Re: SPI and the case of dissolution

Hi,

I wonder how SPI handles the case of dissolution; if the entire
organisation became incapacitated, what happens to the trademarks?
Or how do you guard against the dissolution?

I am sorry if this is blunt, but I could not figure it out from the
bylaws and I am new in this area and trying to make sure I don't
screw the founding of Debian Switzerland up.

If Debian Switzerland dissolved, everything we hold would be
transferred to SPI.

--
.''`. martin f. krafft <madduck(at)debian(dot)org>
: :' : proud Debian developer, author, administrator, and user
`. `'` http://people.debian.org/~madduck - http://debiansystem.info
`- Debian - when you have better things to do than fixing systems

"never speak disrespectfully of society.
only people who can't get into it do that."
-- oscar wilde

Martin,

> I wonder how SPI handles the case of dissolution; if the entire
> organisation became incapacitated, what happens to the trademarks?
> Or how do you guard against the dissolution?

I don't think that case was anticipated, at least I can't find it in the
bylaws. Maybe someone who's been here from the beginning (Ian? Joey?)
could enlighten me. In my experience, when NPOs fall apart there is plenty
of warning (months to years) and lots of time for the board and membership to
decide what to do with the assets of the organization. As an example, the
Women's Philharmonic in San Francisco went bankrupt in 1999 and didn't
finally dissolve all of their assets until 2003.

The Associated Project resolution does say that assets are "in trust" for the
various organziations. This would imply that we are required to consult
with each OSS project on what to do with their individual assets. Even if
not compelled by law, it's what we *would* do.

Also, Swiss lay is going to be substantially different from US law; you don't
even have the same concept of non-profit organizations. I think you need to
consult with an attorney in your country. Please let the DPL or SPI Board
know if you need help locating one.

--
Josh Berkus
PostgreSQL Project
Core Team Member
(any opinions expressed are my own)

Thanks for the responses!

also sprach Josh Berkus <josh(at)postgresql(dot)org> [2006.10.25.1752 +0200]:
> The Associated Project resolution does say that assets are "in
> trust" for the various organziations. This would imply that we
> are required to consult with each OSS project on what to do with
> their individual assets. Even if not compelled by law, it's what
> we *would* do.

Right. I think this is enough.

> Also, Swiss lay is going to be substantially different from US
> law; you don't even have the same concept of non-profit
> organizations. I think you need to consult with an attorney in
> your country. Please let the DPL or SPI Board know if you need
> help locating one.

I have a lawyer who's taking care of this (for free).

... but all in all it seems like there's not too much to worry here.
I'll just set it up to enable us to transfer everything to SPI at
short notice.

--
.''`. martin f. krafft <madduck(at)debian(dot)org>
: :' : proud Debian developer, author, administrator, and user
`. `'` http://people.debian.org/~madduck - http://debiansystem.info
`- Debian - when you have better things to do than fixing systems

"heuristic is computer science jargon for 'doesn't actually work.'"
-- charlie reiman

On Wed, Oct 25, 2006 at 11:40:21AM +0200, martin f krafft wrote:
> I wonder how SPI handles the case of dissolution; if the entire
> organisation became incapacitated, what happens to the trademarks?
> Or how do you guard against the dissolution?

The rules in case of dissolution are explained in our certificate of
incorporation:

http://www.spi-inc.org/corporate/certificate-of-incorporation

I will quote the relevant bit here:

"In the event of dissolution, all of the remaining assets and property
of the organization shall, after payment of all necessary expenses
thereof, be distributed to organizations that qualify under Section 501
(c) (3) of the Internal Revenue Code of 1986, or corresponding
provisions of any subsequent Federal tax laws, or to the Federal
government, or State or local governments for a public purpose, subject
to the approval of a Justice of the Supreme Court of the State of New
York."

Basically, what that means is that we'd have to give the assets to other
charitable nonprofit organizations with the same tax status as SPI, or
to the government. In practice we would consult with the associated
projects on how to do this, as Josh said, but those are the
restrictions. It probably wouldn't let us leave the assets to a foreign
organization, but if the associated projects wanted to move their money
to other new or existing US charitable nonprofits upon SPI's
dissolution, we could definitely do that.

- Jimmy Kaplowitz
jimmy(at)spi-inc(dot)org

I also meant to send this to the list, Thursday morning. MJ

---------- Forwarded message ----------
From: Mark R Dobyns Jones <markrdjones(at)gmail(dot)com>
Date: Oct 25, 2006 11:58 AM
Subject: Re: SPI and the case of dissolution
To: martin f krafft <madduck(at)debian(dot)org>

On 10/25/06, martin f krafft <madduck(at)debian(dot)org> wrote:
> Hi,
>
> I wonder how SPI handles the case of dissolution; if the entire
> organisation became incapacitated, what happens to the trademarks?
> Or how do you guard against the dissolution?
>
> I am sorry if this is blunt, but I could not figure it out from the
> bylaws and I am new in this area and trying to make sure I don't
> screw the founding of Debian Switzerland up.
>
> If Debian Switzerland dissolved, everything we hold would be
> transferred to SPI.
>
> --
> .''`. martin f. krafft <madduck(at)debian(dot)org>

I'll try for a very brief and not entirely accurate introduction to
this huge topic.

The short answer is corporate life has its risks.

Note that dissolution refers to the a very narrow moment: the instant
and process a corporate body goes out of existence, and a great deal
happens before then for nearly any corporate body.

There is guidance on the SPI "corporate charter" or "articles of
organization"; SPI's charter calls itself "certificate of
incorporation." The corporation is a New York State (U.S.A.) corporate
body, so dissolution process would involve New York State laws and
processes.
See: http://www.spi-inc.org/corporate/certificate-of-incorporation

Since SOFTWARE IN THE PUBLIC INTEREST, INC. elected to obtain tax
exempt status via U.S. federal laws, it was required to specify in its
charter, that in the case of dissolutions, its remaining assets go to
similar tax exempt organizations, termed 501(c)(3) organizations after
the U.S. Federal tax law that specifies a particular kind of tax
exempt organization.

Here's the charter's reference to dissolution procedures:

NINTH: In the event of dissolution, all of the remaining assets and
property of the organization shall, after payment of all necessary
expenses thereof, be distributed to organizations that qualify under
Section 501 (c) (3) of the Internal Revenue Code of 1986, or
corresponding provisions of any subsequent Federal tax laws, or to the
Federal government, or State or local governments for a public
purpose, subject to the approval of a Justice of the Supreme Court of
the State of New York.

For a voluntary winding up of the affairs of an organization (a term
conceivably referring to five- to twenty-year process), which occur
in planned way, various appropriate and intentional business-like
actions can be taken to set up projects, assets and so forth into new
corporate bodies appropriate to the mission of those projects, and the
mission of the original corporation. Long long before dissolution is
approached.

(If SPI were subject to an involuntary process that led tor
dissolution, speculatively, via a bankruptcy proceeding or successful
suit in which all of the assets were turned over to some other entity,
those processes would occur before the dissolution of the corporation
as a category of "necessary expenses" noted in section NINE in the
charter.)

In the corporate world, nothing is forever, and for that matter, no
sovereign nation is forever.

One guards against dissolution by having good corporate practices,
staying solvent, having clear decision making processes, preventing
intractable or unresponsive individuals from becoming members the
board, and staying out of trouble generally, keeping required filings
and reports to sovereign authorities up to date, and having an
activity and mission that is self sustaining.

On the question of trademarks, and other assets, there are a variety
of means to hold them outside the reach of typical kinds of corporate
disaster, but this makes for a more complicated permission to use or
license those assets.

~Mark Jones

Josh Berkus writes ("Re: SPI and the case of dissolution"):
> I don't think that case was anticipated, at least I can't find it in
> the bylaws. Maybe someone who's been here from the beginning (Ian?
> Joey?) could enlighten me. In my experience, when NPOs fall apart
> there is plenty of warning (months to years) and lots of time for
> the board and membership to decide what to do with the assets of the
> organization. As an example, the Women's Philharmonic in San
> Francisco went bankrupt in 1999 and didn't finally dissolve all of
> their assets until 2003.

I assume you're talking about an Associated Project dissolving or
disappearing, rather than SPI itself. I think we should be looking
for the answere in the Associated Projects framework.

The most relevant section seems to be this:

If a Project's internal organization or procedures are unclear or
disputed, SPI will deal with the situation as fairly as possible; if
possible SPI will act according to the decisions or rough consensus
of the Project's participants or in case of doubt that of the whole
Community.

This leaves the board quite a bit of discretion to try to do the right
thing, which I think is the best answer to the problem.

If SPI itself were to dissolve the matter would get complicated. Each
project would have to say what we should do with the money, and of
course we would only be able to pass it on to other appropriatley
charitable institutions. Let's hope that doesn't happen any time soon.

Ian.