Our corporate law attorney will guide you through every step of organizing the Flexible Purpose Corporation.
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