Law Office Management
Jul. 2, 2010
Profits with a Purpose
Oakland’s Sustainable Economies Law Center helps social entrepre-neurs find creative legal fixes.
Last year, an alternative-energy advocate approached Oakland lawyer Jenny Kassan with an interesting predicament. The client had sought out Kassan because her legal specialty is what she calls "sustainable economies," an approach that helps social entrepreneurs and mission-oriented community groups wade through transactional and regulatory laws that were not designed with them in mind. This particular client wanted to equip a local school with solar panels that would eventually be donated to the institution. But the solar enthusiast could neither afford to install the panels himself nor solicit investments from the public without running afoul of securities laws. To get around this hitch, Kassan, who works in the Katovich Law Group, devised a solution that lets donors join a club that supports solar power for the school, instead of having to invest in a company. "It's a different model of how to bring money into a project up front," Kassan says. In return for their contributions, the members receive benefits such as discount coupons from local green businesses. This kind of creative approach to the law is the idea behind the Oakland?based Sustainable Economies Law Center (SELC), which Kassan co-founded in December with Berkeley sole practitioner Janelle Orsi. Last month, the SELC brought in its first class of law student interns to research and help businesses address the legal barriers associated with altruistic collaborative enterprises. Examples of such efforts include land sharing for community gardens; business cooperatives; and community-owned assets like solar panels. These kinds of enterprises appear to be increasing, trade groups say, because sharing resources is both economical and environmentally sound. The SELC could see its niche grow in relevance with the passage of two bills before the California Legislature. This spring, legislation was introduced (AB 1871) that would amend insurance laws to make it easier for people to lend their vehicles to car-sharing pools. Another bill (SB 1463) would create "flexible-purpose corporations," which would allow businesses to codify their intent to pursue social or environmental good while also turning a profit. For example, existing California corporations could adopt the new model to formalize their social mission and emphasize purpose over profits. "A corporate board has a fiduciary duty to shareholders, and generally, what is seen as in the best interest of the company is maximizing profits," explains Susan MacCormac, a partner with Morrison & Foerster who helped create the model. "This would allow what is in the best interest of a corporation to be broadly defined. It would give companies broader discretion." And if a socially conscious business is sold, its charitable way of doing business can be preserved. Organizations that may have been founded as nonprofits could use the new structure to gain access to capital markets. And nonprofits that happen to be drawing too much revenue could convert to a flexible-purpose corporation to eliminate potential tax and legal complications. The SELC has been following the legislation, and Kassan expects that the center will help businesses and nonprofits convert to flexible-purpose entities if the bill passes (a hearing on the legislation is slated for the fall). Until then, co-founder Orsi says, the organization will continue to look for creative legal work-arounds when counseling collaboration-oriented clients. "There are so many legal barriers to something as simple as sharing a car," says Orsi, who is also co-author of The Sharing Solution (Nolo, 2009). "There are barriers to people sharing yard space in order to grow food. So I decided to break down those barriers and sort those issues out."
Kari Santos
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