Re: Minutes of the GNOME Board meeting 6 March 2001

[Bart Decrem <bart eazel com>]

Elliot Lee wrote:

> On Fri, 9 Mar 2001, Daniel Veillard wrote:
>
> >   My recollection is:
> >     - incorporating in Delaware doesn't have a distinctive advantage
> >       (remember we are non-profit ;-)
>
> I think the franchise fees are cheaper there, and there may be a few other
> advantages beside the ones specific to for-profits. I apologize for not
> being able to be more specific; I cannot find the details now that I
> actually want it.
>
> I guess I am merely asking you to ask the lawyers for a little more
> information on this, since they should know a lot more - California
> shouldn't be chosen just because it is more convenient for them, but
> because it is best for us.

Hi Elliott,

Good point.  I have forwarded your question to our attorney and asked him to
respond either directly to you, or to me.

I did have an extended conversation with our attorney about this and dragged
Tim Ney (FSF) into the meeting for a second opinion from someone who's dealt
with the issues and doesn't live in California.  Bottom line: the 3 of us
agreed that there's no material reason to prefer Delaware over California,
and therefore agreed to proceed as proposed.  Here's an email exchange about
this issue:

Q: Pls explain the consequences of incorporating in California vs Delaware:
A:
> 1. There is likely no benefit to incorporating the project as a nonprofit
corporation under Delaware law.  If a Delaware corporation
> does any business or holds any property in California for charitable
purposes it is subject to the Supervision of Trustees and
> Fundraisers for Charitable Purposes Act which requires periodic reports to
be filed with the California Attorney General and gives the
> Attorney General power to investigate the corporation's affairs to verify
compliance with its purposes and the terms of any charitable
> trust applicable to it.  The fiduciary standards applied to directors of
such a corporation would probably be the strict California
> standards for charitable trustees.  This standard is not applicable to
directors of California nonprofit corporations; the standard for
> directors of California nonprofit corporations is not as onerous, which is
basically a business judgment, prudent person rule.
>
>  Any Delaware corporation transacting intrastate business in California
must qualify to do business and designate an agent for service
> of process in California and would also have to establish any tax exempt
status with the California Franchise Tax Board.
>

Q: Is there a flip side to this that weighs the other way: presumably the
GNOME Foundation will be 'doing business' in all 50 states and have
a presence in other continents.  By this, I mean that our software is
available for download from anywhere in the world, that we will be
promoting GNOME around the world, that there are developers around the world
and that corporations with a stake in the project are not just
HQ'd in California.  Does the fact that we'd be a Cal corporation in any
way increase administrative burdens in other states/countries?

A:
>  Most commentators believe there is seldom any advantage for a California
group to organize in another state as a nonprofit
> corporation.  Even if the other state's law permit greater limits on
liabilities of, or broader indemnities to, directors and officers
then
> California law permits, choice of issues suggests that it is problematic
that these laws will control over the perhaps stricter standards
of
> California law.
>
>  The above discussion relates primarily to organizations which are public
benefit corporations, but similar concerns attend to mutual
> benefit corporations, primarily those relating to choice of law as to which
state's law would govern the corporation's activities.

Q: Executive summary:
A: whether gnome is a cal corp or incorporates in some other state doesn't
matter much (if at all) re carrying out its activities in other
states or worldwide; a calif corp will have no more or less to deal with than
a corp incorporated in another state.

Let me know if you have additional questions/concerns on this topic.

Bart


>
>
> </nitpick>
> -- Elliot
> The truth knocks on my door, and I say
> "Go away. I'm looking for the truth"
> ...and so it goes away.
>
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