The Perpetual Purpose Trust – could the Patagonia model apply to your business?
In 2017, I was hired by the Organically Grown Company in Oregon to help with the process of transferring a portion of the company’s ownership to a Perpetual Purpose Trust (PPT). This was the first transaction of its kind in the United States.
Since then, a few more companies in the U.S. have chosen to incorporate a PPT into their ownership structure.
What is a PPT? It is a mechanism that allows an organization to ensure that it is managed in perpetuity consistent with enumerated purposes. Unlike other ownership structures which are relatively easy to change and can lose their mission when new owners / investors join, PPTs ensure organizations remain purpose driven forever.
In 2022, Patagonia, a global outdoor clothing brand, completed a transaction in which all of its stock was transferred to a nonprofit and a PPT. The PPT has 100% of the voting power in the company.
PPTs are relatively simple to set up and so can be used at any stage of a company’s development. I would like to share an example of a client we are currently working with and how they are using the PPT to preserve the company’s independence and purpose in perpetuity.
The Walker Group, an IT consulting firm based in Connecticut, is wholly owned by Kate Emery. Under her leadership, the company has made a strong commitment to contributing to its community through support of social entrepreneurs and other innovative leadership efforts aimed at solving local and global issues.
Kate is contemplating retirement soon and would like to exit in a way that ensures the preservation of the company’s commitment to social good.
The Kassan Group is helping Kate transfer her ownership of the company to a PPT pursuant to a trust agreement that contains a detailed description of the trust purposes such as ensuring that The Walker Group continues to provide financial and volunteer support for its community. The trust is governed by a stewardship committee that is constrained by the trust purposes. There is
also a provision for a trust enforcer who is responsible for ensuring that the trust stays true to the purposes in the trust document. Kate will be paid for the value of her stock over time out of company net revenues.
If you’d like to include a PPT in your organization’s structure, please contact us for a consultation!