Public-benefit corporation

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Public-benefit corporations have, in the USA, historically been public corporations chartered by a state designed to perform some public benefit. Several states have signed into law, new types of public benefit corporations and benefit corporations that allow for public benefit to be a charter purpose in addition to the traditional corporate goal of maximizing profit for shareholders.[1] [2] In other countries, they are known as crown corporation, statutory corporation, government owned corporation having monopoly over a specific service or market.

A public authority is a type of public-benefit corporation that takes on a more bureaucratic role, such as the maintenance of public infrastructure, that often has broad powers to regulate or maintain public property.[not verified in body] These agencies are also known in other countries as statutory authorities, statutory boards, government owned corporations, regulatory agency, QUANGO and independent government agency.

Authorities borrow from both municipal corporation law (that is, the laws responsible for the creation of cities, towns, and other forms of local government) and private corporations law. Other public-benefit corporations resemble private non-profit organizations, and take on roles that private corporations might otherwise perform. These corporations often operate in heavily regulated industries, such as broadcasting and transportation.

Corporations such as these are often found in common law jurisdictions such as the Commonwealth countries and the United States.

Origins[edit]

Although people generally associate corporations, sometimes negatively, with private business, corporations in theory began as means to serve public purposes. Corporate theory has its roots in primarily government and religious institutions, where the institution itself is identifiable independently of its membership's mortality. For example, if the Pope dies, the Catholic Church continues to exist, just as it continues to exist as generations pass on and get replaced by new members.

Public-benefit corporations likely have their direct roots in mercantile capitalism. In the early days of European exploration and colonization, a government or monarch would sometimes grant a charter to an entity allowing it to incorporate and make potentially risky investments. While certainly not public-benefit corporations by today's standards, entities such as the Massachusetts Bay Company, Hudson's Bay Company, and the Dutch East India Company arguably are early prototypes of publicly chartered (in this case, crown-chartered) corporations successfully making risky investments.[citation needed]

History[edit]

The first public authority on record is the Port of London Authority, established 1908.[citation needed] According to the Port of London Acts The Authority is a public trust established to "administer, preserve and improve the Port of London." The goal was to create an entity that would be run self-sufficiently like a private company yet remain under the control of the government. The name Authority is derived from the founding act of Parliament which repeatedly stated that "Authority is hereby given...."

The special status of this entity and the fact that it remained subject to administrative law was established by the UK courts in R v Port of London Authority: ex parte Kynoch [1919] 1 KB 176.

Incorporation and powers[edit]

Public-benefit corporations are generally governed by boards of directors, which are appointed, rather than elected, and, internally, reflect bureaucratic forms. The corporation is government-owned and performs a specific, narrow function for the public good.

Public-benefit corporations are most often created by statute. In many Commonwealth countries, public-benefit corporations continue to receive charters from the British monarchy. In the United States, they receive their charters usually from states, but possibly from the federal government.

Public authorities are usually created with a specific mandate, such as the construction of bridges, mass transit, etc. Unlike departments or ministries of the state, these corporations usually are enabled by statute to raise revenues through bond issues.

For more information, read below about individual jurisdictions.

Public-benefit corporations by location[edit]

United Kingdom[edit]

The first reference to public-benefit corporations in United Kingdom law is in the Health and Social Care (Community Health and Standards) Act 2003, which established NHS Foundation Trusts as public-benefit corporations. Schedule 1 of the Act sets out the requirements for a public-benefit corporation which include a membership made up of individuals living in a specific area, employees of the corporation and service users, and a board of governors some of whom are elected by the members based on "constituencies" such as staff, users or public. British authorities have used other terms with similar functions to public-benefit corporations such as statutory authority, QUANGO and crown corporation.

Public-benefit corporations are distinguishable from public authorities in that the latter do not have a membership.

Examples of other bodies which have a similar role to, whilst not being formally called, public-benefit corporations include the BBC, which is incorporated by royal charter. Many universities have charters going back centuries, and so are also chartered corporations.

Canada[edit]

Via Rail in Canada is an independent crown corporation offering intercity passenger rail services in Canada. The Canadian Broadcasting Corporation is another example.

The Province of Ontario shares two international public-benefit corporations with the U.S. state of New York:

Russia[edit]

In Russia the law “On Noncommercial Organizations” describes the status state corporations. It is a special form of noncommercial partnership founded by the state to fulfill socially significant tasks. The activities of each corporation are described in a special federal law. Assets transferred to a state corporation are not state property from the legal point of view. Under the law “On Noncommercial Organizations”, property transferred to as the investment in a partnership is the property of the partnership. The partnership itself is no one's property. It manages its assets as described in its charter. The rights of the founder are considerable in the partnership, but they are still not ownership rights. There is only one founder in a state corporation, and it is the Russian Federation. That is why the state corporation is independent. It is a set of assets that are managed for purposes established in its charter by managers appointed by the founder. State corporations, as a rule, are subordinate not to the government, but to the Russian president, and act to accomplish some important goal. The state corporations can manage those assets as demanded by the sketchily described goals and tasks of the charters and as allowed by the supervisory council, on which there is no one the president does not trust.

United States[edit]

Since the U.S. Constitution does not explicitly or implicitly empower the Government of the United States to create corporations outside of the confines of the federal government, the power to define and create corporations (other than as agencies of the U.S. government) is mostly reserved to the individual states. (However, certain corporations chartered by acts of Congress do exist, mostly non-profit organizations serving the public interest, such as the Boy Scouts of America, as well as various charitable, fraternal, and veterans' organizations. In addition, certain parastatals, which are for-profit, but may exercise unique powers, such as Fannie Mae and Freddie Mac, have federal charters.)

Private corporations were not so common in the early United States as they are today; corporations were often founded to create a public purpose, such as the maintenance of a toll bridge. Today, public-benefit corporations are popular in some states in the United States, perhaps especially New York State. Many interstate compacts in the United States are public-benefit corporations.

Federal government public benefit corporations are also known as Independent agencies of the United States government. It is a form of Government-owned corporation.

Examples of federal public-benefit corporations created, owned and operated by the U.S. government include Amtrak, the United States Postal Service and the Corporation for Public Broadcasting.

Many public authorities in the United States are interstate compacts or local and regional entities covering multiple municipalities on the county or state level.

And Ello, a Facebook-like company, recently set itself up as a Public Benefit Company.[3]

California[edit]

California Corporation law designates three types of non-profit corporations - Religious Corporations (for example, a religious order might be incorporated as one of these), Mutual Benefit Corporations (a condominium association) and a Public Benefit Corporation (often things like hospitals or colleges). The assets of a public benefit corporation are irrevocably dedicated to its charitable purpose. (Generally beginning in California Corporation Code at §5100 - http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=05001-06000&file=5110-5111)

Under California law a Public Benefit Corporation may be created by a public entity - as the two examples above suggest, but the definition in the California Codes is very specific.

Delaware[edit]

The General Corporation Law (Title 8, Chapter 1 of the Delaware Code) was recently amended by Senate Bill No. 47, effective August 1, 2013, adding a new subchapter XV, which authorizes the creation of Public Benefits Corporations. As defined in the GCL, a PBC is a for-profit corporation intended to produce a public benefit and operate in a responsible and sustainable manner. The PBC is to be managed in a manner that balances stockholders' pecuniary interests, the best interests of those materially affected by the corporation's conduct and the public benefit for which the PBC is formed.

Florida[edit]

Georgia[edit]

Illinois[edit]

The Bi-State Development Agency is a bi-state agency managing public transportation between southern Illinois and Missouri. It serves the St. Louis metropolitan area.

The Regional Transportation Authority (RTA) oversees funding and operation of public transit in the Illinois portion of the Chicago metropolitan area.

The Illinois State Toll Highway Authority

Maine[edit]

In the state of Maine, public-benefit corporations:

  • are designated as a public-benefit corporation by statute; or
  • are tax exempt under section 501(c)(3) of the Internal Revenue Code; or
  • are organized for a public or charitable purpose and is required to distribute assets to a similar tax exempt organization upon dissolution; or
  • have elected to be a public-benefit corporation.

Maryland[edit]

Massachusetts[edit]

Missouri[edit]

See Bi-State Development Agency.

New Jersey[edit]

In July of 2013, Governor Markell signed into law a new type of public benefit corporation, [3]

The New Jersey Turnpike Authority (NJTA) is a public-benefit corporation in New Jersey, created by the New Jersey Turnpike Authority Act of 1948.

The Delaware River and Bay Authority controls the Delaware Memorial Bridge between Delaware and New Jersey, and is a bi-state agency. The Delaware River Port Authority is a bi-state agency of New Jersey and Pennsylvania. The Port Authority of New York and New Jersey is a bi-state agency shared with New York.

NJ Transit, formed in 1979 operates bus, light rail and passenger rail service in New Jersey and in neighboring states as well as funding and planning of bus and rail services and programs.

Although "Public Benefit Corporation" is not a statutorily defined term under State laws (New Jersey Statutes or the New Jersey Administrative Code), such corporations are among those included within the statutorily defined term "State Agency".

New Hampshire[edit]

New York[edit]

The widespread use of public authorities in the United States was pioneered in New York state by Robert Moses. New York likely has the most extensive number of public-benefit corporations in the country. The approval of the New York State Public Authorities Control Board is required in some cases when creating an authority. An authority may at times levy taxes and tolls; this means that they are not part of the usual state budgetary process, and gives them a certain independence. Their most admired ability by the New York State and local government, is to circumvent strict public debt limits in the New York State Constitution. Furthermore, they may make contracts; because of public authorities' corporate status, there is generally no remedy against the chartering State for the breach of such contracts.[4] On the other hand, as agents of the state, public authorities are not subject to many laws governing private corporations, and are not subject to municipal regulation. Employees of public authorities usually are not state employees, but are employees of the authority.[5] Public authorities can also often condemn property.[6]

Among the major public-benefit corporations in New York state are the Port Authority of New York and New Jersey, a bistate authority, the Metropolitan Transportation Authority, which manages most of the public transportation in New York City.

Tennessee[edit]

Tennessee is arguably the banner state for the Tennessee Valley Authority's (TVA's) operations, which span a region extending into seven states (most of Tennessee and parts of six others), but the TVA is actually a federally owned public authority. The TVA has been key in aiding the region's economic development, most notably in the 1930s during the Great Depression[dubious ].

Texas[edit]

Vermont[edit]

Like Maine, the state of Vermont defines public-benefit corporations broadly. They include public-benefit corporations founded by the state and by private entities. The Vermont Economic Development Authority[4] is an example of a state-owned public-benefit corporation.

Washington[edit]

Other meanings[edit]

More broadly, a public-benefit corporation could be any corporation that exists for a charitable purpose, though these are generally called non-profit corporations if they are not founded by a government. Some jurisdictions (the U.S. State of Maine, for instance) might define a public-benefit corporation broadly. In California, public-benefit corporations are one of several types of non-profit corporations.

See also[edit]

References[edit]

  1. ^ http://www.huffingtonpost.com/gov-jack-markell/public-benefit-corporation_b_3635752.html
  2. ^ http://venturebeat.com/2011/10/11/benefit-corporations-californi/
  3. ^ Fox, Justin. "How the Market Ruined Twitter". www.blogs.hbr.org. Retrieved 3 November 2014. 
  4. ^ John Grace & Co. v. State University Constr. Fund, 44 N.Y.2d 84, 375 N.E.2d 377; 404 N.Y.S.2d 316 (1978).
  5. ^ Ciulla v. State, 191 Misc. 528; 77 N.Y.S.2d 545; (NY Court of Claims, 1948)
  6. ^ 87 NY Jur PUBLIC AUTHORITIES Section 1 et seq.

External links[edit]