Mechanisms for the Transfer of Assets to SoylentNews PBC

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Introduction

SoylentNews PBC is up and running! We have incorporated, established the initial board of directors, held board meetings, elected officers, opened a bank account, and developed a plan for generating revenue. One task still remaining to place SoylentNews PBC on sound legal/financial footing is for the corporation to acquire certain important assets that are currently owned by private individuals. These assets include:

  • NCommander's property: Linode accounts, database, [please fill in], ...
  • matt_'s property: "SoylentNews.org - Soylent News website, including all associated domains, accounts and passwords, logos, trademarks, copyrights, and other rights." (This is the exact language in the purchase agreement with Barrabas).

This page is for discussion of the legal mechanisms that SoylentNews PBC could use to acquire these assets (or rights to these assets). Each option has advantages and drawbacks, but because everyone may not agree on whether certain features are advantages or drawbacks, they are listed simply as "Features" below. The options are listed roughly in order of the number of pages of legalese involved :-)

Transfer Mechanisms

Not doing anything (included for completeness)

  • Feature: SoylentNews PBC does not own or have rights in the Assets.
  • Feature: SoylentNews PBC does not issue stock.
  • Feature: SoylentNews PBC is not placed in debt.
  • Feature: A patchwork of separate agreements may be needed over time for specific purposes (e.g., to comply with the CA's rules for getting wildcard certificates)
  • Feature: The current owners of the Assets have no guarantee of cash reimbursement for expenses incurred to date.
  • Feature: The availability of the Assets may change unexpectedly.

Assignment in connection with the issuance of common stock

Wikipedia page for Common Stock
Estimated length of agreement: 3.5 pages.

  • Feature: SoylentNews PBC becomes the sole owner of the Assets.
  • Feature: SoylentNews PBC issues common stock to the current owners of the Assets in exchange for the Assets.
  • Feature: SoylentNews PBC is not placed in debt.
  • Feature: A vote of the majority of the stockholders (on a per-share basis) is binding on the corporation.
  • Feature: The Board of Directors can issue additional shares of common stock.
  • Feature: The current owners of the Assets can directly contribute cash to SoylentNews PBC for ongoing operating expenses, in connection with this issuance.
  • Feature: The current owners of the Assets have no guarantee of cash reimbursement for expenses incurred to date.

Assignment in connection with the issuance of an unsecured debt instrument (e.g., a corporate bond)

Wikipedia page for Corporate Bond
Estimated length of agreement: 15 pages.

  • Feature: SoylentNews PBC becomes the sole owner of the Assets as long as it does not default on payment to the bondholders.
  • Feature: SoylentNews PBC does not issue stock.
  • Feature: SoylentNews PBC is placed in debt to the bondholders.
  • Feature: The bondholders have no voting power.
  • Feature: The bondholders must be paid their principle, plus interest, on the maturity date, subject to the terms of a subscription agreement.
  • Feature: If SoylentNews PBC defaults on its payments, it may be placed into bankruptcy.
  • Feature: SoylentNews PBC must register with the United States Securities and Exchange Commission and file for an exemption under one or more sections of the United States Code for a private placement (<- checking on this).
  • Feature: SoylentNews PBC must comply with all securities laws.

Assignment in connection with the issuance of an unsecured convertible debt instrument (e.g., a convertible bond, a.k.a. a convertible note)

Wikipedia page for Convertible Bond
Estimated length of agreement: 15 pages.

  • Feature: SoylentNews PBC becomes the sole owner of the Assets.
  • Feature: SoylentNews PBC does not issue stock, unless it is unable to pay the principal, plus interest, on the maturity date.
  • Feature: SoylentNews PBC is placed in debt to the bondholders.
  • Feature: The bondholders have no voting power.
  • Feature: The bondholders must be paid their principle, plus interest, on the maturity date, subject to the terms of a subscription agreement.
  • Feature: SoylentNews PBC must register with the United States Securities and Exchange Commission and file for an exemption under one or more sections of the United States Code for a private placement.
  • Feature: SoylentNews PBC must comply with all securities laws.
  • Feature: If the bond converts into common stock, SoylentNews PBC is not placed in debt.
  • Feature: If the bond converts into common stock, a vote of the majority of the stockholders (on a per-share basis) is binding on the corporation.
  • Feature: The Board of Directors can issue additional shares of common stock.
  • Feature: The current owners of the Assets have no guarantee of cash reimbursement for expenses incurred to date.

License, subject to the terms of a license agreement

Wikipedia page for License
Estimated length of agreement: 25 pages.

  • Feature: SoylentNews PBC does not own the Assets.
  • Feature: SoylentNews PBC owns the rights to use the Assets, subject to the terms of a license agreement.
  • Feature: SoylentNews PBC does not issue stock.
  • Feature: If the license agreement does not include an up-front payment, SoylentNews PBC is not placed into debt.
  • Feature: SoylentNews PBC must meet the obligations of the license agreement or the license is terminated.

General Questions

  • Question:
"The bondholders must be paid their principle, plus interest, on the maturity date, subject to the terms of a subscription agreement."
What limitations, if any, are there on: interest rate, early repayment, and maturity date? At the extreme could we, say, issue a bond which matures in 99 years, with 0.001% APR, but which the board could repay at an earlier date/time so long as it is financially reasonable (i.e. not jump from frying pan into fire). That obviously puts the bondholders in a less-than-ideal position.
I pose this question not so much as an actual proposal, but to gather information as to our options.
  • Comment:
The maturity date and interest rate that you mentioned would make such a bond effectively a donation. Donating the assets (or issuing bonds) would eliminate the opportunity that we have now to establish the corporation's capital structure, leading to a concentration of power in the Board of Directors. According to our Certificate of Incorporation:
The specific public benefit purpose of the Corporation is to engage in and promote free and open journalism through the production, publication, and community-sourced analysis and discussion of news and original and third-party-sourced works of fact and opinion.
Without stockholders, there is no mechanism in place to require the Board of Directors to adhere to this purpose, for example.
Officers, Directors, and Stockholders are analogous to the executive, legislative, and judicial branches of government, respectively. An effective judiciary comprises a small group of unelected, experienced, even-tempered people who realize that intervening when not absolutely necessary will almost certainly do more harm than good :)
  • Question:
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