Corporate Models for Maximizing Benefits from Resources and Infrastructure Projects

The present report provides a comparative analysis of corporate models frequently used for social development purposes for the benefit of economically disadvantaged and marginalized communities. The objective of this analysis is to identify workable models through which economic and social benefits derived from resource and infrastructure development projects can be transparently held in perpetuity and equitably delivered to a specifically identified community in a developing country. The report considers Sovereign Wealth Funds (“SWFs”), Trusts, Foundations and Community Interest Companies (“CICs”) as potential models that could be adopted or tailored to suit the above-stated objectives.

Clinic: Graduate Institute, Fall 2016

Executive Summary

The full report can be accessed and downloaded here.

The present report provides a comparative analysis of corporate models frequently used for social development purposes for the benefit of economically disadvantaged and marginalized communities. The objective of this analysis is to identify workable models through which economic and social benefits derived from resource and infrastructure development projects can be transparently held in perpetuity and equitably delivered to a specifically identified community in a developing country.

The report considers Sovereign Wealth Funds (“SWFs”), Trusts, Foundations and Community Interest Companies (“CICs”) as potential models that could be adopted or tailored to suit the above-stated objectives.

SWFs are established by states to hold vast public assets, invest them in foreign financial instruments and use the returns thereof for domestic financial and development purposes. The report examines the types, legal structure and governance regimes of SWFs and highlights the fact that private entities cannot set up an SWF, but may advocate for its establishment which would require legislative or administrative action. Nevertheless, the governance principles applied by SWFs for ensuring transparency and accountability may still serve as useful guidelines for any corporate model with the above objectives.

The report then considers trusts and foundations as suitable corporate structures, given that they are frequently set up to hold assets for the benefit of an identified community. Specific examples of trusts in New Zealand, South Africa and Canada are examined to determine how they have been constituted and used to create and distribute wealth within the communities concerned. Based on this examination, trusts and foundations appear to be flexible and adaptable vehicles for attaining community development objectives, particularly owing to the high level of community participation that they allow for and also to the fact that they may freely be established by private initiative.

Lastly, we review CICs, a unique type of company established under English law. CICs operate as regular limited liability companies engaging in standard commercial activities but with an additional legal requirement to pursue social purposes which are set out in their constitutive documents. The key attraction of CICs is the asset-lock feature, which ensures that a defined proportion of a company’s assets is safeguarded and retained for carrying out its stated social objectives. This feature is generally set out in enabling legislation, but may also be incorporated into a company’s constitutive documents, in the absence of such legal framework.

The conclusion that can be drawn from the overall analysis is that there is no ‘one size fits all’ model for projects of this nature. Any model to be applied will need to be tailored to the specific contextual elements of any given project. With this caveat in mind, the report seeks to enable any interested party to make an informed choice by presenting potential options and discussing their suitability for any project with such objectives.

The full report can be accessed and downloaded here.

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