CORPORATE VEHICLES

NEW APPROACHES DEMAND NEW VEHICLES

Existing corporate structures lacked the features that were needed to implement the Sustainable Communities Framework. So we developed three new corporate vehicles that combine the best features of conventional structures with those that enhance benefits to communities and bolster sustainability. Together, these constitute a framework that supports our community economic development programs. Our pilot project is designed to be launched in Puerto Rico.

Commonwealth Development Organizations

A Commonwealth Development Organization (CDO) is the primary entity that coordinates an entire project including the establishment and running of one or both of the other two vehicles. See a detailed and downloadable write-up of CDOs here.

A Public Benefit Financial Institution (PBFI) is the principal vehicle that manages the issuance of a complementary currency under a CDO project. See the section titled Money for a more in-depth explanation of the four ways in which a PBFI issues that currency. In short, they are: a) sell it (for another currency), b) lend it, c) invest it and d) spend it. This means that a PBFI is functionally the equivalent of a sales organization, a bank, a venture capital firm and a public foundation all rolled into one entity that exists for the purpose of enhancing the economic vitality of communities. A downloadable document on PBFIs is available here. You can also see a detailed and downloadable write-up of Money here.

Public Benefit Financial Institutions

Small Business Holding Companies

A Small Business Holding Company (SBHC) is designed to be a public holding company that provides a means by which anyone in a community can invest in its small businesses locally without having to be wealthy. While a significant portion of the Sustainable Communities Framework (SCF) is non-profit in nature, no economic development plan is complete unless it provides support for the for-profit community also, in particular the small- and medium-sized enterprises (SMEs) that make up the economic backbone of communities everywhere. The ideal program provides comprehensive solutions for both sectors. NCG’s SCF program does just that.

To provide a means to support for-profit activities related to SMEs, NCG worked with senior management at the SEC to create a concept we named Small Business Holding Companies. An SBHC is a generic public holding company that concentrates its investments in SMEs.

Think of an SBHC as a regional Berkshire Hathaway, both in terms of the overall size of the SBHC and the size of the companies it invests in or acquires. Active oversight of its subsidiaries is what allows an SBHC to avoid being classified as investment company by the SEC, further easing its creation and management.

We will form our SBHCs as a special type of for-profit company called a benefit corporation, whose legal purposes include a positive impact on society, workers, the community and the environment, in addition to profit as their legally defined goals.  In line with the rationale and objectives of benefit corporations, our SBHCs will exist for the purpose of investing in, purchasing and supporting local small businesses for the benefit of the community and its stakeholders. This article explores in-depth how SBHCs work: How to Increase the Flow of Capital to Small Businesses While Enhancing Liquidity for Investors.

National Commonwealth Group will form one or more SBHCs in each region where we establish the SCF program to support local SMEs. See this page for more information about SHBCs, and this video originally created in 2008 by Michael Sauvante, chief architect of the Small Business Holding Company concept. It was updated in 2016 to reflect the adaptation to SBHCs.