Steward-ownership: not just for world changers
14 - 03 - 2023 • Lisanne van der Velden
In our previous blog, ‘A social structure: steward-ownership’, we briefly discussed a way to ensure the social, sustainable or social mission of your company. This structure is called ‘steward-ownership’ and separates control and economic interest. This allows the steward-owned company to focus entirely on its mission, and gives the “stewards” complete control.
We ended our previous blog with a reference to the following misconception: a steward-owned company is some sort of quality certificate for world improvement and is not allowed to make or distribute profits. In this blog we explain why this assumption is incorrect.
Focus on your mission….
Steward-ownership may exist in different (legal) forms, sizes and degrees. Each company is structured differently and has a different purpose. All steward-owned companies have one thing in common: the desire to protect its purpose and putting its purpose before profit. This does not mean that no profit is or may be made at all. The big difference between steward-owned businesses and ‘regular’ businesses is how the profits are used.
…. and think carefully about your profits
Who decides whether profits are distributed and what can you do with them? Do you have to record it? Below we briefly outline how this works in the two structures we discussed in our previous blog.
- The STAK
In a limited liability company (the BV), the general meeting of shareholders (the GM) determines whether profits are distributed. In the STAK structure as mentioned in our previous blog, the GM consists of only one entity: the STAK (a Dutch foundation). This means that the management board of the STAK (delegates from various stakeholders) decides on behalf of the STAK whether or not the BV distributes profits. Once a resolution to distribute has been made by the GM, however, it must still be approved by the board of the BV (stewards). This is actually only a formality: the board may only refuse to distribute profits if this would mean that the BV could no longer satisfy its creditors (distribution test). By putting together a balanced board of the STAK, with delegates from all the different stakeholders (founders, investors, independent third parties), this distribution resolution will in principle be well-considered. However, it is also possible to adopt a somewhat stricter and clearer dividend policy. You can agree in advance how the profits in the BV will be used, for example, to reserve or use them for investments for the benefit of the mission. This will be laid down in the BV’s articles of association.
- The Cooperative
A cooperative may distribute profits to its members but is not obliged to do so. However, the profits must be used in such a way that the members benefit. The cooperative is not subject to a statutory distribution test, as is the case with the BV. In practice, however, the boards of cooperatives often apply this test, and it is certainly advisable to do so; pretesting prevents (hopefully) financial problems afterwards. The general meeting of members (the GM) decides what happens to the profits, unless the cooperative’s articles of association state otherwise. Even with the cooperative, you can agree and record in advance how the profits are to be used. For example, it is possible to put a cap (maximum) on the total profits that a member can receive from the cooperative during its membership, or to establish a different profit arrangement for each member group (for example, investment members or founding members).
In short; a steward-owned company can make and distribute profits just like any other company. However, it is advisable to think in advance about the composition of the body that resolves on the appropriation of profits and/or to what extent you already want to determine how the profits should be used. After all, the purpose of a steward-owned enterprise should come before profit. Will you leave profit appropriation in the hands of the stewards, or will you lay down a comprehensive dividend policy in writing? BVDV is happy to assist.
What if you do want a quality certificate?
So, steward-ownership in itself is not a quality certificate. It is a way to structure your company. A quality certificate for world improvement does not exist, but there are plenty of ways for a company to be more conscious of the environment, society or its employees. To promote your social, sustainable or social mission, you do not need a special quality certificate at all. Of course, there are certificates you can apply for. For example, B Corp, Great Place to Work-Certified™ or World-class Workplace. Participating in the community of these types of organizations will bring you in touch with similar businesses; this, of course, can also be beneficial and beneficial to your business.
If you would like to protect the mission of your company, a steward-ownership structure can be the solution. This mission does not have to be socially responsible (but that is what we focus on at BVDV). Nor does it mean that you can no longer make or distribute profits; it depends entirely on how you structure and shape your business. Every business is different, and steward-ownership comes in multiple forms, sizes and degrees. However, it is a good idea to think in advance about the dividend policy of the steward-owned company (with whom, how strictly and where do you lay this down). We are happy to brainstorm with you!
If you have any questions, please let us know.
BVDV itself is B Corp and supports social entrepreneurs and Social Impact Factory Utrecht, the physical hotspot for social entrepreneurship. BVDV is also a member of Stewards NL. Stewards NL is an initiative of We Are Stewards and connects steward-owned companies, investors and legal advisors to exchange ideas and knowledge.