What is a Social Purpose Corporation?

On March 30, 2012, Washington State passed legislation allowing for a new form of for profit-corporation, a Social Purpose Corporation (“SPC”). See RCW 23B.25. The SPC became available as a corporate form on June 7, 2012. As of March 1, 2014, there are eighty-nine (89) registered SPCs in Washington. [1] Washington SPCs are located throughout Eastern and Western Washington and engage in numerous industries including healthcare, agriculture, entertainment, engineering, finance, education, biology, and home heating. A map of Washington SPCs is available at http://www.spcwa.com.

The SPC is an exciting addition to Washington business law because it allows a corporation to carry out is business in a manner that has positive short-term or long term effects on its employees, suppliers, customers, the community, or the environment. See RCW 23B.25.020. Unlike a typical corporation, an SPC can fulfill its social purpose by taking actions that may be contrary or incompatible with maximizing profits for its shareholders. See RCW 23B.25.040. The SPC entity form also insulates its directors and officers from liability for taking actions consistent with the SPC social purpose that may conflict with maximizing the company’s profit. RCW 23B.25.060.

An existing for-profit corporation may elect to become an SPC by following a specific statutory procedure requiring an affirmative vote of the shareholders, amendment to the corporation’s Articles of Incorporation, and other conditions. RCW 23B.25.130. Similarly, an existing SPC can revert to a regular for-profit corporation by following a specified procedure. RCW 23B.25.140. SPCs have special requirements to maintain the corporate form, including preparation and publication of an annual, publicly available social purpose report to SPC shareholders. RCW 23B.25.150.

If you are considering forming a business, a Spokane business attorney can help. The attorneys at Wolff, Hislop & Crockett are experienced legal advisors who can work with you, your accountant, or practice management team regarding the business form that suits your personal situation. Contact us today for a consultation.

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[1] Source: SPCwa.com, available at: http://www.spcwa.com/we_are_spc/list-of-spcs/

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Wolff, Hislop and Crockett