Model Forms

The Articles of Incorporation or Charter must be prepared by a duly licensed attorney in the jurisdiction of incorporation. Table 1 is provided to help that attorney identify which nonprofit statutes can accommodate this structure and which cannot. Some jurisdictions have statutory limits that make this model impractical or impossible, while others provide a more flexible framework. The lawyer’s task is to adapt the model language, where necessary, to the local statutes without undermining the central features that distinguish this form of enterprise from a conventional nonprofit or a standard business corporation.

The reader should understand that, even though a CCE may be chartered in only one jurisdiction, the CCE can still do business in the remaining forty-nine states simply by registering in those states as a foreign corporation doing business within those states. Similarly, any subsidiaries can do business in other jurisdictions by registering as a foreign entity within those jurisdictions. Therefore, it is incumbent on the incorporator to pick the best jurisdiction for incorporation base upon the rights and liabilities granted by the jurisdiction to the CCE’s directors, officers, workers, and the corporation itself and not based upon where the CCE wants to do business.

Because of their specialized design, these provisions are intended to spark informed discussion among professionals rather than to substitute for that discussion. Three groups, in particular, should be in active conversation when they are discussed: (1) attorneys who concentrate on business and nonprofit organization, fiduciary duties, and parent–affiliate structures; (2) certified public accountants and auditors who are responsible for financial reporting, surplus treatment, and internal controls; and (3) economists and policy analysts who study enterprise design, labor markets, and the distribution and use of surplus.

By working through these Articles and their accompanying summaries, the reader can gain a concrete picture of how a commons capitalism entity operates in practice, from its overall structure to the internal allocation of rights, duties, and surplus. Because these provisions serve both as governing documents and as a teaching tool for this framework, the intention is to complete a curated set of both the comprehensive Articles and the selected Articles before concluding the Research section of this website.

In particular, the webpages of model forms are for general information only. The reader is not to rely on any of the contents of those webpages for legal advice. In the event the reader needs legal advice, the reader must obtain legal advice from a duly licensed attorney.

Summary for Practitioners

This comprehensive outline of Model Articles of Incorporation for a Commons Corporation is provided as a general reference for attorneys examining or advising on the structure of commons-based enterprise entities. The framework presented here represents an innovative governance and economic model that differs substantially from traditional nonprofit, cooperative, and for-profit structures. Although the concepts have no direct statutory analogs or established jurisprudence, the framework is intentionally designed to function within existing federal and state law, including the Model Nonprofit Corporation Act and general nonprofit-governance principles.

Due to the novelty and complexity of commons corporations, these materials should not be treated as model documents ready for immediate use. Some attorneys may be inclined to copy and paste provisions without understanding their potential legal import or the statutory interactions they trigger. These documents are not suitable for that approach. Effective use of these forms requires a sophisticated understanding of nonprofit law, corporate governance, fiduciary-duty doctrine, subsidiary control structures, labor considerations, and jurisdiction-specific statutory constraints. Practitioners must be fully aware of the consequences of each article and must tailor the provisions carefully to the jurisdiction in which incorporation is contemplated. No assurance is made that any given state will permit or enforce all provisions in their presented form. To that end these forms are provided only for general reference to practitioners.

This outline is being developed sequentially. Each article will be drafted individually in governing documents and added to the list as completed. After the comprehensive outline is finalized, a corresponding set of bylaws will be drafted to implement and harmonize the governance, stewardship, and economic structures reflected in the Articles of Incorporation. The result will be a complete and coherent body of governing documents, expanding over time as the project continues.

The creation of a fully articulated legal structure for commons capitalism and for Commons Capitalism Entities is a substantial, unprecedented endeavor. Although the framework is designed to comply with existing law, its application requires careful legal judgment. The practitioner using these forms must exercise that judgment with a high degree of expertise and must avoid treating these materials as boilerplate. The responsibility to understand, adapt, and validate each provision rests entirely with the attorney applying them.

articles of incorporation

The following is a comprehensive list of the Articles of Incorporation for a Commons Corporation, together with text and comments, which have been curated and added for the readers’ information and guidance.

Two parallel sets of governing documents are published on this site: the Original Articles of Incorporation and the Petit Articles of Incorporation (a scaled-down set). Each set is maintained as a continuously revised body of work and will be amended from time to time as the overall framework is refined, internal inconsistencies are reconciled, and individual provisions are clarified and tightened. Each article is assigned a stable identifier and a version designation (with date) to permit precise citation and to provide an auditable revision history. No version is designated as final. The most recent version should be treated as the current baseline, subject to further modification.

Errata Sheet.

Section 1. Name.

(a) Legal Name. The name of the nonprofit corporation is [FULL LEGAL NAME OF COMMONS CORPORATION] (the “corporation”).

(b) Short Name and Style. The corporation may use the short name “[SHORT NAME]” and may describe itself, and be described, as a “Commons Corporation” in its internal and external communications, contracts, and disclosures.

Section 2. Nonprofit Commons Corporation Status.

(a) Nonprofit Corporation. The corporation is organized as a nonprofit corporation under [APPLICABLE NONPROFIT CORPORATION STATUTE] and is governed by these Articles of Incorporation (the “articles”) and the bylaws adopted in accordance with the articles (the “bylaws”).

(b) Commons Corporation Designation. The corporation is designated in these articles as a Commons Corporation, which is a form of nonprofit corporation that holds and administers enterprise wealth as a commons rather than as distributable private profit, as further provided in these articles and the bylaws.

Section 3. Commons Capitalism Entity Identity.

(a) Role as Apex Entity. The corporation serves as the apex entity of an integrated enterprise structure referred to in these articles as a “Commons Capitalism Entity” or “CCE.”

(b) Commons Capitalism Entity Definition. For purposes of these articles, a CCE consists of the corporation together with one or more market-facing entities that are wholly owned, directly and exclusively, by the corporation and that operate as its subsidiaries within the overall commons structure.

(1) Relationship to Subsidiaries. In its role as apex entity of the CCE, the corporation holds the ownership interests in such subsidiaries and provides the overarching commons identity for the CCE as a whole, as further defined in these articles and the bylaws.

Comments

Core Purpose

This article establishes the formal legal name of the nonprofit commons corporation, authorizes a short name for practical use, and defines the corporation’s identity as a “Commons Corporation” that serves as the apex entity of a Commons Capitalism Entity, or CCE.

Nonprofit Status

The article states that the corporation is organized as a nonprofit corporation under an identified nonprofit corporation statute. It clarifies that the corporation is governed by its articles and bylaws and that its commons identity operates within the framework of nonprofit corporate law.

Commons Corporation Designation

The article designates the entity as a Commons Corporation and characterizes this form as a nonprofit structure that holds and administers enterprise wealth as a commons, rather than as distributable private profit, subject to more detailed provisions that appear elsewhere in the governing documents.

Apex Role in a CCE

The article defines a Commons Capitalism Entity as the nonprofit commons corporation together with one or more market-facing entities that are wholly owned, directly and exclusively, by the corporation as its subsidiaries. It confirms that the corporation holds the ownership interests in these subsidiaries and provides the overarching commons identity and coordinating role for the CCE as a whole.

Section 1. Principal Office.

(a) Principal Office. The principal office of [LEGAL NAME OF CORPORATION] (the “Corporation”), a nonprofit corporation organized and existing under the nonprofit corporation law of [JURISDICTION], shall be located at [PRINCIPAL OFFICE STREET ADDRESS, CITY, STATE, POSTAL CODE], or at such other place as may be designated from time to time by the Board of Directors in accordance with the Corporation’s bylaws.
(b) Commons Corporation Designation. The Corporation is designated as a Commons Corporation, serving as the apex entity of a Commons Capitalism Entity.

Section 2. Registered Office.

(a) Registered Office. The registered office of the Corporation in [JURISDICTION] shall be located at [REGISTERED OFFICE STREET ADDRESS, CITY, STATE, POSTAL CODE], or at such other place as may be designated or maintained from time to time in accordance with applicable law.
(b) Relationship to Principal Office. The registered office need not be the same as the principal office.

Section 3. Registered Agent.

(a) Registered Agent. The Corporation’s registered agent in [JURISDICTION] shall be [NAME OF REGISTERED AGENT] at the registered office address stated in Section 2.
(b) Change of Registered Agent or Registered Office. The Board of Directors may change the registered agent or registered office from time to time in accordance with applicable law and the Corporation’s bylaws.

Section 4. Additional Offices.

(a) Additional Offices. The Corporation may have such other offices, within or outside [JURISDICTION], as the Board of Directors may designate from time to time in accordance with the Corporation’s bylaws and applicable law.

Comments

Overview

This Article establishes the Corporation’s principal office and statutory agent information and confirms that the Corporation is a nonprofit corporation under the nonprofit corporation law of the stated jurisdiction.

Principal Office

The Article sets the Corporation’s principal office address and authorizes the Board of Directors to change the principal office location from time to time in accordance with the bylaws.

Commons Corporation Designation

The Article expressly designates the Corporation as a “Commons Corporation” serving as the apex entity of a Commons Capitalism Entity.

Registered Office

The Article states the Corporation’s registered office address in the stated jurisdiction and permits changes as allowed by applicable law. It also clarifies that the registered office does not have to be the same as the principal office.

Registered Agent

The Article names the Corporation’s registered agent at the registered office address and authorizes the Board to change the registered agent or registered office in accordance with applicable law and the bylaws.

Additional Offices

The Article authorizes the Corporation to maintain additional offices within or outside the stated jurisdiction as designated by the Board, subject to the bylaws and applicable law.

Section 1. Nonprofit Corporation and Governance Generally.

(a) The Commons Corporation is a nonprofit corporation organized under the GOVERNING NONPROFIT CORPORATION STATUTE, as amended from time to time, and shall be governed in accordance with that statute, these Articles of Incorporation, and the Bylaws.

(b) Except as otherwise expressly provided in these Articles of Incorporation or required by applicable law, the governance and management of the affairs of the Commons Corporation shall be vested in its Board of Directors.

(c) The Bylaws, Board actions, committee actions, actions of delegated persons, and officer actions shall be subject to, and shall not be inconsistent with, these Articles of Incorporation.

Section 2. Board of Directors.

(a) The Board of Directors shall exercise the corporate powers of the Commons Corporation and manage its affairs, consistent with applicable law and these Articles of Incorporation.

(b) The number of directors, qualifications, and any eligibility requirements for directors shall be as set forth in the Bylaws, subject to any express requirements in these Articles of Incorporation and applicable law.

(c) The manner of selecting directors, the term or terms of office, and the manner and grounds, if any, for removal of directors shall be as set forth in the Bylaws, subject to these Articles of Incorporation and applicable law.

(d) Vacancies on the Board of Directors, including vacancies arising from resignation, removal, death, incapacity, disqualification, or an increase in the number of directors, shall be filled as set forth in the Bylaws, subject to these Articles of Incorporation and applicable law.

(e) The Board of Directors may establish one or more committees and may delegate authority to such committees, and may also delegate authority to one or more persons, in each case to the extent permitted by applicable law, the Bylaws, and these Articles of Incorporation, provided that no committee, person, or other delegate shall exercise authority reserved by applicable law or these Articles of Incorporation to the Board of Directors.

Section 3. Officers and Executive Administration.

(a) The Commons Corporation shall have the officers described in the Bylaws, together with any additional officers the Board of Directors may authorize, and each officer shall have the authority and perform the duties set forth in the Bylaws or as determined by the Board of Directors, in each case consistent with these Articles of Incorporation and applicable law.

(b) Officers shall be appointed and may be removed in the manner set forth in the Bylaws, subject to these Articles of Incorporation and applicable law.

Section 4. Bylaws and Internal Governance Instruments.

(a) The initial Bylaws may be adopted at the organizational meeting of the Board of Directors or, if no directors have been named or elected, by the incorporator or incorporators, in each case to the extent permitted by applicable law.

(b) The Bylaws may thereafter be amended or repealed only as provided in the Bylaws, subject to these Articles of Incorporation and applicable law.

(c) The Board of Directors may adopt governance policies and procedures consistent with these Articles of Incorporation, the Bylaws, and applicable law.

Section 5. Incorporator or Incorporators.

(a) The name and mailing address of the incorporator or incorporators are as follows: [NAME], [MAILING ADDRESS].

(b) The incorporator or incorporators shall have only the authority expressly conferred by applicable law for formation and organization of the Commons Corporation and any authority expressly stated in these Articles of Incorporation.

(c) Upon the election or appointment of the initial Board of Directors and completion of organizational actions, the incorporator or incorporators shall have no further governance authority except to the extent, if any, expressly required by applicable law.

Section 6. Initial Directors and Organizational Meeting.

(a) The names and mailing addresses of the initial directors are as follows: [NAME], [MAILING ADDRESS]; [NAME], [MAILING ADDRESS]; [NAME], [MAILING ADDRESS].

(b) The initial Board of Directors shall hold an organizational meeting as soon as practicable after incorporation to take such actions as are lawful and appropriate to complete organization of the Commons Corporation, including adoption of Bylaws, appointment of officers, and ratification of lawful pre-incorporation actions taken on behalf of the Commons Corporation.

Comments

Purpose and Structural Role

This article establishes the baseline governance architecture for a large commons corporation by confirming nonprofit status, vesting management authority in the Board of Directors, and making the Articles of Incorporation the controlling document for all internal governance.

Nonprofit Status and Governing Framework

The article expressly designates the Commons Corporation as a nonprofit corporation organized under the applicable nonprofit corporation statute, as amended. It provides that the corporation is governed by that statute, the Articles of Incorporation, and the Bylaws. It also makes clear that bylaws and all governance actions taken by the board, committees, delegated persons, and officers must be consistent with, and are subordinate to, the Articles of Incorporation.

Board Authority and Core Governance

The article vests governance and management of the corporation’s affairs in the Board of Directors, except where the Articles or applicable law provide otherwise. It confirms the board’s general authority to exercise corporate powers and manage affairs within the constraints of the governing statute and the Articles. The article then allocates key operational details to the Bylaws, providing that the number of directors, director qualifications and eligibility criteria, selection procedures, terms, and any removal mechanics are to be set out in the Bylaws, subject to any express charter requirements and applicable law. It likewise provides that board vacancies are filled as specified in the Bylaws, subject to the Articles and applicable law.

Committees and Delegation to Persons

The article authorizes the board to establish committees and to delegate authority to committees. It also authorizes delegation of authority to one or more persons, expanding beyond committee structures where permitted under modern nonprofit statutes. All delegation authority is subject to a central reservation principle: neither committees nor delegated persons may exercise authority that applicable law or the Articles reserve to the Board of Directors.

Officers and Executive Administration

The article provides for officers as described in the Bylaws and permits the board to authorize additional officers. Officer authority and duties are set in the Bylaws or by board determination, but only to the extent consistent with the Articles and applicable law. Officers are appointed and may be removed in the manner stated in the Bylaws, subject to the Articles and applicable law.

Bylaws and Internal Governance Instruments

The article addresses the adoption of initial bylaws and the structure for later amendments. It permits initial bylaws to be adopted at the organizational meeting of the Board of Directors or, if directors have not yet been named or elected, by the incorporator or incorporators, to the extent permitted by law. Thereafter, bylaws may be amended or repealed only as the bylaws themselves allow, and only to the extent consistent with the Articles and applicable law. The article also authorizes the board to adopt governance policies and procedures consistent with the Articles, the Bylaws, and applicable law.

Incorporators and Transition to Board Control

The article provides for listing the incorporator or incorporators by name and mailing address and limits their role to formation and organizational authority conferred by applicable law and any authority expressly stated in the Articles. Once the initial Board of Directors is elected or appointed and organizational actions are completed, the incorporator has no further governance authority except to the extent required by applicable law.

Initial Directors and Organizational Meeting

The article provides for listing initial directors and their addresses and requires the initial board to hold an organizational meeting promptly after incorporation. It specifies customary organizational actions, including adopting bylaws, appointing officers, and ratifying lawful pre-incorporation acts taken on behalf of the corporation.

ARTICLE [__]. Commons Purposes.

Section 1. Threefold Commons Purposes.
(a) Premium Wages and Social Benefits. The Corporation is organized and shall be operated to pay or distribute premium wages and social benefits to workers of the Corporation and its Subsidiaries, in each case as provided in the Articles of Incorporation and the bylaws.
(b) Expansion and Acquisition of Subsidiaries. The Corporation is organized and shall be operated to expand existing Subsidiaries and to acquire existing companies so that, upon acquisition and any necessary conversion or reorganization, they become Subsidiaries of the Corporation.
(c) Stewardship of Net Profits for Sustainability of the Commons Purposes. The Corporation is organized and shall be operated to steward net profits and other receipts as a commons to support the long-term sustainability of the purposes in subsections (a) and (b), including capitalization, reserves, and related internal funding mechanisms established under the Articles of Incorporation and the bylaws.

Comments

Threefold Statement of Commons Purposes

This Article states the Corporation’s commons purposes as a three-part formulation intended to govern how the Corporation is operated and how net profits and other receipts are stewarded in support of those purposes.

Premium Wages and Social Benefits

The first purpose is to pay or distribute premium wages and social benefits to workers of the Commons Corporation and its Subsidiaries, with the specific programs, eligibility rules, and administration to be implemented through the Articles of Incorporation and the bylaws.

Expansion and Acquisition of Subsidiaries

The second purpose is to expand existing Subsidiaries and to acquire existing companies so that, following acquisition and any required conversion or reorganization, those businesses become Subsidiaries of the commons corporation.

Stewardship of Net Profits to Sustain the Commons Purposes

The third purpose is to steward net profits and other receipts as a commons to support the long-term sustainability of the first two purposes, including through capitalization, reserves, and related internal funding mechanisms established under the Articles of Incorporation and the bylaws.

1. Nonprofit Status and General Powers.

(a) Nonprofit Corporation. The Commons Corporation is a nonprofit corporation and shall have all powers of a nonprofit corporation under the governing nonprofit corporation statute, as the same may be amended from time to time, subject to the limitations and provisions set forth in the Articles of Incorporation and any duly adopted Bylaws.

(b) General Corporate Powers. The Commons Corporation shall have the power to do all things necessary or convenient to carry out its lawful activities and operations, including all powers incidental to a nonprofit corporation, and all powers reasonably related to the stewardship, management, and administration of the Commons Corporation and its wholly owned Subsidiaries, in each case subject to the limitations and provisions set forth in these Articles.

(c) No Implied Expansion Beyond Charter Limits. No grant of power in this Article shall be interpreted to authorize any act prohibited by these Articles, including any act inconsistent with the Commons Corporation’s nonprofit status or any express restrictions elsewhere in these Articles.

2. Powers Relating to Subsidiaries and Market Facing Operations.

(a) Ownership and Control of Subsidiaries. The Commons Corporation shall have the power to form, acquire, organize, capitalize, recapitalize, restructure, dissolve, merge, consolidate, and otherwise own and control one or more Subsidiaries, and to exercise all rights of a sole owner with respect to each Subsidiary, subject to any approvals, constraints, and governance requirements stated in these Articles.

(b) Oversight and Governance Arrangements. The Commons Corporation shall have the power to establish governance, oversight, and reporting requirements for Subsidiaries, including the approval of subsidiary charter documents, bylaws, policies, and material intercompany arrangements, and to appoint or remove directors, managers, or other governing persons to the extent permitted by applicable law and not inconsistent with these Articles.

(c) Intercompany Agreements. The Commons Corporation shall have the power to enter into contracts and agreements with any Subsidiary, including agreements for shared services, management support, licensing, use of intellectual property, cash management, guarantees, and other arrangements on terms the Board deems appropriate, subject to any express constraints in these Articles.

3. Powers Relating to Property, Contracts, and Finance.

(a) Property Powers. The Commons Corporation shall have the power to acquire, receive, own, hold, lease, license, improve, develop, use, mortgage, pledge, sell, transfer, exchange, and otherwise deal in real and personal property of every kind, tangible or intangible, wherever located, subject to any approval requirements and restrictions stated in these Articles.

(b) Contracting and Commercial Powers. The Commons Corporation shall have the power to enter into, perform, and enforce contracts and other obligations; to sue and be sued in its own name; to compromise, settle, and arbitrate disputes; and to take such other actions as the Board determines are appropriate to protect or advance the Commons Corporation’s lawful interests, subject to these Articles.

(c) Borrowing and Credit Support. The Commons Corporation shall have the power to borrow money; issue evidences of indebtedness; and secure obligations by pledge, mortgage, or other lien on its property, and to provide credit support, including guarantees, for Subsidiaries, in each case subject to the limitations and approvals set forth in these Articles.

(d) Cash Management. The Commons Corporation shall have the power to maintain bank accounts and other accounts; establish treasury and cash management practices; receive dividends or other lawful distributions from Subsidiaries; and make lawful transfers to Subsidiaries consistent with these Articles and applicable law.

4. Powers Relating to Funds and Allocations.

(a) Establishment and Administration of Funds. The Commons Corporation shall have the power to establish, maintain, administer, and govern the following funds, and only the following funds, as separate accounting funds or other internal designations as the Board determines appropriate, subject to the requirements of these Articles: (1) the Reinvestment Fund, (2) the Social Benefits Fund, (3) the Education Fund, and (4) the Reserve Fund.

(b) Contributions, Allocations, and Disbursements. The Commons Corporation shall have the power to receive contributions to, allocate among, and make disbursements from the foregoing funds, and to adopt policies and procedures governing eligibility, timing, and administration, in each case subject to any restrictions, priorities, or approval requirements stated in these Articles.

(c) Investments of Funds. The Commons Corporation shall have the power to invest and reinvest assets held in the foregoing funds in a prudent manner consistent with applicable law and these Articles, including the power to retain investment advisers and custodians, subject to any restrictions stated in these Articles.

5. Powers Relating to Records, Policies, and Administration.

(a) Governance Instruments and Policies. The Commons Corporation shall have the power to adopt, amend, and repeal bylaws, policies, procedures, and governance instruments consistent with these Articles and applicable law, including policies for oversight, compliance, conflicts of interest, and intercompany practices.

(b) Records and Reporting. The Commons Corporation shall have the power to maintain corporate and financial records, prepare reports, conduct audits, and implement internal controls as the Board deems appropriate or as required by applicable law, subject to these Articles.

(c) Engagement of Professionals. The Commons Corporation shall have the power to employ and retain officers, employees, agents, independent contractors, and professional advisers, including legal counsel, accountants, auditors, and consultants, and to pay reasonable compensation and expenses, subject to these Articles.

6. Limitation of Powers to Charter Consistency.

(a) Express Subordination to These Articles. All powers granted by this Article are expressly subordinate to, and limited by, the provisions and restrictions set forth elsewhere in these Articles.

(b) Severability of Powers Provisions. If any provision of this Article is determined to be invalid or unenforceable, the remaining provisions shall continue in full force to the maximum extent permitted by law, and shall be construed to carry out the intent of this Article consistent with these Articles.

Comments

Overview and Drafting Function

This article is a comprehensive “powers” provision. It confirms the Commons Corporation’s nonprofit status, grants broad statutory and incidental nonprofit corporate powers, and makes clear that those powers are enabling only to the extent they remain consistent with, and subordinate to, the Articles of Incorporation and duly adopted bylaws.

Nonprofit Status and General Authority

The article expressly designates the Commons Corporation as a nonprofit corporation and incorporates the full suite of powers available under the applicable nonprofit corporation statute, as amended over time. It then grants broad “necessary or convenient” authority to carry out lawful activities and to steward, manage, and administer the Commons Corporation and its wholly owned Subsidiaries, while emphasizing that no power grant may be used to imply authority that conflicts with nonprofit status or any other charter restrictions.

Subsidiary Formation, Ownership, and Oversight

The article authorizes the Commons Corporation to form, acquire, organize, capitalize, recapitalize, restructure, merge, consolidate, dissolve, and otherwise own and control Subsidiaries, and to exercise the rights of a sole owner, subject to any approvals, constraints, and governance requirements stated elsewhere in the charter. It also authorizes the Commons Corporation to establish governance and reporting requirements for Subsidiaries, including approving subsidiary governing documents and material intercompany arrangements, and to appoint or remove subsidiary directors, managers, or other governing persons to the extent permitted by law and consistent with the charter.

Intercompany Agreements and Support Arrangements

The article expressly authorizes the Commons Corporation to enter into agreements with Subsidiaries, including shared services, management support, licensing and intellectual property arrangements, cash management, guarantees, and related arrangements, on board approved terms, subject to any express charter constraints.

Property, Contracting, and Dispute Powers

The article grants standard powers to acquire, hold, improve, encumber, sell, transfer, exchange, and otherwise deal in real and personal property of any kind, tangible or intangible, wherever located, subject to any charter based approval requirements or restrictions. It also confirms broad contracting capacity, the ability to sue and be sued, and authority to compromise, settle, and arbitrate disputes to protect or advance the Commons Corporation’s lawful interests, subject to charter limitations.

Borrowing, Credit Support, and Cash Management

Financial powers include borrowing money, issuing indebtedness, securing obligations with liens, and providing credit support, including guarantees, for Subsidiaries, subject to charter limitations and approvals. The article also authorizes maintaining accounts, establishing treasury practices, receiving lawful distributions from Subsidiaries, and making lawful transfers to Subsidiaries consistent with the charter and applicable law.

Funds and Allocations

The article authorizes establishment and administration of four funds, and only four funds, as separate accounting funds or other internal designations: the Reinvestment Fund, the Social Benefits Fund, the Education Fund, and the Reserve Fund. It authorizes receiving contributions, allocating amounts among the funds, and making disbursements from them pursuant to board adopted policies and procedures on eligibility, timing, and administration, subject to any restrictions, priorities, or approvals stated elsewhere in the charter. It also authorizes prudent investment and reinvestment of fund assets consistent with applicable law and charter limits, including retaining investment advisers and custodians.

Records, Policies, and Professional Engagement

The article authorizes adopting, amending, and repealing bylaws, policies, procedures, and governance instruments consistent with the charter and applicable law, including compliance, conflicts of interest, and intercompany practices. It also authorizes maintaining corporate and financial records, preparing reports, conducting audits, implementing internal controls, and retaining employees, agents, contractors, and professional advisers, including legal counsel and accountants, with authority to pay reasonable compensation and expenses.

Charter Supremacy and Severability

The article closes by stating that all powers granted are expressly subordinate to, and limited by, other provisions and restrictions in the Articles of Incorporation. It also includes a severability provision to preserve the remainder of the article if any portion is held invalid or unenforceable, and directs that the remainder be construed to carry out the article’s intent consistent with the charter.

Section 1. Nonprofit Corporation Status.
(a) The Corporation is a nonprofit corporation and shall be organized and operated exclusively as a nonprofit corporation under the Act and these Articles.
(b) The Corporation shall not be organized or operated for the private benefit of any person, and no part of the Corporation’s net earnings shall inure to the benefit of any director, officer, employee, or other private person, except as reasonable compensation for services rendered and reimbursement of expenses incurred on behalf of the Corporation, as determined in good faith by the Board.

Section 2. No Members.
(a) The Corporation shall have no members.
(b) No person shall have or acquire any membership interest, voting membership right, statutory membership right, or other rights or powers of a “member” (however described) under the Act or otherwise.
(c) Any designation, issuance, or acknowledgment of a membership interest or member right is void.

Section 3. No Shareholders and No Equity Interests.
(a) The Corporation shall have no shareholders and shall not authorize, issue, or recognize any shares of stock or other equity securities.
(b) No person shall have or acquire any ownership interest, equity interest, residual interest, or similar proprietary interest in the Corporation by reason of any contribution, service, employment, office, or other relationship with the Corporation.
(c) Any issuance or purported issuance of shares, equity interests, or similar proprietary interests in the Corporation is void.

Section 4. No Private Residual Claim.
(a) No person shall have any right to receive dividends, distributions, liquidating distributions, redemption proceeds, repurchase proceeds, or other payments attributable to an equity interest or residual claim in the Corporation.
(b) Any provision in any agreement, policy, plan, instrument, or arrangement that purports to create an equity interest or private residual claim in the Corporation is void and unenforceable against the Corporation.

Section 5. Savings Clause.
(a) This Article shall be construed to prevent any characterization, treatment, or arrangement that would cause the Corporation to be treated as having members or shareholders under the Act.
(b) If any provision of this Article is held invalid as applied to any person or circumstance, the remaining provisions shall be construed and applied to achieve, to the maximum extent permitted by law, the intent that the Corporation have no members and no shareholders.

Comments

Nonprofit Corporation Status and Private Benefit Limits

The Article confirms the Corporation’s status as a nonprofit corporation to be organized and operated exclusively as such under the governing nonprofit statute (the “Act”) and the Articles. It also prohibits operation for the private benefit of any person and bars inurement of net earnings to directors, officers, employees, or other private persons, except for good faith Board determined reasonable compensation for services and reimbursement of expenses incurred on the Corporation’s behalf.

No Members

The Article eliminates membership entirely by providing that the Corporation shall have no members and that no person may have or acquire any membership interest, voting membership right, statutory membership right, or other member rights or powers under the Act or otherwise. Any designation, issuance, or acknowledgment of a membership interest or member right is declared void, which is intended to prevent accidental creation of membership status through documents, practices, or third-party characterizations.

No Shareholders and No Equity Interests

The Article forecloses any equity structure by providing that the Corporation shall have no shareholders and shall not authorize, issue, or recognize shares of stock or other equity securities. It further states that no person may have or acquire any ownership, equity, residual, or similar proprietary interest in the Corporation by reason of contribution, service, employment, holding office, or any other relationship with the Corporation. Any issuance or purported issuance of shares or other proprietary interests is void.

No Private Residual Claim

To reinforce the absence of equity, the Article denies any right to dividends, distributions, liquidating distributions, redemption proceeds, repurchase proceeds, or other payments attributable to an equity interest or residual claim. It then voids and makes unenforceable against the Corporation any provision in any agreement, policy, plan, instrument, or arrangement that purports to create an equity interest or private residual claim.

Savings Clause and Construction

The Article directs that it be construed to prevent any characterization or arrangement that would cause the Corporation to be treated as having members or shareholders under the Act. If any provision is held invalid as applied in a particular context, the remaining provisions must be construed and applied, to the maximum extent permitted by law, to preserve the core intent that the Corporation has no members and no shareholders.

Section 1. Duration and Existence.

(a) Perpetual Duration. The corporation shall have perpetual duration and shall continue in existence as a nonprofit corporation unless and until it is dissolved in accordance with these articles and the applicable nonprofit corporation statute.

(b) Nonprofit Corporate Status. The corporation is, and at all times during its existence shall be, organized and operated as a nonprofit corporation under [APPLICABLE NONPROFIT CORPORATION STATUTE], subject to the provisions of these articles and the bylaws adopted under these articles.

Section 2. Dissolution according to Articles and Law.

(a) Dissolution as Provided. The corporation may be dissolved only in the manner provided in these articles, in the bylaws to the extent consistent with these articles, and in the applicable nonprofit corporation statute.

(b) Effect of Dissolution. Upon dissolution of the corporation in accordance with Section 2(a) of this article, the corporation’s existence shall cease at the time and in the manner provided in the applicable nonprofit corporation statute, subject to any continued existence required by that statute for the limited purpose of winding up and liquidating its affairs.

Comments

Perpetual Duration of the Commons Corporation

The article provides that the commons corporation has perpetual duration. It is intended to continue indefinitely as a legal entity, rather than being formed for a fixed term of years or for a specific project that automatically ends. The corporation’s existence ends only if and when it is dissolved in accordance with its articles of incorporation and the applicable nonprofit corporation statute. This gives stability and continuity to the commons enterprise structure, signaling to workers, counterparties, and other stakeholders that the corporation is designed to operate on a continuing basis.

Nonprofit Corporate Status throughout Existence

The article confirms that the corporation is, and is expected to remain, a nonprofit corporation organized under an identified nonprofit corporation statute. Throughout its existence, the corporation’s legal status is anchored in nonprofit law, subject to its articles and bylaws. This reinforces that the commons corporation is not a profit-distributing vehicle, but instead is governed within the nonprofit framework for the entire duration of its existence unless lawfully dissolved.

Dissolution according to Articles and Law

The article specifies that the corporation may be dissolved only in the manner provided in its governing documents and in the applicable nonprofit corporation statute. Dissolution is therefore a controlled and legally structured event, requiring compliance with the procedures laid out in the articles, the bylaws to the extent consistent with the articles, and the governing statute. Upon dissolution, the corporation’s legal existence ends at the time and in the manner set by the statute, subject to any limited continuation needed to wind up and liquidate its affairs. This ensures that even the end of the corporation’s existence is handled in an orderly and legally compliant way.

Section 1. Nonprofit Commons Corporation and Apex Entity.

(a) Nonprofit Corporation. The entity formed by these Articles of Incorporation is a nonprofit corporation organized under the GOVERNING NONPROFIT CORPORATION STATUTE, as amended from time to time.

(b) Legal Name. The legal name of the corporation is [LEGAL NAME OF COMMONS CORPORATION].

(c) Designation as Commons Corporation. The corporation shall be referred to in these Articles of Incorporation as the “Commons Corporation.”

(d) Apex Entity of a Commons Capitalism Entity. The Commons Corporation is the apex entity of a Commons Capitalism Entity (CCE) and shall act as the sole steward and controlling entity within that CCE, subject to the limitations and governance requirements set forth in these Articles of Incorporation and the Bylaws.

Section 2. Definition and Structure of the Commons Capitalism Entity.

(a) Composition of the CCE. For purposes of these Articles of Incorporation, the Commons Capitalism Entity (CCE) consists of the Commons Corporation together with one or more Subsidiaries that are designated as Subsidiaries pursuant to this Article and are wholly owned by the Commons Corporation.

(b) No Shareholders of the Commons Corporation. The Commons Corporation has no shareholders and shall not issue shares or any equity interests of any kind.

(c) Separate Legal Existence. Each business entity in which the Commons Corporation holds an ownership interest is a separate legal entity distinct from the Commons Corporation, and no ownership interest shall be construed to merge the legal existence of the Commons Corporation with that entity.

Section 3. Subsidiaries and Designation by the Board.

(a) Subsidiary Definition. For purposes of these Articles of Incorporation, “Subsidiary” means a legal entity, whether organized as a corporation, limited liability company, partnership, or other form recognized by applicable law, that (1) is directly owned by the Commons Corporation in the amount of one hundred percent (100%) of the equity or ownership interests, (2) conducts market-facing operations, and (3) has been affirmatively designated as a Subsidiary by resolution of the Board of Directors in accordance with this Article.

(b) Board Designation Required. No entity shall be deemed a Subsidiary unless and until the Board of Directors adopts a resolution designating that entity as a Subsidiary for purposes of these Articles of Incorporation.

(c) Effective Date and Conditions of Designation. A designation resolution may specify an effective date, may be conditioned on completion of acquisition, formation, conversion, licensing, capitalization, governance arrangements, or other objective conditions, and may classify a Subsidiary by line of business, geography, or other administratively useful criteria, in each case as determined by the Board of Directors.

(d) Forms of Wholly Owned Interests. Wholly owned ownership interests may be evidenced by shares of stock, membership interests, limited liability company interests, partnership interests, or other ownership interests recognized by applicable law, provided that the Commons Corporation directly owns one hundred percent (100%) of such interests.

(e) Sole Owner of All Ownership Interests. If a Subsidiary is organized in a form that issues shares, the Commons Corporation shall be the sole shareholder of that Subsidiary and shall hold one hundred percent (100%) of the issued and outstanding shares. If a Subsidiary is organized as a limited liability company, the Commons Corporation shall be the sole member and shall hold one hundred percent (100%) of the membership interests. If a Subsidiary is organized as a partnership or other entity form recognized by applicable law, the Commons Corporation shall be the sole partner or sole equity owner, as applicable, and shall hold one hundred percent (100%) of the partnership interests or other ownership interests of that Subsidiary.

(f) Prohibition on Partial or Indirect Ownership for Subsidiary Status. Ownership structures that are less than one hundred percent (100%), whether direct or indirect, shall not qualify as a Subsidiary for purposes of these Articles of Incorporation.

Section 4. Authority to Own Other Business Interests.

(a) Permitted Non-Subsidiary Interests. The Commons Corporation may acquire, hold, and dispose of equity, membership, partnership, contractual, or other business interests in one or more entities that are not wholly owned by the Commons Corporation, or that are wholly owned but not designated as Subsidiaries, in each case as determined by the Board of Directors.

(b) Not a Subsidiary. Any entity in which the Commons Corporation holds less than one hundred percent (100%) of the ownership interests shall not be deemed a Subsidiary. Any entity that is wholly owned by the Commons Corporation but has not been designated as a Subsidiary by Board resolution shall not be deemed a Subsidiary.

(c) No Implied Conversion. The holding of any business interest, whether controlling or noncontrolling, shall not be construed to create or imply Subsidiary status absent an express Board designation under this Article.

Section 5. Authority to Form, Acquire, and Organize Subsidiaries.

(a) Formation and Acquisition. The Commons Corporation may form, acquire, reorganize, merge, consolidate, convert, and dissolve Subsidiaries, and may take all lawful actions necessary or convenient to establish, own, and operate Subsidiaries consistent with these Articles of Incorporation.

(b) Governance of Subsidiaries. The Commons Corporation may approve and require subsidiary governing documents and policies, including provisions addressing board composition, reporting, budgeting, internal controls, and intercompany arrangements, in each case consistent with these Articles of Incorporation.

(c) Separate Boards. Each Subsidiary shall have its own board of directors or other governing body separate from the Board of Directors of the Commons Corporation, except to the extent that individuals may serve in both capacities if permitted by applicable law and the subsidiary’s governing documents.

Section 6. Intercompany Relationships.

(a) Agreements and Shared Services. The Commons Corporation may enter into agreements with any Subsidiary for management services, shared services, licensing, intellectual property use, cash management, and other intercompany arrangements as authorized by the Board of Directors, consistent with these Articles of Incorporation.

(b) Observance of Separateness. The Commons Corporation shall cause the CCE to observe appropriate separateness among entities, including maintaining separate books and records and otherwise respecting formalities appropriate to each entity’s legal form, as determined by the Board of Directors consistent with applicable law.

Section 7. Construction.

(a) Internal Definitions and Control. The definitions and structural rules in this Article are intended to govern internal interpretation and administration of these Articles of Incorporation and shall be applied consistently throughout these Articles of Incorporation, including the Polycentric Governance Article and the Establishment of Funds Article.

(b) Charter Supremacy. This Article is subject to, and shall be construed consistently with, all other provisions of these Articles of Incorporation, including any express prohibitions or limitations stated elsewhere in these Articles of Incorporation.

Comments

Purpose and Role of This Article

This article establishes the structural architecture of a Commons Capitalism Entity by identifying the nonprofit Commons Corporation as the apex entity and by setting binding internal rules for when other entities will be treated as Subsidiaries for purposes of the Articles of Incorporation.

Commons Corporation as Apex Entity of the CCE

The article designates the corporation formed by the charter as a nonprofit corporation organized under the governing nonprofit corporation statute, names it as the “Commons Corporation,” and states that it functions as the apex entity and sole steward and controlling entity within the Commons Capitalism Entity, subject to charter and bylaw limitations.

CCE Composition and No Equity in the Commons Corporation

The article defines the CCE, for charter purposes, as the Commons Corporation together with one or more Subsidiaries that are both wholly owned and affirmatively designated as Subsidiaries under this article. It also states that the Commons Corporation has no shareholders and may not issue shares or any equity interests.

Entity Separateness and Non-Merger Principle

The article emphasizes entity separateness by providing that each business entity in which the Commons Corporation holds an ownership interest remains a separate legal entity, and that ownership does not merge the legal existence of the Commons Corporation with that entity.

Subsidiary Definition and Required Elements

The article defines “Subsidiary” as a legal entity of any form recognized by applicable law that satisfies three requirements: one hundred percent direct ownership by the Commons Corporation of the equity or ownership interests, market-facing operations, and affirmative designation as a Subsidiary by board resolution adopted in accordance with this article.

Board Designation Requirement and Flexibility of Designation

The article makes Subsidiary status conditional upon board action, stating that no entity is a Subsidiary unless and until the Board adopts a resolution designating it as such. The designation resolution may specify an effective date, may be conditioned on objective milestones, and may classify Subsidiaries by administratively useful criteria such as business line or geography.

Forms of Wholly Owned Interests and Sole Ownership Requirement

The article recognizes multiple legal forms of ownership interests, including shares, membership interests, partnership interests, or other ownership interests recognized by law, so long as the Commons Corporation directly owns one hundred percent of such interests. It further provides that, depending on entity form, the Commons Corporation must be the sole shareholder, sole member, or sole partner or sole equity owner, holding one hundred percent of the relevant ownership interests.

Prohibition on Partial or Indirect Ownership for Subsidiary Status

The article provides that ownership structures that are less than one hundred percent, whether direct or indirect, do not qualify for Subsidiary status under the charter.

Authority to Hold Non-Subsidiary Business Interests

The article authorizes the Commons Corporation to acquire, hold, and dispose of business interests that are not wholly owned, and also interests that are wholly owned but not designated as Subsidiaries. It clarifies that neither partial ownership nor mere ownership, without express board designation, creates Subsidiary status, and rejects any implied Subsidiary classification from control or ownership alone.

Authority to Form, Acquire, and Govern Subsidiaries

The article authorizes the Commons Corporation to form and acquire Subsidiaries and to undertake common restructuring actions to establish, own, and operate Subsidiaries consistent with the charter. It also authorizes the Commons Corporation to approve and require subsidiary governance documents and policies addressing topics such as board composition, reporting, budgeting, internal controls, and intercompany arrangements.

Separate Subsidiary Boards

The article requires each Subsidiary to have its own governing body separate from the Commons Corporation’s Board, while allowing individuals to serve in both capacities when permitted by law and the subsidiary’s governing documents.

Intercompany Agreements and Observance of Formal Separateness

The article authorizes intercompany agreements between the Commons Corporation and Subsidiaries for management services, shared services, licensing, intellectual property use, cash management, and other intercompany arrangements, and requires the Commons Corporation to cause the CCE to observe appropriate separateness among entities, including separate books and records and respect for entity formalities.

Construction, Consistency, and Charter Supremacy

The article states that its definitions and structural rules govern internal interpretation and administration of the charter and must be applied consistently throughout the Articles of Incorporation, including related governance and funds articles. It also provides that the article must be construed consistently with all other charter provisions, including any express prohibitions or limitations elsewhere in the charter.

Section 1. Reserved Owner Power.
(a) Authority. As the sole shareholder or sole owner of each Subsidiary, the Corporation, acting solely through the Board, may issue written directives to a Subsidiary board (each, an “Owner Directive”) requiring the Subsidiary board to take specified action within the Subsidiary’s lawful authority.
(b) Board Action Required. An Owner Directive may be issued only by the Board acting collectively by duly adopted resolution. No officer, employee, committee, or individual director may issue an Owner Directive.
(c) No Direct Command to Management. An Owner Directive shall be addressed to the Subsidiary board and shall not constitute a direction to any Subsidiary officer or employee. Implementation shall occur through Subsidiary board action and Subsidiary management under that board’s authority.

Section 2. Permitted Scope and “When Necessary” Standard.
(a) Permitted Scope. Owner Directives may address only matters that the Board determines are necessary or appropriate for one or more of the following purposes:
(1) material legal, regulatory, safety, or compliance risk;
(2) material financial risk to the Subsidiary or the enterprise, including liquidity, solvency, fraud, or material misstatement risk;
(3) enterprise-wide risk management, including cybersecurity, data integrity, or reputational risk with material operational impact;
(4) material failures of reporting, internal controls, or audit cooperation;
(5) material strategic or performance concerns where a Subsidiary’s actions or inaction materially threaten competitiveness or lawful business objectives;
(6) implementation of group-wide standards expressly approved by the Board that are limited to reporting, controls, risk management, or other non-operations-directive governance standards.
(b) Prohibited Scope. Owner Directives shall not be used for routine day-to-day operational micromanagement, ordinary personnel supervision, or other matters that are reasonably within a Subsidiary board’s ordinary course oversight and a Subsidiary management team’s ordinary course discretion.
(c) No Mission-Based Retention. No Owner Directive may require a Subsidiary to retain personnel, operate lines of business, or refrain from otherwise lawful competitive actions for mission-based reasons inconsistent with the Subsidiary’s lawful business objectives.

Section 3. Adoption Threshold and Emergency Directives.
(a) Standard Threshold. Owner Directives shall be adopted by Supermajority Vote.
(b) Emergency Directives. The Board may adopt an Owner Directive by Supermajority Vote on an expedited basis when the Board determines immediate action is necessary to avert substantial harm or material risk.
(c) Written Form and Specificity. Each Owner Directive shall be in writing and shall specify:
(1) the applicable purpose under Section 2(a);
(2) the required Subsidiary board action or decision points;
(3) any deadlines; and
(4) any required reporting back to the Board.

Section 4. Subsidiary Board Duty to Convene, Deliberate, and Act.
(a) Duty to Convene. Upon receipt of an Owner Directive, the Subsidiary board shall convene as promptly as reasonably practicable and in any event within [  ] days, or such shorter period specified in the Owner Directive for emergencies.
(b) Duty to Implement or Respond. The Subsidiary board shall either:
(1) adopt resolutions implementing the Owner Directive; or
(2) deliver to the Board a written response within [  ] days stating with specificity the legal or practical basis for any inability to implement, together with an alternative plan that substantially achieves the stated purpose.
(c) Interim Measures. The Subsidiary board shall adopt reasonable interim measures to address imminent risk pending final implementation where the Owner Directive so requires or where delay would foreseeably create material harm.

Section 5. Escalation for Noncompliance.
(a) Determination of Noncompliance. If the Board determines a Subsidiary board has materially failed to comply with an Owner Directive without adequate justification, the Board may take one or more of the following actions by Supermajority Vote:
(1) require a special meeting of the Subsidiary board;
(2) require additional reporting, audit cooperation, or control remediation;
(3) remove and replace one or more Subsidiary directors to the fullest extent permitted by law and the Subsidiary’s organizational documents;
(4) take any other action available to the Corporation as sole shareholder or sole owner that is consistent with this Article and applicable law.
(b) No Direct Assumption of Management. Actions under this Section shall not be construed to authorize the Corporation or the Board to assume day-to-day operational management of a Subsidiary.

Section 6. Required Conformity in Subsidiary Governing Documents.
(a) Mirror Authority. The Board shall cause each Subsidiary’s governing documents, and any shareholder, member, or governance instruments between the Corporation and a Subsidiary, to recognize and facilitate the Owner Directive mechanism consistent with this Article, including meeting deadlines and information access sufficient to carry out Owner Directives.
(b) Supremacy Within the Group. In the event of conflict among internal governance instruments within the group, the Board shall cause appropriate amendments to eliminate the conflict to the extent legally permissible.

Section 7. Records and Confidentiality.
(a) Records. The Corporation shall maintain records of Owner Directives, Subsidiary board responses, and implementation status.
(b) Confidentiality and Privilege. Owner Directives and related communications may be subject to confidentiality and privilege protections as determined by the Board.

Section 8. Definitions.
(a) Subsidiary. “Subsidiary” means a legal entity, whether organized as a corporation, limited liability company, partnership, or other form recognized by applicable law, that (1) is directly owned by the Corporation in the amount of one hundred percent (100%) of the equity or ownership interests, (2) conducts market-facing operations, and (3) has been affirmatively designated as a Subsidiary by resolution of the Board of Directors in accordance with the Articles of Incorporation.
(b) Supermajority Vote. “Supermajority Vote” means the affirmative vote of at least [__]% of the directors then in office.

Comments

Purpose and Allocation of Authority

This article establishes a formal mechanism by which the Commons Corporation, acting solely through its Board, may issue written owner-level directives to Subsidiary boards in order to address specified categories of material risk or enterprise-level governance needs, while preserving the separate governance role of each Subsidiary board.

Reserved Owner Power and Board-Only Issuance

The Corporation may issue an “Owner Directive” only as sole shareholder or sole owner and only through collective Board action by duly adopted resolution. The article expressly prohibits any officer, employee, committee, or individual director from issuing an Owner Directive.

Directives Run to Subsidiary Boards, Not Management

Owner Directives must be addressed to the Subsidiary board and do not constitute direct instructions to Subsidiary officers or employees. Implementation is intended to occur through Subsidiary board action and Subsidiary management operating under that board’s authority.

Permitted Scope and “When Necessary” Limitation

Owner Directives are limited to matters the Board determines are necessary or appropriate to address material legal or compliance risk, material financial risk, enterprise-wide risk management concerns, material failures in reporting or internal controls, material strategic or performance threats to competitiveness or lawful business objectives, or implementation of Board-approved group-wide governance standards that are limited to reporting, controls, and risk management rather than operational micromanagement.

Prohibited Scope and Operational Autonomy

The article prohibits use of Owner Directives for routine day-to-day operational micromanagement, ordinary personnel supervision, and other matters that fall within ordinary Subsidiary board oversight and management discretion. It also bars directives that would require mission-based retention of personnel, continuation of lines of business, or restraint of otherwise lawful competitive actions when inconsistent with the Subsidiary’s lawful business objectives.

Voting Threshold and Emergency Use

Owner Directives require adoption by a defined Supermajority Vote of the Board. The Board may proceed on an expedited basis in emergencies when it determines immediate action is necessary to avert substantial harm or material risk, but the supermajority threshold still applies.

Written Form and Required Specificity

Each Owner Directive must be in writing and must identify the applicable permitted purpose, the required Subsidiary board action or decision points, applicable deadlines, and any required reporting back to the Board.

Subsidiary Board Obligations Upon Receipt

Upon receipt, the Subsidiary board must convene promptly and within the stated time period, with a shorter period permitted for emergencies. The Subsidiary board must then either adopt implementing resolutions or deliver a timely written response explaining with specificity any legal or practical inability to implement, together with an alternative plan that substantially achieves the directive’s stated purpose. The article also contemplates interim measures where needed to address imminent risk.

Escalation Tools for Material Noncompliance

If the Board determines a Subsidiary board has materially failed to comply without adequate justification, the Board may, by Supermajority Vote, require special meetings, require additional reporting or control remediation, remove and replace Subsidiary directors to the fullest extent permitted by law and Subsidiary governing documents, and take other lawful sole-owner actions consistent with the article.

No Assumption of Day-to-Day Management

The article expressly provides that escalation actions do not authorize the Corporation or its Board to assume routine operational management of a Subsidiary.

Conformity of Subsidiary Governing Documents

The Board must cause each Subsidiary’s governing documents and relevant intra-group governance instruments to recognize and facilitate the Owner Directive mechanism, including deadlines and information access. If internal instruments conflict, the Board must cause appropriate amendments to eliminate conflict to the extent legally permissible.

Records and Confidentiality

The Corporation must maintain records of Owner Directives, Subsidiary responses, and implementation status. The article also contemplates that related communications may be protected by confidentiality and privilege as determined by the Board.

Defined Terms

The article supplies a uniform definition of “Subsidiary” that requires one hundred percent direct ownership, market-facing operations, and affirmative designation by Board resolution under the Articles of Incorporation, and it defines “Supermajority Vote” by a specified percentage of directors then in office.

Section 1. Purpose and Scope.

(a) Purpose of this Article. This Article establishes the principal structures and rules for polycentric governance of the Commons Corporation and its Subsidiaries. It organizes decision-making, monitoring, and dispute resolution in nested layers and multiple centers rather than a single centralized authority.

(b) Scope of Governance. This Article governs, without limitation, (1) the relationship between the Commons Corporation and its Subsidiaries, (2) the certification and use of operating reserves, (3) the stewardship of Consolidated Surplus, and (4) the allocation and use of the Four Funds.

(c) Coordination with Related Articles. This Article is intended to operate in coordination with the Article establishing the Standing Budget and Allocation Committee, the Article establishing the Office of the Ombudsman, the Article establishing the Worker Veto over Alienation, and the Article establishing the purposes and baseline allocation rules for the Four Funds. To the extent feasible, these Articles shall be interpreted as a coherent polycentric system.

Section 2. Definitions.

(a) Subsidiary. “Subsidiary” has the meaning stated in the Article titled Commons Capitalism Entity Structure and Subsidiaries, including the requirements of one hundred percent (100%) direct ownership, market-facing operations, and affirmative designation by resolution of the Board of Directors. Entities that are controlled but not wholly owned by the Commons Corporation are not Subsidiaries for any purpose under these Articles. Entities that are wholly owned but not designated as Subsidiaries by Board resolution are not Subsidiaries for any purpose under these Articles.

(b) Net Profits. “Net Profits” means the net income of a Subsidiary determined in accordance with generally accepted accounting principles or other accounting standard adopted by the Commons Corporation and applicable law, after provision for taxes to the extent not already reflected in net income, and after reduction for the amount of operating reserves that are required and certified to be retained at that Subsidiary under this Article and any companion Articles addressing reserves.

(c) Consolidated Surplus. “Consolidated Surplus” means aggregate Net Profits retained at the Commons Corporation level after (1) satisfaction of third-party obligations and statutory liabilities and (2) certified retention of operating reserves at each Subsidiary.

(d) Four Funds. The “Four Funds” are the Reserve Fund, the Education Fund, the Social Benefits Fund, and the Reinvestment Fund established in the Article on Establishment of Funds. Each Fund’s purpose is stated in that Article and in any companion Articles on funds and allocations.

(e) Governance Centers. For purposes of this Article, “Governance Centers” include the Board of Directors, Subsidiary boards and managers, the Standing Budget and Allocation Committee, designated fund directors or offices, Worker Committees, and the Office of the Ombudsman, each acting within the scope of its authority in these Articles.

(f) Worker Committees. “Worker Committees” means the Corporation Worker Committee and the Subsidiary Worker Committees established under the Article on Worker Veto over Alienation and any related governing instruments.

(g) Baseline Allocation Rules. “Baseline Allocation Rules” means the default allocation rules for Consolidated Surplus among the Four Funds, including any fixed percentages, priority ordering, or thresholds established in these Articles.

Section 3. Boundaries and Demarcation.

(a) Membership and Eligibility. The Corporation shall adopt and maintain clear rules that identify who is entitled to (1) access benefits funded by the Commons Corporation and its Subsidiaries, (2) participate in governance processes, and (3) receive allocations or support from the Four Funds. These boundary rules shall be documented in Subsidiary charters or bylaws and in a consolidated register maintained by the Corporation.

(b) Resource and Benefit Demarcation. Assets, accounts, streams of revenue, workforce entitlements, and fund incomes shall be segregated and recorded so that (1) allocations are traceable to defined internal beneficiaries and Subsidiaries and (2) resources held in common at the consolidated level are distinguishable from operating assets and reserves of each Subsidiary.

Section 7. Graduated Sanctions and Corrective Measures.

(a) Graduated Enforcement. The Corporation shall establish graduated, proportionate sanctions for noncompliance with reserve, reporting, and fund-governance rules that aim to restore compliance and preserve participation. Sanctions may escalate from corrective guidance and warnings to temporary restrictions on distributions or access to particular fund support, and, in the final instance, remedial financial adjustments enforced at consolidation.

(b) Notice and Opportunity to Be Heard. Before imposing material sanctions, the Corporation shall provide notice and an opportunity for the affected Subsidiary or internal body to be heard, except where emergency action is required to prevent substantial harm to the Corporation, a Subsidiary, or their workers.

(c) Corrective Incentives. Sanctions shall be designed to promote repair of institutional capacity rather than immediate exclusion. Remedies may include mandated technical assistance, conditional access to Education Fund support to improve governance or accounting capacity, or temporarily reallocated Reinvestment Fund support for operational stabilization, where consistent with fund purposes.

(d) Coordination With Worker Veto and Ombudsman. Where sanctions or corrective measures materially affect personnel, property, or core functions at a Subsidiary, such actions shall be coordinated with any applicable Worker Veto rights and may be subject to review or inquiry by the Ombudsman as provided in the relevant Articles.

Section 8. Nested Governance of Consolidated Surplus and the Four Funds.

(a) Sequential Priority of Uses. Subject to applicable law and creditor protections, Subsidiary net income shall be applied in the following order:

(1) satisfaction of third-party obligations and statutory liabilities;

(2) retention of certified Subsidiary operating reserves;

(3) transfer of certified surplus to the Commons Corporation as Consolidated Surplus; and

(4) allocation of Consolidated Surplus among the Four Funds consistent with Baseline Allocation Rules as established in the Article on Establishment of Funds and any variance adopted under Section 9 of this Article.

(b) Fund Purposes. The Four Funds shall be used for the following general purposes, subject to more detailed provisions in the Article on Establishment of Funds and any companion Articles on funds and allocations:

(1) Reinvestment Fund. Supports the Corporation’s growth, expansion, and strategic objectives, including reinvestment in existing operations and the acquisition and conversion of new Subsidiaries, businesses, assets, or technologies.

(2) Social Benefits Fund. Funds premium wages, enhanced benefits, and comparable worker-facing commitments consistent with controlling directives of the Corporation.

(3) Education Fund. Supports training, governance education, and institutional capacity building to strengthen local rulemaking, monitoring, and participation.

(4) Reserve Fund. Maintains consolidated liquidity beyond Subsidiary reserves and may provide conditional support to Subsidiaries in order to preserve system-wide stability and the functionality of nested governance.

(c) Governance Centers for Funds. Governance over Consolidated Surplus and the Four Funds shall be exercised in nested layers as follows:

(1) Board of Directors. The Board holds stewardship authority over Consolidated Surplus, adopts Baseline Allocation Rules, approves budgets and allocations, and may authorize temporary variance under Section 9.

(2) Standing Budget and Allocation Committee. The Standing Budget and Allocation Committee reviews, formulates, and recommends budgets, cash-flow plans, and allocations of Net Profits and Consolidated Surplus among the Four Funds, including recommendations regarding any deviations from Baseline Allocation Rules, all as provided in the Article establishing that Committee.

(3) Fund directors or offices. Each Fund may be administered by a designated director or office with day-to-day authority to implement Board policies and Committee recommendations for that Fund, within the limits of fund purposes and adopted policies.

(4) Subsidiary boards and representatives. Subsidiary boards, managers, and designated representatives shall participate in deliberations affecting notional subaccounts or allocations associated with that Subsidiary, particularly with respect to Social Benefits and Education Fund support that materially affects its workforce.

(5) Worker Committees. Worker Committees shall have the participatory and veto roles specified in the Article establishing Worker Veto and in the Article establishing the Standing Budget and Allocation Committee, including any powers to veto budgets or budget items that materially affect workers, subject to any override or abuse provisions in those Articles.

(6) Ombudsman. The Ombudsman participates in Committee deliberations as a non-voting member where provided in the Standing Budget and Allocation Committee Article, monitors fund-related practices, and may investigate or report on concerns relating to allocation and use of the Four Funds.

(d) Cross-Fund Coordination. The Board or a designated cross-fund body may coordinate among the Four Funds where obligations or purposes interact, subject to (1) honoring stated fund purposes, (2) compliance with Baseline Allocation Rules and variance procedures, and (3) protection of core worker-facing commitments.

Section 9. Variance From Baseline Allocation Rules.

(a) Principle of Stability. Baseline Allocation Rules are intended to provide stable, predictable funding for each Fund and to protect worker-facing commitments and long-term reserves from ad hoc or opportunistic reallocation.

(b) Extraordinary Variance. The Board may approve temporary variance from Baseline Allocation Rules only upon a finding that extraordinary circumstances exist, such as severe economic disruption, systemic risk to the Corporation or its Subsidiaries, or legally mandated obligations that cannot be met without such variance.

(c) Supermajority and Written Findings. Any such variance shall require a supermajority vote of the Board as specified in the bylaws and shall be accompanied by written findings that (1) describe the extraordinary circumstances, (2) explain why the variance is necessary and proportionate, and (3) state the expected duration of the variance and the plan for returning to Baseline Allocation Rules when conditions normalize. The findings shall be recorded in the minutes and made available internally to affected governance bodies.

(d) Role of the Standing Budget and Allocation Committee. The Standing Budget and Allocation Committee may recommend variance from Baseline Allocation Rules in its written recommendations to the Board, supported by financial projections and analysis. Any deviation recommended by the Committee shall be clearly identified as such and shall not become effective unless approved by the Board in accordance with subsection (c).

(e) Restoration. Variances shall be treated as temporary. The Board shall periodically review whether conditions justifying variance continue to exist and shall restore allocations to Baseline Allocation Rules as soon as reasonably practicable when those conditions no longer prevail.

(f) Oversight and Review. Worker Committees, Subsidiary boards, and the Ombudsman may review and comment on variance decisions and may invoke any complaint or review mechanisms provided in the Ombudsman Article or Worker Veto Article, where applicable.

Section 10. Dispute Resolution, Ombudsman, and Oversight.

(a) Local Dispute Mechanisms. Each Subsidiary shall maintain rapid, low-cost procedures for resolving disputes among participants or between participants and managers, including disputes relating to application of local appropriation rules, reserve practices, or local use of Education Fund or Social Benefits Fund support. These procedures shall be designed to minimize transaction costs and to preserve local engagement, subject to the Corporation’s overarching obligations.

(b) Role of the Ombudsman. The Office of the Ombudsman shall serve as an independent, confidential channel for concerns relating to governance, stewardship, and compliance with this Article, including concerns about (1) certification of reserves, (2) allocation and use of the Four Funds, (3) application of sanctions under Section 7, and (4) interactions among Governance Centers. The Ombudsman may examine records, conduct interviews, retain external advisors, and issue reports to the Board as provided in the Ombudsman Article.

(c) Escalation and Recommendations. Where local or committee-level mechanisms do not resolve a dispute affecting polycentric governance, the Ombudsman may recommend remedial measures to management and the Board, including policy changes, adjustments to monitoring or reporting regimes, or corrective use of Education Fund or Reserve Fund resources, all within existing fund purposes.

(d) Coordination With Worker Veto and Other Articles. Disputes involving Worker Veto rights over Alienation, budget vetoes, or emergency actions shall be handled primarily under the Articles establishing those rights and procedures.

Comments

Overall Purpose and Integration With Governance Framework

This article requires the Commons Corporation to establish and maintain a defined fund structure and to treat the stated percentage allocations as baseline allocation rules that operate in coordination with the Polycentric Governance Article and the Standing Budget and Allocation Committee framework. It also makes clear that temporary deviations from those baseline allocations are not discretionary reallocations, but must be handled through the variance procedures established elsewhere in the charter.

Definitions That Drive the Allocation System

The article defines Net Profits as Subsidiary net income determined under GAAP or another adopted accounting standard and applicable law, after provision for taxes to the extent not already reflected in net income, and after reduction for the amount of operating reserves required and certified to be retained at the Subsidiary level under the Polycentric Governance framework and companion reserves provisions.

The article adopts a uniform Subsidiary definition by cross reference, requiring one hundred percent direct ownership, market-facing operations, and affirmative designation by Board resolution. It also expressly excludes from Subsidiary status both entities that are controlled but not wholly owned and entities that are wholly owned but not designated as Subsidiaries by Board resolution, and it applies that exclusion across the charter for all purposes.

The article also defines the Four Funds as the Reserve Fund, Education Fund, Social Benefits Fund, and Reinvestment Fund.

Funds Established and Baseline Allocation Percentages

The article mandates that the Commons Corporation establish and maintain four separate funds on its books and records and in accounts or instruments permitted by law and corporate policy. It then sets the baseline funding allocations from aggregate Subsidiary Net Profits as follows: fifteen percent to the Reserve Fund, ten percent to the Education Fund, twenty-five percent to the Social Benefits Fund, and fifty percent to the Reinvestment Fund.

Reserve Fund

The Reserve Fund is established to provide financial stability and enable the Corporation to meet unforeseen expenses, obligations, or strategic opportunities. The article ties withdrawals to the fund-use authorization provisions and any companion charter provisions governing reserves and funds.

Education Fund

The Education Fund is established to support educational initiatives, training programs, scholarships, and other activities that advance the knowledge, skills, and professional development of employees of contributing Subsidiaries. The article assigns administration to the officer or office designated by the Board and limits use to the purposes and authorization mechanics stated in the article and any companion provisions governing the Education Fund.

Social Benefits Fund

The Social Benefits Fund is established to administer workers’ benefits and related programs, including health and wellness, family assistance, housing support, and other initiatives designed to enhance quality of life and workforce security, as well as benefits related to retirement and disability for employees of contributing Subsidiaries. The article assigns administration to the Benefits Director or another officer or office designated by the Board, and limits uses to those consistent with the fund’s stated purpose and the article’s authorization requirements.

Reinvestment Fund

The Reinvestment Fund is established to support growth, expansion, and strategic objectives, including reinvestment in existing operations and acquisition of new businesses, assets, or technologies. The article assigns management to the Acquisition Director or another officer or office designated by the Board, and limits uses to those consistent with the fund’s stated purpose and the article’s authorization requirements.

Remittance Timing and Implementation by Policy

The article requires each Subsidiary to remit its allocated amounts to the Commons Corporation in the form, frequency, and timetable established by Corporation policy. It also constrains those policies by requiring consistency with applicable law, the certification of operating reserves, and any charter provisions governing reserves, consolidated surplus mechanics, and funds.

Separate Accounting, Auditability, and Financial Statement Treatment

The article requires that contributions to each fund be recorded separately in the Corporation’s accounting system with sufficient detail to support audit, compliance review, and reporting. It further requires that contributions and disbursements be reflected in the Corporation’s financial statements under applicable accounting standards and under policies adopted within the broader governance framework.

Board Authorization, Delegations, and Control of Spending

The article requires Board authorization for any expenditure, encumbrance, or other alienation of fund assets, and limits permitted uses to those consistent with the specific fund purpose, the Corporation’s mission, and applicable law and fiduciary duties. The Board may adopt procedures, thresholds, and delegation authorities for fund disbursements, including procedures recommended by the Standing Budget and Allocation Committee, but delegated approvals must remain within Board-set limits.

Charter Supremacy and Variance Discipline

The article includes a conflict rule providing that if a Board-adopted policy conflicts with the article, the article controls unless and until properly amended. It also treats material deviations from baseline allocation rules or from stated fund purposes as variance decisions subject to the Polycentric Governance Article’s supermajority and written findings requirements.

Administration, Investments, and Reporting

Each fund must be administered by the person or office identified for that fund, subject to Board oversight and Board-adopted investment, custody, and spending policies. The Board may adopt investment policies addressing permitted investments, risk tolerances, and custodial arrangements, and all investments must comply with applicable law and fiduciary standards. Fund administrators must report to the Board at intervals the Board reasonably requires regarding balances, recent activity, projected needs, and investment performance.

Section 1. Purpose and Permitted Uses

(a) The Commons Corporation is expressly authorized to retain and deploy consolidated Surplus for parent-funded promotional, pricing, rebate, wage-support, or trial-support programs for Subsidiaries that are designed to facilitate market entry, customer acquisition, long-term customer retention, or defensive responses to competitive pressure, subject to Board-established measurement and sunset policies.

(b) Programs authorized under this Section are intended to advance the long-term financial strength and stability of the Commons Corporation and its Subsidiaries, and not to provide private returns to any manager, director, officer, or other private stakeholder.

(c) All programs under this Section shall be structured and administered in a manner that remains consistent with the Corporation’s status as a nonprofit entity without private residual claims and with the long-term continuity of the group’s operations.

Section 2. Parent Stewardship of Surplus

(a) The Commons Corporation shall accept and steward consolidated Surplus in a manner that targets only Reasonable Net Returns at the consolidated level rather than maximal consolidation of every dollar of group profit.

(b) The Commons Corporation shall reallocate excess consolidated Surplus, being the difference between consolidated results and Reasonable Net Returns, to the strategic Permitted Uses authorized in this Article and elsewhere in the governing documents.

(c) The Board shall adopt, maintain, and periodically review written financial policies for measuring consolidated Surplus, determining Reasonable Net Returns, and prioritizing allocations among Permitted Uses, including but not limited to wage enhancements, benefits, education and training, reserves, and acquisition or conversion of new Subsidiaries.

(d) In stewarding Surplus, the Board shall consider the long-term liquidity, solvency, and risk profile of the Commons Corporation and its Subsidiaries and shall avoid policies that would reasonably be expected to undermine the group’s continued ability to operate in competitive markets.

Section 3. Measurement of Subsidiary Net Profits

(a) Each Subsidiary shall measure and report its own pre-allocation net profit, defined for purposes of this Article as the Subsidiary’s highest achievable net profit subject to applicable legal, contractual, and market constraints and before taking into account any parent-funded programs or allocations of consolidated Surplus.

(b) Pre-allocation net profit shall be used as the principal operating performance metric for Subsidiary management and for any Subsidiary-level boards or advisory bodies, and it shall be calculated and reported in accordance with the accounting policies adopted by the Commons Corporation.

(c) The Board shall adopt policies to ensure that the measurement of pre-allocation net profit is consistent across Subsidiaries to the extent practicable, while allowing for justified differences in industry practices or regulatory requirements.

Section 4. Subsidiary Incentives and Performance Signals

(a) Subsidiaries shall retain primary responsibility for generating the highest possible net profits in their respective markets consistent with applicable law, contractual obligations, and the operational standards adopted by the Commons Corporation.

(b) For internal performance measurement, reporting, and managerial incentives, each Subsidiary’s financial statements and key performance indicators shall reflect pre-parent-support net profit, being gross or net operating results before the effect of any parent-funded wage premiums, promotional subsidies, rebates, or other programs funded from consolidated Surplus.

(c) Parent-funded programs authorized in this Article shall be accounted for at the Commons Corporation level, or in such other manner as the Board may determine, in order to preserve clean performance signals at the Subsidiary level and to maintain clear accountability of Subsidiary managers to market discipline.

(d) The Commons Corporation may lawfully and contractually provide targeted, time-bound support to Subsidiaries through the programs described in Section 1 while preserving these clean performance signals and shall design such programs so that they do not obscure or dilute the responsibility of Subsidiary management for the underlying economic performance of the Subsidiary.

(e) Nothing in this Article shall be construed to authorize the payment of private returns to managers, directors, officers, or other private stakeholders, and all incentives shall be structured as compensation for services or as internal allocations of Surplus consistent with the nonprofit character of the Commons Corporation.

Section 5. Board Policies on Reasonable Net Returns

(a) The Board shall adopt written policies that specify the method or methods for determining Reasonable Net Returns at the consolidated level, which may include quantitative ranges, qualitative factors, and scenario-based analyses appropriate to the industries and markets in which the Commons Corporation and its Subsidiaries operate.

(b) In establishing Reasonable Net Returns, the Board shall consider at least the following: the need to maintain prudent reserves; the capital and reinvestment requirements of Subsidiaries; foreseeable economic and competitive conditions; and the Corporation’s obligations under its other governing documents.

(c) The Board’s policies on Reasonable Net Returns shall be reviewed on a regular schedule established by the Board and may be amended from time to time, provided that any amendment shall remain consistent with the principle that the Commons Corporation does not seek to maximize consolidated profit for private distribution but instead targets a level of net return that supports ongoing viability, resilience, and the internal allocation purposes authorized in the governing documents.

(d) The Board shall maintain records of the criteria and reasoning used to determine Reasonable Net Returns for each fiscal period, and such records shall be preserved with the corporate records to support transparency and continuity of practice.

Section 6. Definitions

(a) “Surplus” means the consolidated surplus of the Commons Corporation and its Subsidiaries, being the net operating economic value of the Commons Corporation and its Subsidiaries, defined as consolidated revenues less permitted operating expenses and reasonable reserves, determined in accordance with generally accepted accounting principles as applied under the Corporation’s financial policies and subject to any additional constraints stated in the governing documents.

(b) “Reasonable Net Returns” means the level or range of consolidated net return that the Board determines, consistent with the financial policies adopted under this Article and other governing provisions, is sufficient to cover prudent reserves, ongoing operational viability, and planned internal allocations, without seeking to maximize consolidated profit for private distribution.

(c) “Subsidiary” means any legal entity that is directly and wholly owned by the Commons Corporation and that conducts market-facing operations, and does not include entities that are merely controlled, but not wholly owned, by the Commons Corporation.

Comments

Purpose And Permitted Uses.

The Article authorizes the Commons Corporation to retain and use consolidated Surplus for parent-funded programs such as promotions, pricing support, rebates, wage support, and trial offers that help Subsidiaries enter, build, or defend markets. These programs must operate under Board-approved measurement rules and clear sunset or review provisions so that they remain targeted, time-limited, and accountable.

Stewardship Approach.

The parent’s role is to aim for Reasonable Net Returns at the consolidated level rather than trying to capture every possible dollar of group profit. Any consolidated Surplus above that reasonable target is treated as excess and is reallocated to strategic internal uses authorized in the governing documents, including wage and benefits enhancements, education and training, reserves, and acquisition or conversion of additional Subsidiaries. The Board is required to adopt written policies that define how Surplus is measured, how the Reasonable Net Returns target is set, and how allocations among these permitted uses are prioritized, with attention to long-term liquidity, solvency, and risk.

Measurement Of Subsidiary Performance.

Each Subsidiary must calculate and report its own pre-allocation net profit, defined as the highest net profit the Subsidiary can reasonably achieve within legal, contractual, and market constraints and before taking parent-funded programs into account. That pre-allocation net profit is the primary operating performance metric for Subsidiary management and any Subsidiary-level boards or advisory bodies, and it is computed under accounting policies set by the Commons Corporation, with room for justified industry or regulatory differences.

Subsidiary Incentives And Performance Signals.

Subsidiaries remain responsible for generating the highest sustainable net profits in their respective markets, subject to law and corporate standards. For internal reporting and managerial incentives, each Subsidiary’s financial statements and key performance indicators must show results before the effect of any parent-funded wage premiums, promotional subsidies, rebates, or similar support. Parent-funded programs are accounted for at the Commons Corporation level or as otherwise determined by the Board so that performance signals at the Subsidiary level remain clean and management remains clearly accountable for underlying economic performance, even when targeted, time-bound support is provided. Nothing in the Article permits the payment of private returns to managers, directors, officers, or other private stakeholders.

Board Policies On Reasonable Net Returns.

The Board must adopt and periodically review written policies specifying how Reasonable Net Returns will be determined at the consolidated level. Those policies may combine quantitative ranges, qualitative factors, and scenario analysis that fit the markets in which the group operates. In applying these policies, the Board considers prudent reserves, Subsidiary capital and reinvestment needs, foreseeable economic and competitive conditions, and other obligations in the governing documents. The policies must remain faithful to the core principle that the Commons Corporation does not pursue maximum consolidated profits for private distribution, but instead seeks a level of net returns that supports long-term viability, resilience, and the internal allocation purposes authorized by the Article.

Key Definitions.

The Article defines “Surplus” as the consolidated surplus of the Commons Corporation and its Subsidiaries, essentially consolidated revenues minus permitted operating expenses and reasonable reserves, calculated under generally accepted accounting principles and the Corporation’s financial policies. “Reasonable Net Returns” means the level or range of consolidated net return the Board decides is sufficient to fund prudent reserves, ongoing operations, and planned internal allocations, without trying to maximize profit for private distribution. “Subsidiary” is limited to entities that are directly and wholly owned by the Commons Corporation and that conduct market-facing operations; entities that are only controlled but not wholly owned do not qualify as Subsidiaries for purposes of this Article.

ESTABLISHMENT OF FUNDS

Section 1. Purpose.

(a) The Commons Corporation (the Corporation) shall establish and maintain the funds described in this Article for the purposes stated in this Article and any companion Articles on governance and allocations.

(b) Each Fund shall be used only for the purposes expressly authorized in this Article, in accordance with applicable law, the Corporation’s mission, and any policies adopted by the Board of Directors (the Board).

(c) The percentage allocations stated in this Article constitute part of the Baseline Allocation Rules for Consolidated Surplus and Net Profits for purposes of the Polycentric Governance Article and the Article establishing the Standing Budget and Allocation Committee. Any temporary variance from these allocations shall be governed by the variance procedures set forth in the Polycentric Governance Article and related Articles.

Section 2. Definitions.

For purposes of this Article:

(a) Net Profits. “Net Profits” means the net income of a Subsidiary determined in accordance with generally accepted accounting principles or other accounting standard adopted by the Corporation and applicable law, after provision for taxes to the extent not already reflected in net income, and after reduction for the amount of operating reserves that are required and certified to be retained at that Subsidiary under the Polycentric Governance Article and any companion Articles addressing reserves and funds.

(b) Subsidiary. “Subsidiary” has the meaning stated in the Article titled Commons Capitalism Entity Structure and Subsidiaries, including the requirements of one hundred percent (100%) direct ownership, market-facing operations, and affirmative designation by resolution of the Board of Directors. An entity that is controlled but not wholly owned by the Corporation is not a Subsidiary for purposes of this Article or any other Article. An entity that is wholly owned but not designated as a Subsidiary by Board resolution is not a Subsidiary for purposes of this Article or any other Article.

(c) Board. “Board” means the Corporation’s Board of Directors.

(d) Four Funds. “Four Funds” means, collectively, the Reserve Fund, the Education Fund, the Social Benefits Fund, and the Reinvestment Fund established by this Article.

(e) SPOL. “SPOL” means the Subsidiary Performance Officer and Liaison established under the Articles of Incorporation (or any successor or replacement office with substantially similar reporting and monitoring duties).

Section 3. Funds Established; Funding Allocations.

The Corporation shall establish and maintain the following separate funds, each of which shall be maintained on the Corporation’s books and records and in accounts or instruments permitted by law and corporate policy:

(a) Reserve Fund. A Reserve Fund shall be established to provide financial stability and to enable the Corporation to meet unforeseen expenses, obligations, or strategic opportunities. The Reserve Fund shall be funded by an amount equal to the aggregate of fifteen percent (15 percent) of the Net Profits of each Subsidiary. Withdrawals from the Reserve Fund shall be permitted only as provided in Section 5 and in any companion Articles governing reserves and funds.

(b) Education Fund. An Education Fund shall be established to support educational initiatives, training programs, scholarships, and other activities that advance the knowledge, skills, and professional development of employees of each respective contributing Subsidiary. The Education Fund shall be funded by an amount equal to the aggregate of ten percent (10 percent) of the Net Profits of each Subsidiary. The Education Fund shall be administered by the officer or office designated by the Board to administer the Education Fund and shall be used only as provided in Section 5 and any companion Articles governing the Education Fund.

(c) Social Benefits Fund. A Social Benefits Fund shall be established to administer workers’ benefits including, but not limited to, health and wellness programs, family assistance, housing support, and other initiatives designed to enhance quality of life and workforce security, and to provide benefits related to retirement and disability of employees of each respective contributing Subsidiary. The Social Benefits Fund shall be funded by an amount equal to the aggregate of twenty-five percent (25 percent) of the Net Profits of each Subsidiary. The Social Benefits Fund shall be administered by the Benefits Director and shall be used only as provided in Section 5 and in any companion Articles governing worker benefits.

(d) Reinvestment Fund. A Reinvestment Fund shall be established to support the Corporation’s growth, expansion, and strategic objectives, including reinvestment in existing operations and the acquisition of new businesses, assets, or technologies. The Reinvestment Fund shall be funded by an amount equal to fifty percent (50 percent) of the Net Profits of each Subsidiary. The Reinvestment Fund shall be managed by the Acquisition Director and shall be used only as provided in Section 5 and in any companion Articles governing acquisitions and reinvestment.

Section 4. Timing of Funding and Accounting.

(a) Remittances. Each Subsidiary shall remit its allocated amounts to the Corporation in the form, frequency, and on the timetable established by Corporation policy, consistent with applicable law, the certification of operating reserves, and any applicable Articles on reserves, Consolidated Surplus, and funds.

(b) Separate Accounting. All Fund contributions shall be recorded separately in the Corporation’s accounting system and maintained with sufficient detail to permit audit, compliance review, and reporting. Contributions and disbursements shall be reflected in the Corporation’s financial statements in accordance with applicable accounting standards and any policies adopted under the Polycentric Governance Article and the Article establishing the Standing Budget and Allocation Committee.

Section 5. Use, Disbursement, and Authorization.

(a) Board Authorization. No Fund shall be expended, encumbered, or otherwise alienated except upon authorization of the Board and then only for purposes consistent with (1) the express purpose of that Fund as set forth in Section 3, (2) the Corporation’s mission, and (3) applicable law and fiduciary duties.

(b) Procedures and Delegations. The Board may adopt specific disbursement procedures, thresholds, delegation authorities, and approval processes for each Fund, including processes recommended by the Standing Budget and Allocation Committee. Disbursements that do not exceed the limits delegated by the Board may be authorized in accordance with those delegation rules.

(c) Conflict Rule. In the event of any conflict between a Board-adopted policy and the terms of this Article, the terms of this Article shall control unless and until amended in accordance with applicable law and the Articles of Incorporation.

(d) Variance Decisions. Any use or reallocation of Fund assets that would constitute a material deviation from the Baseline Allocation Rules or from stated Fund purposes shall be treated as a variance decision for purposes of the Polycentric Governance Article and shall comply with its supermajority and written findings requirements.

Section 6. Administration, Management, and Investments.

(a) Fund Administrators. Each Fund shall be administered by the person or office specified in Section 3 (the Fund Administrator), subject to oversight by the Board and any investment, custody, or spending policies adopted by the Board.

(b) Investment Policies. The Board may adopt an investment policy for each Fund that prescribes permitted investments, risk tolerances, and custodial arrangements. All investments shall comply with applicable law and any fiduciary standards applicable to the Corporation.

(c) Reporting. Fund Administrators shall report to the Board at such intervals as the Board reasonably requires regarding Fund balances, recent activity, projected needs, and investment performance. Copies of such reports, and such supporting materials as the Board specifies, may also be provided to the SPOL for the limited purpose of performance measurement and reporting, and not for the purpose of spending approval, allocation decisions, benefit design, investment management, or operational direction.

Comments

Overall Purpose and Integration With Governance Framework

This article requires the Commons Corporation to establish and maintain a defined fund structure and to treat the stated percentage allocations as baseline allocation rules that operate in coordination with the Polycentric Governance Article and the Standing Budget and Allocation Committee framework. It also makes clear that temporary deviations from those baseline allocations are not discretionary reallocations, but must be handled through the variance procedures established elsewhere in the charter.

Definitions That Drive the Allocation System

The article defines Net Profits as Subsidiary net income determined under GAAP or another adopted accounting standard and applicable law, after provision for taxes to the extent not already reflected in net income, and after reduction for the amount of operating reserves required and certified to be retained at the Subsidiary level under the Polycentric Governance framework and companion reserves provisions.

The article adopts a uniform Subsidiary definition by cross reference, requiring one hundred percent direct ownership, market-facing operations, and affirmative designation by Board resolution. It also expressly excludes from Subsidiary status both entities that are controlled but not wholly owned and entities that are wholly owned but not designated as Subsidiaries by Board resolution, and it applies that exclusion across the charter for all purposes.

The article also defines the Four Funds as the Reserve Fund, Education Fund, Social Benefits Fund, and Reinvestment Fund.

Funds Established and Baseline Allocation Percentages

The article mandates that the Commons Corporation establish and maintain four separate funds on its books and records and in accounts or instruments permitted by law and corporate policy. It then sets the baseline funding allocations from aggregate Subsidiary Net Profits as follows: fifteen percent to the Reserve Fund, ten percent to the Education Fund, twenty-five percent to the Social Benefits Fund, and fifty percent to the Reinvestment Fund.

Reserve Fund

The Reserve Fund is established to provide financial stability and enable the Corporation to meet unforeseen expenses, obligations, or strategic opportunities. The article ties withdrawals to the fund-use authorization provisions and any companion charter provisions governing reserves and funds.

Education Fund

The Education Fund is established to support educational initiatives, training programs, scholarships, and other activities that advance the knowledge, skills, and professional development of employees of contributing Subsidiaries. The article assigns administration to the officer or office designated by the Board and limits use to the purposes and authorization mechanics stated in the article and any companion provisions governing the Education Fund.

Social Benefits Fund

The Social Benefits Fund is established to administer workers’ benefits and related programs, including health and wellness, family assistance, housing support, and other initiatives designed to enhance quality of life and workforce security, as well as benefits related to retirement and disability for employees of contributing Subsidiaries. The article assigns administration to the Benefits Director or another officer or office designated by the Board, and limits uses to those consistent with the fund’s stated purpose and the article’s authorization requirements.

Reinvestment Fund

The Reinvestment Fund is established to support growth, expansion, and strategic objectives, including reinvestment in existing operations and acquisition of new businesses, assets, or technologies. The article assigns management to the Acquisition Director or another officer or office designated by the Board, and limits uses to those consistent with the fund’s stated purpose and the article’s authorization requirements.

Remittance Timing and Implementation by Policy

The article requires each Subsidiary to remit its allocated amounts to the Commons Corporation in the form, frequency, and timetable established by Corporation policy. It also constrains those policies by requiring consistency with applicable law, the certification of operating reserves, and any charter provisions governing reserves, consolidated surplus mechanics, and funds.

Separate Accounting, Auditability, and Financial Statement Treatment

The article requires that contributions to each fund be recorded separately in the Corporation’s accounting system with sufficient detail to support audit, compliance review, and reporting. It further requires that contributions and disbursements be reflected in the Corporation’s financial statements under applicable accounting standards and under policies adopted within the broader governance framework.

Board Authorization, Delegations, and Control of Spending

The article requires Board authorization for any expenditure, encumbrance, or other alienation of fund assets, and limits permitted uses to those consistent with the specific fund purpose, the Corporation’s mission, and applicable law and fiduciary duties. The Board may adopt procedures, thresholds, and delegation authorities for fund disbursements, including procedures recommended by the Standing Budget and Allocation Committee, but delegated approvals must remain within Board-set limits.

Charter Supremacy and Variance Discipline

The article includes a conflict rule providing that if a Board-adopted policy conflicts with the article, the article controls unless and until properly amended. It also treats material deviations from baseline allocation rules or from stated fund purposes as variance decisions subject to the Polycentric Governance Article’s supermajority and written findings requirements.

Administration, Investments, and Reporting

Each fund must be administered by the person or office identified for that fund, subject to Board oversight and Board-adopted investment, custody, and spending policies. The Board may adopt investment policies addressing permitted investments, risk tolerances, and custodial arrangements, and all investments must comply with applicable law and fiduciary standards. Fund administrators must report to the Board at intervals the Board reasonably requires regarding balances, recent activity, projected needs, and investment performance.

Section 1. Composition of the Board.

The Board of Directors (the “Board”) shall consist of seven (7) directors.

Section 2. Director Categories and Selection Methods.

The seven directors shall be selected as follows:

(a) Executive Director Appointee. One (1) director shall be appointed by the Executive Director of the Commons Corporation (the “Executive Director Appointee”).

(b) Subsidiary Committee Electee. One (1) director, designated the “Subsidiary Director,” shall be elected by a committee (the “Subsidiary Committee”) composed of the managers of all Subsidiaries of the Commons Corporation. If the total number of managers is an even number, then the manager with the least seniority among the managers shall not be included in the Subsidiary Committee. If two or more managers are tied for least seniority, the Executive Director shall select, by written determination, which of those tied managers shall be excluded from the Subsidiary Committee.

(c) Acquisition Director. One (1) director, designated the “Acquisition Director,” shall be elected by a three-member committee comprised of (i) the Executive Director Appointee, (ii) the Subsidiary Committee Electee, and (iii) the director elected by the workers (as described in Section 2(d) below). The Acquisition Director shall have general management and supervisory authority over acquisition strategy and execution as funded through allocations from the Reinvestment Fund, shall exercise such powers as the Board may from time to time delegate with respect to acquisition strategy and execution, and shall report solely to the Board of Directors. The Acquisition Director shall not have unilateral authority to alienate the Commons Corporation’s property or to amend the retained-surplus covenant except as the Board may expressly authorize in writing.

(d) Benefits Director (Worker-Elected). One (1) director, designated the “Benefits Director,” shall be elected by the workers of the Commons Corporation and its Subsidiaries. To be eligible to vote in the Benefits Director election a worker must (i) have been continuously employed by the Commons Corporation or a Subsidiary for at least two (2) years immediately preceding the record date for the election, and (ii) not be an elected corporate officer. The Benefits Director shall have general management and supervisory authority over the Social Benefits Fund and shall report solely to the Board of Directors.

(e) Retiree Electee. One (1) director shall be elected as follows:

(i) If the Retiree Electorate Threshold is satisfied on the record date for the election, the Retiree Electee shall be elected by the Eligible Retirees.

(ii) If the Retiree Electorate Threshold is not satisfied on the record date for the election, the Retiree Electee shall instead be elected by the Eligible Worker Voters, and the director so elected shall serve as the Retiree Electee for that term.

(iii) The election shall revert automatically to an election by the Eligible Retirees for the first term for which the Retiree Electorate Threshold is satisfied on the applicable record date.

(f) Independent Directors. Two (2) directors shall be independent directors (the “Independent Directors”) and shall be elected by the five (5) directors then serving (i.e., the Executive Director Appointee, the Subsidiary Committee Electee, the Acquisition Director, the Benefits Director, and the Retiree Electee). The five directors shall be presented with a slate of qualified candidates prepared in accordance with Section 5, which slate shall contain exactly four (4) qualified candidates in total and shall include two (2) candidates nominated by the Eligible Worker Voters. The election of the Independent Directors by the five electing directors shall be conducted by cumulative voting in accordance with Section 6(e). Each Independent Director must satisfy the qualifications in Section 3 below.

Section 3. Qualifications of Independent Directors.

To qualify as an Independent Director a candidate must satisfy all the following at the time of election and for the duration of his or her service as a director, unless the Board determines otherwise in accordance with applicable law:

(a) Financial Ties. The candidate must not have significant financial ties, recent employment history, or close familial or business relationships with the management of the Commons Corporation or any of its Subsidiaries that could reasonably be expected to compromise independence of judgment.

(b) Compromising Interest. The candidate must not hold positions or possess interests (financial, managerial, fiduciary or otherwise) that could reasonably be expected to compromise the candidate’s ability to act in the best interests of the Commons Corporation and the purposes set forth in its charter.

Section 4. Terms; Timing of Elections and Appointments.

Unless otherwise provided by the bylaws or by resolution of the Board consistent with applicable law, each director shall serve for a term of three (3) years and until his or her successor is duly elected or appointed and qualified, or until earlier resignation, removal or disqualification. Elections and appointments required by this Article shall occur at the corporation’s annual meeting or at a special meeting called for that purpose; provided that initial staggering of terms and the timing of the first elections may be established by Board resolution.

Section 5. Nominations; Slate Procedures for Independent Directors.

The Board shall cause a slate of qualified candidates for the Independent Director positions to be presented in writing to the five electing directors not fewer than thirty (30) days prior to the meeting at which the Independent Directors will be elected. The slate shall be prepared as follows:

(a) Slate Size; Two Worker-Nominated Candidates Required. The slate shall contain exactly four (4) qualified candidates in total for the two (2) Independent Director positions. Two (2) of the four (4) candidates shall be candidates properly nominated by the Eligible Worker Voters under subsection (c) and included on the slate, provided that each such nominee satisfies the qualifications in Section 3 and is not excluded under subsection (d).

(b) Nominating Body and Process. The slate shall be prepared by a nominating committee established by the Board or by any process set forth in the bylaws; provided that the process shall include reasonable solicitation of candidate suggestions from eligible worker voters and eligible retiree voters.

(c) Worker Nominations Included on Slate. The slate shall include two (2) candidates properly nominated by Eligible Worker Voters under procedures established by the Board or set forth in the bylaws, provided that each such nominee satisfies the qualifications in Section 3. The nomination procedures shall include a reasonable petition or support threshold that is designed to be accessible to the electorate and not unduly restrictive.

(d) Qualification Screening and Exclusions. The nominating body shall screen all proposed candidates for compliance with Section 3 and may exclude a proposed candidate only upon a written determination placed in the corporate records that the candidate does not satisfy Section 3 or that the nomination was not properly made under the adopted procedures.

(e) Backfill if Worker Nominations Are Unavailable or Disqualified. If the Eligible Worker Voters do not timely nominate two (2) qualified candidates, or if one or both worker-nominated candidates are excluded under subsection (d), then the nominating body shall fill the vacant worker-nomination slot or slots with qualified candidates selected through its search process, and the slate shall still consist of exactly four (4) qualified candidates.

(f) Candidate Disclosures. Each candidate included on the slate shall provide written disclosures reasonably sufficient for the electing directors to assess independence and qualifications, including financial ties, positions, and relationships relevant to Section 3, together with any other information reasonably requested by the nominating body.

Section 6. Advisory Ballot and Election of Independent Directors.

(a) Advisory Ballot Required. After issuance of the slate and before the meeting at which the Independent Directors will be elected, the Commons Corporation shall conduct an advisory ballot of (i) Eligible Worker Voters and (ii) Eligible Retirees regarding the slate candidates. The advisory ballot shall be limited to the candidates on the slate prepared under Section 5.

(b) Advisory Only; No Director Election by Workers or Retirees. The advisory ballot is advisory only and does not constitute an election of Independent Directors and confers no power on workers or retirees to elect, remove, or seat Independent Directors.

(c) Advisory Ballot Form. The advisory ballot shall be conducted as a cumulative voting ballot. Each eligible voter shall have a number of votes equal to the number of Independent Director seats to be filled (two (2)). Each voter may allocate such votes among one or more candidates on the slate in any combination (including casting both votes for a single candidate) but may not cast more than two (2) total votes.

(d) Reporting of Advisory Results. The worker advisory results and retiree advisory results shall be separately tabulated and reported to the five electing directors not fewer than five (5) days prior to the election meeting, together with participation rates and the method used.

(e) Election of Independent Directors by Electing Directors; Cumulative Voting. The five (5) electing directors shall elect the two (2) Independent Directors by cumulative voting as follows:

(i) Each electing director shall have a number of votes equal to the number of Independent Director seats to be filled (two (2)).

(ii) Each electing director may allocate such votes among one or more candidates on the slate in any combination (including casting both votes for a single candidate) but may not cast more than two (2) total votes.

(iii) The two (2) candidates receiving the highest total number of votes from the electing directors shall be elected as the Independent Directors.

(iv) If a tie would affect the election of one or both Independent Directors, the electing directors shall conduct successive reballots among the tied candidates until the tie is resolved.

Section 7. Vacancies and Removals.

(a) Vacancies. A vacancy in any director position for any reason may be filled for the unexpired term as follows: (i) a vacancy in the Executive Director Appointee position shall be filled by the Executive Director; (ii) a vacancy in the Subsidiary Committee Electee position shall be filled by the Subsidiary Committee; (iii) a vacancy in the Benefits Director position shall be filled by a special election of the Eligible Worker Voters in accordance with procedures established by the Board; (iv) a vacancy in the Retiree Electee position shall be filled by a special election conducted in accordance with Section 2(e) (i.e., by the Eligible Retirees if the Retiree Electorate Threshold is satisfied on the record date for the special election, and otherwise by the Eligible Worker Voters); and (v) any vacancy in an Independent Director position shall be filled by election of the remaining directors then serving using the cumulative voting method in Section 6(e) as nearly as practicable. A person appointed or elected to fill a vacancy shall serve for the remainder of the unexpired term and until a successor is elected or appointed and qualified.

(b) Removal. Directors may be removed only in accordance with the corporation’s bylaws and applicable law.

Section 8. Administration; Definitions.

For the purposes of this Article: (i) “managers” means the most senior operating manager of each Subsidiary as defined in the bylaws or as otherwise designated by the Board; (ii) “elected officers” means persons serving as officers elected by the Board under the corporation’s bylaws; (iii) “subsidiary officers” means persons serving as officers of a Subsidiary (whether elected or appointed) as defined in the Subsidiary’s bylaws or as otherwise designated by the Subsidiary’s board; and (iv) any term not defined herein has the meaning given in the corporation’s bylaws; and in addition:

(v) “Retiree” means a natural person who (A) was employed by one or more Subsidiaries, (B) is not employed by the Commons Corporation or any Subsidiary on the applicable record date, (C) has completed at least ten (10) years of service, whether continuous or aggregate, with one or more Subsidiaries, and (D) is not serving as an officer or director of the Commons Corporation or any Subsidiary on the applicable record date.

(vi) “Eligible Retiree” means a Retiree whose current contact information is on file with the Commons Corporation (or its designated administrator) and who has not affirmatively opted out of participation in retiree elections.

(vii) “Retiree Electorate Threshold” is satisfied only if the number of Eligible Retirees on the record date is at least one hundred (100).

(viii) “record date” means the record date established by the Board (or as provided in the bylaws) for the applicable election or special election.

(ix) “Eligible Worker Voters” means those workers eligible to vote under Section 2(d) and any implementing procedures established by the Board or set forth in the bylaws.

Section 9. Conflicts and Recusal.

Directors shall disclose potential conflicts of interest in accordance with the corporation’s conflict-of-interest policy and shall recuse themselves from votes where such recusal is required by that policy, by these Articles, or by applicable law.

Comments

Cautionary Note for Practitioners

The Article and its accompanying comments are drafted as model provisions, not as legal advice. They are intended as general reference material for practitioners who already understand corporate and nonprofit governance and who are able to adapt, supplement, or disregard the model as required by the governing statute, case law, and client circumstances.

The framework assumes a corporation that retains surplus within an internal system of funds rather than distributing it as private equity or conventional residual claims. Consolidated surplus is held and stewarded inside the enterprise structure under defined allocation rules, with no leakage to investors or private capital accounts. Any practitioner using these materials must integrate that core assumption into the broader legal design and must not treat the Article as a plug and play form.

Purpose And Overall Structure of the Article

The Article establishes a seven-member Board of Directors and sets out how directors are selected, what independence means, how terms and vacancies work, and how conflicts of interest are handled. The design is intentionally pluralistic. Board seats are allocated among executive leadership, subsidiary management, active workers, retired workers, and independent professionals.

Despite this diversity of selection paths, all directors share the same fiduciary duty to the corporation and its purposes. There are no investors or external owners whose capital interests must be served. Surplus is governed as a retained resource for the benefit of workers and the enterprise over time, not as a pool of distributable returns. The “retained surplus covenant” described in the comments functions as a constitutional style promise that surplus will remain within the enterprise and will move only through approved internal funds and programs.

Fixed Board Size

The Board size is fixed at seven directors. That number is treated as the full complement of the Board unless the Articles are amended through appropriate governance procedures.

Seven directors create a structure that is large enough to accommodate distinct roles and perspectives yet small enough to operate as an active, engaged governing body. The fixed size supports stable voting dynamics and makes it possible to define specific categories of directors without needing to adjust seat counts each time the internal design is revisited.

Director Categories and Selection Methods

The seven Board seats are allocated across defined categories so that internal voices participate directly in Board formation while leaving fiduciary duties unified. In summary, the Article provides that the seven directors are: (a) one Executive Director Appointee, (b) one Subsidiary Committee Electee referred to as the Subsidiary Director, (c) one Acquisition Director, (d) one worker elected Benefits Director, (e) one Retiree Electee, and (f) two Independent Directors elected by the five sitting directors.

The Executive Director Appointee is appointed directly by the Executive Director. This role provides a clear line of connection between senior management and the Board yet remains subject to the Board’s overall authority.

The Subsidiary Committee Electee, or Subsidiary Director, is elected by a Subsidiary Committee composed of the managers of all subsidiaries. If the number of managers is even, the least senior manager is excluded from the committee. If there is a tie for least seniority, the Executive Director decides which of the tied managers is excluded. This mechanism keeps the committee at an odd number and reduces the risk of deadlock while giving operating management a defined path to Board participation.

The Acquisition Director is elected by a three member committee consisting of (a) the Executive Director Appointee, (b) the Subsidiary Director, and (c) the worker elected Benefits Director. The Acquisition Director has general management and supervisory authority over the Acquisition Fund and exercises Board delegated powers with respect to acquisitions, while reporting solely to the Board. The Article then limits this director’s unilateral authority by providing that the Acquisition Director may not act alone to alienate corporate property or amend the retained surplus covenant, except where the Board expressly authorizes such action in writing. This keeps control of the core surplus rules and major asset decisions with the full Board.

The Benefits Director is elected by workers of the corporation and its subsidiaries who meet two conditions: (a) at least two years of continuous employment immediately before the election record date, and (b) not serving as an elected corporate officer. The Benefits Director has general management and supervisory authority over the Benefits Fund and reports solely to the Board. This structure gives longer tenured workers a structured voice in Board composition and places stewardship of worker benefits in the hands of a director who is selected by workers yet owes duties to the corporation as a whole.

The Retiree Electee is chosen by retired workers of the corporation and its subsidiaries who meet the corporation’s retirement qualifications and are actually retired from group employment. The comments deliberately use the label “Retiree Electee” rather than “Retiree Director.” That label highlights the method of selection but avoids suggesting that the director has a special fiduciary duty to retirees as a group. The Retiree Electee sits as a full director with duties to the corporation and its purposes, not as a delegate.

The two Independent Directors are elected by the five directors already in place, namely the Executive Director Appointee, the Subsidiary Director, the Acquisition Director, the Benefits Director, and the Retiree Electee. They must be chosen from a written slate of candidates prepared in advance, and they must meet specific independence standards described in the Article.

Qualifications Of Independent Directors

The Article requires that an Independent Director satisfy two core independence standards at the time of election and throughout service, unless the Board lawfully determines otherwise.

First, an Independent Director must not have significant financial ties, recent employment relationships, or close family or business connections with management of the corporation or any subsidiary that could reasonably be expected to compromise independent judgment.

Second, an Independent Director must not hold positions or interests, whether financial, managerial, fiduciary, or otherwise, that could reasonably be expected to interfere with acting in the best interests of the corporation and the purposes stated in its charter.

These standards are drafted to ensure that Independent Directors bring meaningful distance from the day to day management structure. Their role is to provide a degree of external perspective on surplus stewardship, acquisition activity, and internal funds, all in a setting where there are no outside investors whose capital returns might otherwise dominate decision making.

Terms, Elections, And Vacancies

Directors normally serve three-year terms and hold office until a successor is duly elected or appointed and qualified, or until earlier resignation, removal, or disqualification. Elections and appointments occur at the annual meeting or at a properly called special meeting. The Board is authorized to establish staggered initial terms and to set the timing of the first elections by resolution so that not all seats turn over in the same year.

Vacancies are filled by the same constituencies or bodies that originally selected the director, for the remainder of the unexpired term. In broad outline, (a) a vacancy in the Executive Director Appointee seat is filled by the Executive Director, (b) a vacancy in the Subsidiary Director seat is filled by the Subsidiary Committee, (c) a vacancy in any worker or retiree elected seat, including the Benefits Director or Retiree Electee, is filled by a special election of the applicable class of voters under procedures adopted by the Board, and (d) a vacancy in an Independent Director seat is filled by election of the remaining directors then in office. The replacement director serves for the rest of the unexpired term and until a successor is qualified.

Removal of directors is governed by the bylaws and applicable law. The Article intentionally leaves the detailed removal procedures to those sources so that statutory protections, notice requirements, and voting standards can be addressed comprehensively in one place.

Nominations and Slate Procedures for Independent Directors

For Independent Directors, the Article requires a written slate of at least three qualified candidates to be presented to the five electing directors not fewer than thirty days before the meeting at which the election will occur. The slate may be prepared by a nominating committee of the Board or through another process specified in the bylaws.

This approach gives the Board time to vet candidates for independence and qualifications, aligns with common governance practice in more sophisticated entities, and helps ensure that the Independent Director seats are not treated as informal or ad hoc appointments.

Administration And Definitions

To support the composition mechanics, the Article includes a specific administration and definitions section limited to this Article. For its purposes: (a) “managers” means the most senior operating manager of each subsidiary as defined in the bylaws or as designated by the Board, (b) “elected officers” means officers elected by the Board under the bylaws, and (c) “subsidiary officers” means officers of a subsidiary as defined by that subsidiary’s governance documents or as designated by the subsidiary’s board. Terms not defined in the Article take their meaning from the bylaws.

The comments explain why these definitions are placed in the Board composition Article rather than in a global definitions section. The reasons include: (a) the terms are used in a highly Article specific way, particularly for constructing the Subsidiary Committee and its voting pool, (b) centralizing them in a general definitions article could create conflicts with other definitions used for different purposes in the bylaws, (c) keeping them local improves standalone readability and allows practitioners to lift or adapt the Board Article as a modular unit, and (d) future variants of Board structures can be introduced by amending this Article without rewriting an enterprise wide definitions section.

This reflects a conscious drafting strategy that treats the Articles as constitutional level provisions and supports modular use of model text across different entities built on similar principles.

Conflicts And Recusal

The Article concludes by requiring directors to disclose potential conflicts of interest under the corporation’s conflict of interest policy and to recuse themselves from deliberations and votes when recusal is required by that policy, by the Articles, or by applicable law.

This integrates standard conflict practice into the Board’s operation and is especially important in a system where there are no outside investors, where internal funds directly affect worker benefits and enterprise expansion, and where decisions about surplus deployment can significantly influence the economic position of workers and retirees over time.

Retained Surplus Covenant and Limits on The Acquisition Director

The comments place special focus on the retained surplus covenant, which is the core charter and bylaw commitment that consolidated surplus will be retained within the enterprise and managed under specified allocation rules rather than treated as distributable private profit. In summarized form, the covenant typically provides that: (a) the corporation targets only reasonable net returns at the consolidated level, (b) surplus above those reasonable returns is committed to defined uses such as premium wages, Nordic style benefits, education and training, reserves, and acquisition or conversion of additional subsidiaries, and (c) surplus is not distributable as private equity gains or conventional residual claims.

The same commentary clarifies that the Acquisition Director is expressly barred from unilaterally changing that covenant or alienating corporate property except pursuant to specific written authority granted by the Board. Any amendment to the surplus rules or significant change in asset position must therefore come through Board level decision making, not through delegated execution. This preserves the Board’s role as steward of the surplus framework and confirms that acquisition activity is an instrument of that framework, not a backdoor bypass of it.

Practical Governance Implications

In practice, the Board configuration described in the Article has several important implications.

First, it integrates within a single governing body (a) an Executive Director appointee, (b) a director elected by subsidiary managers, (c) directors with specific oversight responsibilities for acquisition and benefits funds, and (d) a director elected by retirees, while also adding two Independent Directors subject to meaningful independence standards. All directors serve under a unified fiduciary duty to the corporation and to the purposes embedded in the retained surplus covenant, rather than to investor capital or external owners.

Second, the Independent Directors, screened for independence and elected from a pre-established slate, provide an additional layer of oversight with respect to management decisions about surplus stewardship, acquisitions, and benefit allocations. Their role is particularly significant in a structure that has no investors and no external owners to demand accountability through capital pressure.

Third, the use of local definitions and a modular drafting style makes the Board Article a flexible tool for practitioners. It can be copied, adapted, or reconfigured without constant cross referencing to a central definitions article, while still coordinating with the bylaws for terms that need a broader organizational meaning.

Overall, the Article and its comments describe a Board that operates in an environment without private investors, that holds surplus under a retained surplus covenant, and that uses a carefully structured mix of internal voices and independent oversight to steward that surplus for workers and the enterprise as a whole over time.

Closing Caution To Practitioners

These comments end with a renewed caution that the Article and commentary are for general reference only and do not constitute legal advice. Practitioners are urged to revise or disregard particular provisions as required by the governing statute, controlling case law, and the specific needs of the client.

The Board Article, with its comments, offers a coherent starting point for drafting a Board composition article for this type of corporation. It does not replace the need for a full legal analysis of the entity’s structure, regulatory environment, and operational plans, and it assumes that the drafter understands the underlying surplus model and can integrate that model into a complete charter and bylaw system.

Section 1. Establishment and Purpose.

(a) There is hereby established the Office of the Ombudsman (the Office). The Office shall exist to provide workers and other internal stakeholders with a confidential, independent channel for raising concerns; to act as an impartial liaison between workers and management of the Commons Corporation and its Subsidiaries; and to examine, evaluate, and report on financial, governance, compliance, and stewardship matters relevant to the Corporation and its Subsidiaries.

(b) The Office shall advise the Board of Directors on systemic risks, remedial measures, and compliance with the Corporation’s charter, bylaws, and policies, including those implementing polycentric governance, the Standing Budget and Allocation Committee, and the Four Funds.

(c) The Office shall assist in the functioning of polycentric governance by monitoring how Governance Centers interact, identifying bottlenecks and failures in coordination, and recommending adjustments to preserve the effectiveness of nested, overlapping centers of authority.

(d) The Office shall assist in the operation of workers’ veto rights established in the Article on Worker Veto over Alienation, including providing mediation, written recommendations or decisions, and records required under that Article, while remaining impartial between Worker Committees, managers, and boards.

Section 2. Appointment, Term, and Reporting.

(a) The Ombudsman shall be appointed by the Board and shall report directly to the Board as an independent officer of the Corporation. The Ombudsman shall not report to any other officer, director, or Subsidiary manager for purposes of the Ombudsman’s duties.

(b) The Ombudsman shall serve for a term specified in the bylaws and may be removed by the Board only for cause, including substantial neglect of duties, misconduct, or incapacity, as determined by a supermajority vote of the Board.

(c) The Ombudsman shall have the right to meet in executive session with the Board, with or without the presence of management, to discuss findings, concerns, or recommendations.

Section 3. Independence and Conflicts of Interest.

(a) The Ombudsman shall not simultaneously serve as a director, officer with line-management authority, or manager of any Subsidiary. The Ombudsman shall not hold a role that would reasonably be perceived as compromising independence.

(b) The Ombudsman shall disclose to the Board any potential conflicts of interest that may arise in the performance of duties, including prior relationships with parties to a dispute, and shall recuse from particular matters where the Board determines that impartiality could reasonably be questioned.

(c) The Board shall take reasonable measures to preserve the Ombudsman’s independence, including protection against retaliation and undue interference with investigations or reporting.

Section 4. Powers and Authority.

(a) The Ombudsman is vested with plenary power to examine and make copies of, or receive certified extracts from, all books, records, accounts, contracts, financial statements, invoices, ledgers, audit reports, board minutes, internal audit work papers, management correspondence, and other documents of the Commons Corporation and each of its Subsidiaries that the Ombudsman reasonably deems necessary to discharge duties.

(b) The Ombudsman shall have the authority to interview any current or former officer, director, employee, contractor, or agent of the Corporation or any Subsidiary and to require submission of information and documents relevant to an inquiry, subject to applicable legal protections and privileges.

(c) The Ombudsman shall have access to budgets, allocation proposals, reserve calculations, fund statements, and variance analyses prepared for the Standing Budget and Allocation Committee, the Board, or any other Governance Center involved in polycentric decision-making.

(d) For matters arising under the Article on Worker Veto over Alienation, the Ombudsman shall have access to Proposed Alienation Action notices, Worker Committee communications, mediation materials, and board or manager responses, to the extent necessary to perform mediation, recommendation, and reporting duties described in that Article and in this Article.

Section 5. External Reviews and Advisors.

(a) When the Ombudsman, in the Ombudsman’s professional judgment, determines that specialist expertise is required or that a matter may materially affect the Corporation’s stewardship obligations, the Ombudsman may, with notice to the Board Chair or such Board committee as the Board directs, retain independent external advisors, auditors, forensic accountants, or legal counsel at the Corporation’s expense.

(b) The Ombudsman shall oversee any such engagements and shall ensure the Board has access to any resulting reports or opinions, subject to applicable legal privileges and confidentiality obligations.

(c) External advisors retained under this Section may be requested to examine matters with particular relevance to polycentric governance, including the robustness of monitoring systems, the design of reserve policies, and the fairness and consistency of worker-facing processes.

Section 6. Intake, Investigation, and Confidentiality.

(a) The Ombudsman shall maintain procedures for confidential intake, assessment, and investigation of disclosures and complaints from workers, directors, officers, managers, and other internal stakeholders. These procedures shall be readily accessible and shall permit both identified and, where appropriate, anonymous submissions.

(b) Information received by the Ombudsman shall be held in strict confidence to the maximum extent permitted by law. Confidentiality may be breached only where required by statute, regulation, court order, or where nondisclosure would present an imminent risk of substantial harm to persons or to the Corporation; in such instances the Ombudsman shall promptly notify the Board.

(c) The Ombudsman shall give particular attention to disclosures that allege (1) misuse or arbitrary application of Worker Veto rights, (2) suppression or retaliation against Worker Committees or participants in polycentric governance processes, or (3) manipulation of budgets, reserves, or fund allocations to circumvent worker protections or charter commitments.

(d) The Ombudsman shall maintain records of complaints, investigations, and outcomes in a manner that protects confidentiality while permitting trend analysis and reporting on systemic issues.

Section 7. Role in Polycentric Governance.

(a) The Ombudsman shall monitor the functioning of the Corporation’s polycentric governance system, including the interactions among the Board, Subsidiary boards and managers, the Standing Budget and Allocation Committee, fund directors or offices, Worker Committees, and other Governance Centers identified in the Articles.

b) The Ombudsman may attend meetings of the Standing Budget and Allocation Committee and other committees designated by the Board as a non-voting participant, for the limited purpose of observing processes, providing independent perspective, and identifying systemic risks or governance failures.

(c) The Ombudsman shall periodically review the use of Baseline Allocation Rules, any variances approved under the Polycentric Governance Article, and the application of graduated sanctions, to assess whether the system operates consistently with the Corporation’s commitments to workers, long-term reserves, and fair internal allocation of resources.

(d) The Ombudsman shall issue to the Board, at intervals determined by the Board, written reports on the overall health of polycentric governance, including recommendations for policy changes, adjustments to committee structures, or enhanced monitoring where recurrent issues are identified.

(e) The Ombudsman may, where appropriate, recommend to the Board that Education Fund resources be used to provide training or capacity building to Governance Centers whose performance is materially affecting the functioning of polycentric governance.

(f) The Ombudsman may, but is not required to, serve as mediator or facilitator in disputes among directors concerning allocation or funding of the Four Funds, as contemplated in the Article on dispute resolution among directors. In deciding whether to accept such a role, the Ombudsman may consider workload, independence, potential conflicts of interest, and the need to preserve capacity for Worker Veto processes and other core responsibilities. The Ombudsman may recommend that directors retain an independent third-party mediator instead of, or in addition to, the Ombudsman’s involvement.

Section 8. Role in Worker Veto Processes.

(a) The Ombudsman shall perform the mediation and related functions assigned under the Article on Worker Veto over Alienation, including serving as mediator or selecting a mediator in the circumstances specified in that Article and commencing mediation as soon as reasonably practicable. The Ombudsman’s participation in disputes among directors concerning the Four Funds shall not diminish or delay the Ombudsman’s availability for matters arising under the Worker Veto Article.

(b) At the conclusion of any mediation undertaken in connection with a Proposed Alienation Action, the Ombudsman shall provide a written statement summarizing any agreement reached or, if no agreement is reached, the Ombudsman’s recommendation or decision regarding the Proposed Alienation Action, as required under the Worker Veto Article. The Ombudsman shall transmit this written statement to the applicable Worker Committee and manager or board.

(c) The Ombudsman shall ensure that the written statement clearly identifies the date of transmission, and the applicable parties, so that any appeal period specified in the Worker Veto Article can be calculated and observed.

(d) The Ombudsman shall provide impartial procedural guidance to Worker Committees, managers, and boards regarding the steps, timelines, and documentation required to exercise or respond to Worker Veto rights, without acting as an advocate for any party in the underlying dispute.

(e) The Ombudsman shall track and report, in aggregate and without compromising confidentiality, recurring patterns in the use of Worker Veto rights, including evidence of abuse of process, repeated failures to give timely notices, or structural impediments to the effective exercise of the veto. The Ombudsman may recommend to the Board remedial measures, including policy changes or training, to address such patterns.

(f) Where the Board has authority under the Worker Veto Article to limit or suspend a Worker Committee’s powers due to abuse, the Ombudsman may provide the Board with independent findings and recommendations, including assessment of whether such action is necessary and proportionate.

Section 9. Reports and Recommendations.

(a) The Ombudsman shall provide at least one comprehensive written report to the Board each fiscal year describing significant activities, systemic issues identified, recommendations made, and the status of prior recommendations, with particular emphasis on polycentric governance and Worker Veto processes.

(b) The Ombudsman may submit special reports to the Board or relevant committees when urgent issues arise, including suspected material breaches of charter obligations, serious threats to fund integrity or reserves, or substantial impairments in Worker Veto functioning.

(c) The Ombudsman’s reports may include recommended changes to policies, committee charters, reserve rules, or fund allocation practices; such recommendations shall be advisory and shall not bind the Board or any Subsidiary, but the Board shall consider them in good faith.

Section 10. Cooperation and Limits.

(a) Subsidiary boards, officers, managers, and employees shall cooperate fully with the Ombudsman in investigations and shall provide access to records, personnel, and information reasonably requested for the performance of duties.

(b) Nothing in this Article shall be construed to grant the Ombudsman authority to direct the day-to-day operations of any Subsidiary, to overrule decisions of the Board or Subsidiary boards, or to supersede the lawful responsibilities of directors, officers, or managers.

(c) The Ombudsman’s role is investigative, advisory, facilitative, and reporting. Any remedial, disciplinary, or transactional decision shall be taken by the appropriate corporate body consistent with the charter, bylaws, and applicable law, including the Polycentric Governance Article and the Worker Veto Article.

(d) The Ombudsman shall not exercise or compel the exercise of Worker Veto rights, but shall support the fair and timely operation of those rights as prescribed in the Worker Veto Article.

Section 11. Charter, Procedures, and Protections.

(a) The Board shall adopt an Ombudsman charter and related procedures implementing this Article, including intake protocols, thresholds for escalation, retention of records, confidentiality safeguards, and performance metrics for the Office. The Ombudsman charter may be amended only by Board action.

(b) The Corporation shall furnish the Ombudsman with adequate staff, office space, secure communications, and technical support required to perform duties effectively, including duties related to polycentric governance monitoring and Worker Veto processes.

(c) The Corporation shall adopt and enforce protections against retaliation for persons who make good faith disclosures or participate in investigations or mediations conducted by or under the supervision of the Ombudsman.

(d) The Board shall periodically review the Ombudsman charter and related procedures to ensure that they remain consistent with the evolution of the Corporation’s polycentric governance structures and the practical operation of Worker Veto rights.

Comments

Establishment and Core Purpose of the Office

The Article creates an independent Office of the Ombudsman as a permanent internal oversight and worker-protection function within the commons corporation and all subsidiaries. The office provides a confidential channel for workers and other internal stakeholders to raise concerns, serves as an impartial liaison between workers and management, and examines financial, governance, compliance, and stewardship matters across the corporate group. It advises the board on systemic risks, remedial measures, and compliance with the charter, bylaws, and policies, including those governing polycentric governance, the Standing Budget and Allocation Committee, and the Four Funds. The office also supports the operation of worker veto rights by providing mediation, written recommendations or decisions, and recordkeeping while remaining neutral among worker committees, managers, and boards.

Appointment, Term, and Reporting Relationship

The Ombudsman is appointed by the board and is designated as an independent officer who reports directly to the board. The Ombudsman does not report to any other officer, director, or subsidiary manager when performing official duties. The term of office is set in the bylaws, and removal is permitted only for cause, such as substantial neglect of duties, misconduct, or incapacity, and then only by supermajority board vote. The Ombudsman is entitled to meet with the board in executive session, with or without management present, to discuss findings, concerns, and recommendations.

Independence and conflicts of Interest Safeguards

The Article structurally separates the Ombudsman from line management and governance roles that could compromise independence. The Ombudsman may not simultaneously serve as a director, as an officer with line-management authority, or as a subsidiary manager, and may not hold any role that would reasonably appear to compromise impartiality. The Ombudsman must disclose potential conflicts of interest, including prior relationships with dispute participants, and may be required to recuse from specific matters where impartiality could reasonably be questioned. The board is obligated to take reasonable measures to preserve independence, including protection against retaliation and interference with investigations or reporting.

Investigative Powers and Access to Information

The Article confers broad information rights on the Ombudsman. The Ombudsman has plenary authority to examine and copy, or receive certified extracts from, all books, records, accounts, contracts, financial statements, invoices, ledgers, audit reports, board minutes, internal audit work papers, and other documents of the corporation and its subsidiaries that are reasonably necessary to perform duties. The Ombudsman may interview any current or former officer, director, employee, contractor, or agent and may require the submission of relevant information and documents, subject to applicable legal protections and privileges. The Ombudsman has explicit access to budgets, allocation proposals, reserve calculations, fund statements, and variance analyses used in polycentric decision-making, and to notices, communications, mediation materials, and responses associated with worker veto processes and proposed alienation actions.

Use of External Reviews and Advisors

When specialist expertise is required or a matter may materially affect stewardship obligations, the Ombudsman may retain independent external advisors, such as auditors, forensic accountants, or legal counsel, at the corporation’s expense, with notice to the board chair or designated board committee. The Ombudsman oversees these engagements and ensures that the board has access to resulting reports or opinions, subject to legal privileges and confidentiality. External advisors can be tasked to review elements of polycentric governance, including monitoring systems, reserve policies, and worker-facing processes, particularly where those systems implicate fairness, consistency, or fund integrity.

Intake, Investigation, and Confidentiality Framework

The Ombudsman must maintain accessible procedures for confidential intake, assessment, and investigation of disclosures and complaints from workers and other internal stakeholders, allowing both identified and appropriate anonymous submissions. Information received is to be kept in strict confidence to the maximum extent permitted by law. Confidentiality may be broken only where required by law or where nondisclosure would pose an imminent risk of substantial harm to individuals or to the corporation, and in such cases the Ombudsman must promptly notify the board. The Ombudsman is directed to pay particular attention to allegations involving misuse of worker veto rights, retaliation against worker committees or participants in governance processes, or manipulation of budgets and allocations to undermine worker protections or charter commitments. Records of complaints, investigations, and outcomes must be maintained in a manner that preserves confidentiality while enabling trend analysis and systemic reporting.

Role in Polycentric Governance System

The Ombudsman functions as a monitoring and feedback mechanism within the polycentric governance architecture. Responsibilities include monitoring how governance centers interact, including the board, subsidiary boards and managers, the Standing Budget and Allocation Committee, fund directors or offices, worker committees, and other identified governance centers. The Ombudsman may attend committee meetings, including the Standing Budget and Allocation Committee, as a non-voting observer to assess processes and identify systemic risks or governance failures. The Ombudsman reviews the use of Baseline Allocation Rules, approved variances, and graduated sanctions to determine whether the overall system remains consistent with commitments to workers, long-term reserves, and fair internal allocation of resources. Periodic written reports to the board on the health of polycentric governance may include recommendations on policies, committee structures, and monitoring practices, and the Ombudsman may recommend targeted use of Education Fund resources to build capacity in underperforming governance centers.

Role in Worker Veto Processes

The Article integrates the Ombudsman directly into the worker veto over alienation framework. The Ombudsman performs mediation and related functions assigned under the Worker Veto Article, including serving as mediator or selecting a mediator where that Article so provides, and commencing mediation as soon as reasonably practicable. At the conclusion of mediation regarding a proposed alienation action, the Ombudsman issues a written statement summarizing any agreement or, if no agreement is reached, the Ombudsman’s recommendation or decision. That statement must clearly identify the parties and the date of transmission so that any appeal period under the Worker Veto Article is triggered and can be observed. The Ombudsman provides impartial procedural guidance to worker committees, managers, and boards on required steps, timelines, and documentation, but does not advocate for any party. The Ombudsman is required to track and report, on an aggregate and confidential basis, recurring patterns in the use or abuse of worker veto rights, such as repeated failures to give timely notices or structural impediments to effective veto use, and may recommend remedial policy changes or training. Where the board has authority to limit or suspend a worker committee’s powers for abuse, the Ombudsman may supply independent findings and recommendations regarding necessity and proportionality.

Reporting Duties and Systemic Recommendations

The Ombudsman must deliver at least one comprehensive written report to the board each fiscal year, summarizing significant activities, systemic issues, recommendations, and the status of prior recommendations, with particular emphasis on polycentric governance and worker veto processes. The Ombudsman may also issue special reports to the board or relevant committees when urgent issues arise, including suspected material breaches of charter obligations, serious threats to fund integrity or reserves, or substantial impairment of worker veto mechanisms. Reports may propose changes to policies, committee charters, reserve rules, or fund allocation practices. These recommendations are advisory rather than binding, but the board is obligated to consider them in good faith.

Cooperation Requirements and Limits on Authority

Subsidiary boards, officers, managers, and employees are required to cooperate fully with the Ombudsman by providing access to records, personnel, and information reasonably requested for the performance of duties. At the same time, the Article draws clear limits on the Ombudsman’s authority. The Ombudsman cannot direct day-to-day operations, overrule decisions of the board or subsidiary boards, or displace the lawful responsibilities of directors, officers, or managers. The Ombudsman’s role is defined as investigative, advisory, facilitative, and reporting, with remedial, disciplinary, and transactional decisions reserved to the appropriate corporate bodies under the charter, bylaws, and applicable law. The Ombudsman may not exercise or compel the exercise of worker veto rights, but instead supports their fair and timely operation.

Ombudsman Charter, Procedures, and Protections

The board must adopt a separate Ombudsman charter and implementing procedures that operationalize the Article, including intake protocols, thresholds for escalation, record retention, confidentiality safeguards, and performance metrics. The Ombudsman charter may be amended only by board action. The corporation is required to provide adequate staffing, office space, secure communications, and technical support so the Ombudsman can perform duties effectively, including oversight of polycentric governance and worker veto processes. The corporation must adopt and enforce protections against retaliation for individuals who make good faith disclosures or participate in investigations or mediations under the Ombudsman’s supervision. The board is also required to periodically review the Ombudsman charter and procedures to ensure they remain aligned with evolving polycentric governance structures and the practical functioning of worker veto rights.

Section 1. Purpose.

There shall be a standing committee of the Commons Corporation (the “Committee”) whose purpose is to (a) review and formulate budgets and cash-flow plans for recommendation to the Board of Directors (the “Board”) for the Commons Corporation and for each subsidiary of the Commons Corporation (each a “Subsidiary”), and (b) develop recommended allocations of corporate surplus among the Reinvestment Fund, the Benefits Fund, the Education Fund and the Reserve Fund, all in accordance with this Article.

Section 2. Committee Authority; Recommendations to the Board.

(a) Budgets and Cash Flow. The Committee shall review, formulate and recommend to the Board for approval (1) annual budgets for the Commons Corporation and for each Subsidiary, and interim or quarterly budgets when necessary, and (2) all necessary cash-flow requirements for the Commons Corporation and for each Subsidiary.

(b) Fund Allocations. The Committee shall review, formulate and recommend to the Board for approval the allocation of available net profits to the following funds: the Reinvestment Fund, the Benefits Fund, the Education Fund and the Reserve Fund.

(c) Baseline Allocation. Except as otherwise recommended in accordance with Section 2(d), the Committee shall use the following baseline proportions of Subsidiary net profits as the starting point for its recommendations: (1) Reinvestment Fund: 50% of Subsidiary net profits; (2) Benefits Fund: 25% of Subsidiary net profits; (3) Education Fund: 10% of Subsidiary net profits; and (4) Reserve Fund: 15% of Subsidiary net profits.

(d) Deviations. The Committee may, in its discretion, recommend deviations from the baseline proportions set forth in Section 2(c) where, based upon facts and circumstances (including but not limited to liquidity needs, extraordinary capital opportunities, regulatory or contractual obligations, actuarial funding requirements, or extraordinary risks), the Committee reasonably determines that a different allocation is warranted. Any such deviation shall be documented in the Committee’s written recommendation to the Board with supporting rationale and any relevant financial projections or analyses.

(e) Submission to the Board. All recommendations of the Committee under this Section 2 (including baseline allocations and any proposed deviations therefrom) shall be submitted to the Board for review and action in accordance with Section 5.

Section 3. Composition; Chair; Voting.

(a) Membership. The Committee shall be comprised of the following persons (each, a “Committee Member”): (1) the Ombudsman of the Commons Corporation (the “Ombudsman”), who shall serve as a non-voting member of the Committee; (2) the Executive Director of the Commons Corporation (the “Executive Director”) or the Executive Director’s appointee; (3) the Benefits Director or the Benefits Director’s appointee; (4) the Subsidiary Director or the Subsidiary Director’s appointee; and (5) the Acquisition Director or the Acquisition Director’s appointee.

(b) Chair. The Executive Director (or the Executive Director’s appointee) shall serve as Chairperson of the Committee and shall preside over Committee meetings. In the absence of the Chair, the Committee may designate from among the voting Committee Members an acting chair for that meeting.

(c) Voting Rights; Quorum. Except for the Ombudsman, all Committee Members shall have equal voting rights. A quorum for the transaction of Committee business shall consist of a majority of the voting Committee Members. Except as otherwise provided in this Article, action of the Committee requires the affirmative vote of a majority of the voting Committee Members present at a meeting at which a quorum is present. The Ombudsman shall participate in deliberations and shall provide independent reports and recommendations to the Committee and to the Board, but shall not vote.

Section 4. Meetings; Records; Reports.

(a) Meetings. The Committee shall meet at such times as necessary to fulfill its responsibilities under this Article, but no less frequently than quarterly. Meetings may be called by the Chair or by a majority of the Committee Members. Meetings may be held in person or by electronic means permitted by the Corporation’s bylaws.

(b) Records. The Committee shall cause minutes to be prepared for each meeting and shall maintain written records of its recommendations, analyses, and supporting documentation. Copies of minutes and written recommendations shall be delivered to the Board and retained as corporate records.

(c) Reports. The Committee shall report its recommendations and the basis therefor to the Board in advance of any Board action on budgets, cash-flow plans, or fund allocations. The Committee shall also provide such periodic reports to the Board as the Board may request.

Section 5. Board Review; Board Discretion; Worker Veto.

(a) Board Review and Discretion. The Board shall review the Committee’s recommendations described in Section 2. The Board is not bound by the Committee’s recommendations and may approve, modify, or reject any recommendation in the Board’s sole discretion, except as otherwise provided in Section 5(b). Nothing in this Article limits the Board’s authority under applicable law or the Corporation’s governing documents to adopt budgets, approve allocations, or take other corporate actions.

(b) Workers’ Veto; Exercise and Effect. Notwithstanding Section 5(a), upon submission of any recommendation concerning budgets or related matters to the Board, the workers’ veto power described in this Section 5(b) shall be exercised and applied as follows:

  1. Exercise of Veto. The workers’ veto power shall be exercised by the Benefits Director after consultation with the Workers’ Representative of each Subsidiary’s Budget Committee (as required by Section 6(d)). The Benefits Director, following such consultation, may exercise a veto with respect to any or all budgets or budget items submitted to the Board, in whole or in part. The exercise of a veto shall be made in writing and delivered to the Board and recorded in the minutes of the Board meeting at which the budget or related matter is considered.
  2. Binding Effect. The exercise of the workers’ veto by the Benefits Director in accordance with Section 5(b) shall be binding on the Board with respect to the subject matter of the veto; the Board shall not adopt, apply, or enforce any budget, budget item or related measure that has been validly vetoed consistent with Section 5(b).
  3. Limitations. The exercise of the workers’ veto shall be limited to the specific budgets, budget items, or cash-flow measures submitted to the Board and shall not otherwise prevent the Board from carrying out duties or exercising powers not directly inconsistent with the vetoed subject matter. Neither the Board nor any third party may invalidate, rescind, delay, refuse to give effect to, or otherwise impair the legal force or binding effect of a veto on the ground that the statement of reasons or any factual materials provided by the Benefits Director are alleged to be inaccurate, incomplete or otherwise deficient; any such allegation shall not affect the validity, enforceability or binding effect of the veto. The Benefits Director shall promptly provide to the Committee and to the Board a written statement of the reasons for any veto, and any factual materials relied upon in support of the veto. A veto shall remain effective and binding unless and until it is (i) withdrawn in writing by the Benefits Director, or (ii) set aside by a final order of a court of competent jurisdiction.

Section 6. Subsidiary Budget Committees; Establishment and Duties.

(a) Establishment. The Board shall cause the Commons Corporation and each Subsidiary to establish and maintain a standing Budget Committee (each a “Subsidiary Budget Committee”) charged with preparing and presenting budgets and cash-flow projections for the applicable entity to the standing Committee established by this Article.

(b) Composition. Each Subsidiary Budget Committee shall be composed of the following personnel (or their appointees): (1) the Subsidiary’s manager (or the manager’s appointee); (2) the Workers’ Representative of the Subsidiary (the “Workers’ Representative”); and (3) the Subsidiary’s comptroller or person with comparable duties.

(c) Duties. It shall be the duty of each Subsidiary Budget Committee to (1) prepare and present to the standing Committee an annual budget for the applicable Subsidiary (or an interim quarterly budget if circumstances so require), and (2) prepare and present to the standing Committee any cash-flow projections or cash-flow needs not anticipated by the Subsidiary’s budget, including projections required to support recommendations to the Board under Section 2(a)(2).

(d) Consultation for Veto. The Workers’ Representative of each Subsidiary’s Budget Committee shall timely consult with the Benefits Director, upon request, for purposes of considering whether the workers’ veto described in Section 5(b) should be exercised with respect to budgets or budget items for that Subsidiary.

Section 7. Miscellaneous.

(a) Conflicts. If any provision of this Article conflicts with any provision of the Corporation’s certificate of incorporation, bylaws, or applicable law, the conflicting provision shall be interpreted and applied to give effect to the maximum extent possible to the intent and purposes of this Article and to the protection of workers’ veto rights as set forth in Section 5(b); provided, however, that in no event shall this Article be construed to authorize actions contrary to mandatory requirements of applicable law.

(b) Amendment. This Article may be amended by the Board in accordance with the Corporation’s governing documents; provided, however, that no amendment shall diminish or eliminate, without the affirmative vote of the Board and written consent of the Benefits Director, the workers’ veto right established in Section 5(b) as to any budgets or budget items in existence at the time of such amendment.

Comments

Purpose

(a) The Corporation will maintain a permanent Standing Budget and Allocation Committee (the “Committee”) whose role is to prepare and propose budgets and cash-flow plans for the Commons Corporation and for each Subsidiary.

(b) The Committee will also develop and propose how available net profits should be divided among four funds: the Reinvestment Fund, the Benefits Fund, the Education Fund, and the Reserve Fund.

Budgets, Cash Flow, and Fund Allocations

(a) The Committee will review, formulate, and recommend annual budgets for the Commons Corporation and for each Subsidiary, and will prepare interim or quarterly budgets when needed.

(b) The Committee will identify and recommend all necessary cash-flow requirements for the Commons Corporation and for each Subsidiary.

(c) The Committee will recommend how to allocate available net profits to the Reinvestment Fund, the Benefits Fund, the Education Fund, and the Reserve Fund, using a clear, structured process that is documented and submitted to the Board.

(d) As a baseline starting point, the Committee will use the following allocation of Subsidiary net profits: fifty percent to the Reinvestment Fund, twenty-five percent to the Benefits Fund, ten percent to the Education Fund, and fifteen percent to the Reserve Fund.

(e) The Committee may recommend deviations from the baseline allocation when facts and circumstances such as liquidity needs, extraordinary capital opportunities, contractual or regulatory obligations, or unusual risks warrant different allocations. Any deviation must be explained in writing and supported by any relevant projections or analyses so that the Board can understand and evaluate the recommendation.

Composition, Leadership, and Voting

(a) The Committee will consist of five persons: the Ombudsman (non-voting), the Executive Director (or the Executive Director’s appointee), the Benefits Director (or appointee), the Subsidiary Director (or appointee), and the Acquisition Director (or appointee).

(b) The Executive Director or the Executive Director’s appointee will serve as Chair and will preside over Committee meetings; in the Chair’s absence, the voting members may designate an acting chair for that meeting.

(c) All members except the Ombudsman will have equal voting rights. A quorum will consist of a majority of the voting members, and ordinary Committee action will require the affirmative vote of a majority of the voting members present at a meeting where a quorum is present.

(d) The Ombudsman will participate in Committee deliberations and will provide independent reports and recommendations to the Committee and the Board but will not vote.

Meetings, Records, and Reports

(a) The Committee will meet as often as necessary to fulfill its responsibilities, but at least quarterly. Meetings may be called by the Chair or by a majority of the Committee Members, and may be held in person or by electronic means permitted under the Corporation’s bylaws.

(b) The Committee will prepare and maintain minutes of each meeting and written records of its recommendations, analyses, and supporting documentation. Copies of minutes and written recommendations will be delivered to the Board and retained as corporate records.

(c) The Committee will report its recommendations, and the reasons for them, to the Board in advance of any Board action on budgets, cash-flow plans, or fund allocations, and will provide additional periodic reports as the Board may request.

Board Review and Workers’ Veto

(a) The Board will review the Committee’s recommendations on budgets, cash-flow plans, and fund allocations. Except where the workers’ veto applies, the Board may approve, modify, or reject any recommendation and will retain its full legal authority under the governing documents and applicable law.

(b) When recommendations are submitted to the Board, the Benefits Director, after consulting with the Workers’ Representatives from each Subsidiary’s Budget Committee, may exercise a workers’ veto in writing on any budget or budget item, in whole or in part.

(c) A properly exercised veto will be binding on the Board, which may not adopt, apply, or enforce the vetoed budget, budget item, or related measure.

(d) Allegations that the Benefits Director’s reasons or supporting materials are inaccurate, incomplete, or deficient will not invalidate, delay, or otherwise impair the legal force or binding effect of a veto. The veto will remain effective unless it is withdrawn in writing by the Benefits Director or set aside by a final court order.

(e) The workers’ veto will be limited to the specific budgets, budget items, or cash-flow measures submitted to the Board and will not prevent the Board from exercising powers that are not directly inconsistent with the vetoed subject matter.

Subsidiary Budget Committees and Consultation

(a) The Board will cause the Commons Corporation and each Subsidiary to maintain a standing Subsidiary Budget Committee charged with preparing and presenting budgets and cash-flow projections for that entity to the Standing Budget and Allocation Committee.

(b) Each Subsidiary Budget Committee will consist of the Subsidiary’s manager (or appointee), the Subsidiary’s Workers’ Representative, and the Subsidiary’s comptroller or comparable finance officer.

(c) Each Subsidiary Budget Committee will prepare and present annual budgets, or interim quarterly budgets when circumstances require, and any additional cash-flow projections the Standing Budget and Allocation Committee needs to make recommendations under the Article.

(d) The Workers’ Representative of each Subsidiary’s Budget Committee will consult in a timely manner with the Benefits Director, when requested, to consider whether the workers’ veto should be exercised for that Subsidiary’s budget items.

Conflicts and Amendments

(a) If any provision of this Article conflicts with the Corporation’s certificate of incorporation, bylaws, or applicable law, the provision will be interpreted and applied so as to preserve, to the maximum extent permitted, the intent of this Article and the protection of workers’ veto rights, while still complying with mandatory legal requirements.

(b) The Board may amend this Article under the Corporation’s normal governance procedures, but it may not diminish or eliminate the workers’ veto as to budgets or budget items already in existence without both an affirmative Board vote and the written consent of the Benefits Director.

Section 1. Establishment and Purpose.

(a) Establishment. A standing Committee on Permitted Uses is established as a committee of the Board of Directors.

(b) Purpose. The Committee shall support the Board’s stewardship of consolidated Surplus through disciplined, documented prioritization of Permitted Uses, including parent-funded programs for Subsidiaries and other internal allocation purposes authorized in the governing documents.

(c) No Private Return Objective. Committee activities and recommendations shall be carried out on the basis that parent-funded programs and other Permitted Uses exist to strengthen the long-term financial stability of the Commons Corporation and its Subsidiaries and are not designed to provide private returns to any manager, officer, employee, worker, or other private stakeholder.

Section 2. Definitions for This Article.

(a) Committee Member. “Committee Member” means a member of the Board of Directors who serves on the Committee pursuant to Section 9 of this Article. Only Committee Members may vote or act for the Committee.

(b) Committee Participant. “Committee Participant” means any officer, employee, worker representative, Subsidiary representative, advisor, or other person who attends a Committee meeting or provides information to the Committee in a nonvoting capacity. A Committee Participant is not a Committee Member and has no Committee decision authority.

(c) Executive Director. “Executive Director” includes any individual serving as Executive Director, Chief Executive Officer, President, or in any substantially equivalent senior executive role of the Commons Corporation.

(d) Executive Director Appointee. “Executive Director Appointee” means any director whose position on the Board of Directors results from appointment by the Executive Director under the Articles of Incorporation, bylaws, or any Board policy or resolution establishing an Executive Director appointment power.

Section 3. Authority and Relationship to Board.

(a) Advisory and Delegated Functions. The Committee shall perform advisory functions and any delegated functions authorized by Board resolution, subject to the Board’s continuing authority and applicable nonprofit corporation law.

(b) No Dilution of Board Duties. Nothing in this Article limits the Board’s authority or fiduciary duties to adopt, amend, or implement financial policies governing consolidated Surplus, Reasonable Net Returns, or allocations among Permitted Uses.

(c) Requests for Information. The Committee may request information from Subsidiary boards, officers, and Committee Participants relevant to permitted-use planning and monitoring, including information necessary to preserve clean performance signals and accountability to market discipline.

Section 4. Scope of Permitted Uses Overseen by the Committee.

(a) Parent-Funded Programs. The Committee shall oversee and recommend policies for parent-funded promotional, pricing, rebate, wage-support, and trial-support programs for Subsidiaries designed to facilitate market entry, customer acquisition, long-term customer retention, or defensive responses to competitive pressure, subject to measurement and sunset policies.

(b) Allocation Priorities and Internal Uses. The Committee shall review and recommend priorities for allocations among Permitted Uses, including wage enhancements, benefits, education and training, reserves, and other authorized internal allocation purposes, with allocations structured to preserve long-term liquidity, solvency, and resilience.

(c) Consistency with Nonprofit Constraints. The Committee shall ensure that recommendations remain consistent with the nonprofit character of the Commons Corporation and the prohibition on private residual claims, including the requirement that incentives and internal allocations not be construed as private returns.

Section 5. Exclusion From Acquisition Evaluation and Limited Conflict Review.

(a) No Acquisition Evaluation Role. The Committee shall not review, evaluate, recommend, approve, veto, delay, or otherwise participate in the selection, negotiation, diligence, valuation, structuring, or approval of any proposed acquisition, conversion, or other transaction intended to add, acquire, or reorganize a Subsidiary, except as expressly provided in this Section 5.

(b) Limited Conflict Review. If the Board, the Reinvestment and Acquisitions Committee, or any officer authorized to pursue acquisitions identifies a reasonable and specific basis to believe that a proposed acquisition would materially conflict with an existing or proposed permitted-use allocation policy, parent-funded program, or Reasonable Net Returns policy, the Committee may provide a limited written analysis addressing only the nature of the conflict, the projected effect on existing permitted-use commitments, and available mitigation options.

(c) No Substitution of Judgment. Any limited conflict review under this Section 5 shall not include recommendations regarding whether the acquisition should proceed, pricing or negotiation positions, diligence scope, target selection, or timing, all of which remain outside the Committee’s jurisdiction and within the authority of the Board and any authorized acquisition body.

(d) Timeliness. Any conflict review request shall specify the decision deadline, and the Committee shall respond within a time frame reasonably necessary to avoid impairing lawful acquisition activity and competitiveness.

Section 6. Parent-Funded Program Approval Framework.

(a) Program Charter and Sunset. For each parent-funded program category, the Committee shall recommend written criteria addressing eligibility, targeting, measurement, reporting, and sunset triggers, including time-bound design appropriate to the competitive purpose served.

(b) Measurement Standards. The Committee shall recommend and periodically review measurement standards suitable to evaluate market entry, acquisition, retention, and defensive-response outcomes, and shall require documentation sufficient to support comparability across programs and time periods.

(c) Accounting Treatment and Performance Clarity. The Committee shall recommend accounting and reporting practices that preserve clean Subsidiary performance signals by reflecting pre-parent-support net profit in Subsidiary internal metrics and by accounting for parent-funded programs at the Commons Corporation level, or in another manner determined by the Board to preserve accountability.

Section 7. Reasonable Net Returns Policy Oversight.

(a) Targeting Reasonable Net Returns. The Committee shall assist the Board in adopting and maintaining policies that target Reasonable Net Returns at the consolidated level, rather than maximal consolidation of every dollar of group profit, and in reallocating excess consolidated Surplus to strategic Permitted Uses authorized in the governing documents.

(b) Policy Content and Factors. The Committee shall recommend written methods for determining Reasonable Net Returns, which may include quantitative ranges, qualitative factors, and scenario-based analyses, and shall ensure consideration of prudent reserves, reinvestment requirements, foreseeable economic and competitive conditions, and obligations under other governing documents.

(c) Records of Criteria and Reasoning. The Committee shall require maintenance of records describing the criteria and reasoning used in determining Reasonable Net Returns for each fiscal period to support continuity of practice and transparency within the corporate record system.

Section 8. Subsidiary Profit Measurement and Reporting Standards.

(a) Pre-Allocation Net Profit Metric. The Committee shall require that each Subsidiary measure and report its pre-allocation net profit as its highest achievable net profit subject to applicable legal, contractual, and market constraints and before taking into account parent-funded programs or consolidated Surplus allocations.

(b) Consistency Across Subsidiaries. The Committee shall recommend policies to promote consistent calculation and reporting across Subsidiaries to the extent practicable, while allowing justified differences based on industry practice or regulatory requirements.

(c) Preservation of Accountability. The Committee shall ensure that parent-funded programs are designed and administered so that they do not obscure or dilute Subsidiary management responsibility for underlying economic performance and market discipline.

Section 9. Committee Composition, Automatic Membership, and Voting.

(a) Committee Automatically Constituted. The Committee is hereby constituted as a standing committee of the Board of Directors. The following directors, by virtue of holding the indicated Board seats, shall be the Committee Members and shall serve on the Committee automatically and without further Board action: (1) Benefits Director; (2) Subsidiary Director; (3) Independent Director One; (4) Independent Director Two; and (5) Retiree Director.

(b) Chair. The Benefits Director shall serve as chair of the Committee.

(c) Ineligibility of Executive Director and Executive Director Appointees. Notwithstanding subsection (a), the Executive Director and any Executive Director Appointee are ineligible to serve as a Committee Member and shall have no vote on any matter before the Committee. If any person described in the preceding sentence holds one of the seats listed in subsection (a), that person shall be deemed disqualified from Committee service.

(d) Vacancies, Disqualification, and Continued Operation. If any seat listed in subsection (a) is vacant, or if the occupant is disqualified under subsection (c), or if the occupant is unable or unwilling to serve on the Committee, the Committee shall continue to operate with the remaining eligible Committee Members. No vacancy or disqualification shall require, authorize, or imply appointment of a substitute Committee Member for that seat, and the Board shall not fill any such vacancy on the Committee by designating another director to serve in place of the absent or disqualified Committee Member.

(e) Quorum, Voting, and Tie Votes. A majority of the then-serving eligible Committee Members shall constitute a quorum for the transaction of Committee business, provided that the quorum shall not be fewer than three Committee Members. The affirmative vote of a majority of the Committee Members present at a meeting at which a quorum is present shall be required for Committee action. If a vote results in a tie, the motion shall fail, the Committee shall be deemed to have made no recommendation, and the matter may be referred to the Board of Directors for determination together with a written report describing the competing views and the reasons for each position.

(f) No Voting by Committee Participants. No Committee Participant may vote.

Section 10. Committee Participants and Documentation Support.

(a) Regular Nonvoting Participants. The Board may designate one or more Committee Participants to attend Committee meetings in a nonvoting capacity to provide data and operational input, which may include the Treasurer, the chief financial officer or controller, the benefits or workforce systems lead, an officer responsible for Subsidiary performance oversight, the Ombudsman or a delegate, and rotating representatives from Subsidiary management and worker governance for factual presentations. Nonvoting participation shall not confer Committee membership or decision authority.

(b) Documentation and Record Support. Committee Participants shall provide, or cause to be provided, the documentation, analyses, summaries, and supporting records reasonably requested by the Committee to allow Committee Members to make informed decisions and recommendations, including financial summaries, program descriptions, performance metrics, risk analyses, and proposed sunset or continuation rationales.

(c) Duty to Cooperate. Officers and employees of the Commons Corporation shall cooperate with the Committee and Committee Participants in the preparation and production of documentation reasonably necessary for the Committee’s work, subject to lawful confidentiality constraints and privilege protections.

(d) No Delegation of Committee Judgment. Documentation and analyses supplied by Committee Participants are informational and shall not be construed as substituting for the Committee’s judgment, nor as conferring decision authority on any Committee Participant.

Section 11. Conflicts and Recusal.

(a) Conflicts. A Committee Member shall recuse from deliberation and voting on any matter in which the Committee Member has a material personal interest or a material relationship with a program beneficiary.

(b) Employment and Compensation Conflicts. Any Committee Participant, and any Committee Member, whose compensation is materially tied to a Subsidiary’s short-term financial performance shall not participate in Committee deliberations on parent-funded programs materially benefitting that Subsidiary except to provide factual information requested by the Committee.

(c) Record of Recusals. The Committee shall maintain in the corporate records a written record of recusals and the general basis for each recusal.

Section 12. Direct Reporting to Board of Directors.

(a) Direct Reporting Line. The Committee reports directly to the Board of Directors and shall not report through the Executive Director or any other officer.

(b) Committee Reports. The Committee shall deliver its reports, recommendations, and any dissenting views directly to the Board of Directors in written form or by presentation at a Board meeting.

(c) Agenda Access. The chair of the Committee is authorized to place Committee matters on the Board agenda and to request Board action on Committee recommendations. No officer shall have authority to veto, delay, or condition the Committee’s communications to the Board.

(d) Information Requests. The Committee may request information, documentation, and analyses from officers, employees, Subsidiary representatives, and advisors as reasonably necessary for Committee work. Such requests shall be satisfied promptly, subject to lawful confidentiality constraints and privilege protections.

(e) Executive Sessions. The Committee may meet in executive session without the Executive Director or other management present and may report the results of any executive session directly to the Board.

Section 13. Reporting to the Board.

(a) Regular Reports. The Committee shall report to the Board on permitted-use allocations, program performance, sunset decisions, and Reasonable Net Returns determinations at intervals established by the Board, and shall present recommendations for modifications to policies when supported by documented results and risk considerations.

(b) Escalation of Material Risks. The Committee shall promptly elevate to the Board any material risk indicators suggesting that permitted-use allocations or program structures could reasonably be expected to undermine long-term liquidity, solvency, or continued ability to operate in competitive markets.

Section 14. Definitions and Construction.

(a) Surplus and Reasonable Net Returns. For purposes of this Article, “Surplus” and “Reasonable Net Returns” shall have the meanings assigned in the governing documents defining consolidated Surplus and the Board-determined level or range of consolidated net return sufficient for prudent reserves, viability, resilience, and planned internal allocations without seeking maximum profit for private distribution.

(b) Subsidiary. For purposes of this Article, “Subsidiary” means a legal entity, whether organized as a corporation, limited liability company, partnership, or other form recognized by applicable law, that: (1) is directly owned by the Commons Corporation in the amount of one hundred percent (100%) of the equity or ownership interests; (2) conducts market-facing operations; and (3) has been affirmatively designated as a Subsidiary by resolution of the Board of Directors in accordance with the Articles of Incorporation.

(c) Construction. This Article shall be construed to authorize disciplined internal allocations and parent-funded programs solely for permitted internal purposes and to prohibit any construction that would treat such programs as private returns or private residual claims.

Comments

Section 1. Establishment and Purpose.

(a) Establishment. A Reinvestment and Acquisitions Committee is hereby constituted as a standing committee of the Board of Directors.

(b) Purpose. The Committee shall oversee and recommend policies, priorities, and decisions relating to deployment of the Reinvestment Fund and related reinvestment resources, including acquisitions, integration investments, modernization initiatives, and other reinvestment actions authorized by the Articles of Incorporation, with the objective of sustaining and strengthening long-term competitiveness of the Commons Corporation and its Subsidiaries on a consolidated basis.

(c) Committee Role. The Committee’s role is to impose disciplined capital allocation and decision-gate structure, to require complete decision packages, and to provide direct recommendations to the Board, while preserving clear accountability between management execution and Board governance.

(d) Exclusive Article. This Article is the sole charter article establishing and governing the Reinvestment and Acquisitions Committee and the only charter-level governance framework for reinvestment-and-acquisitions pipeline work. No separate charter article shall establish any “Reinvestment and Acquisitions Working Group” or other duplicative reinvestment-and-acquisitions body.

Section 2. Definitions for This Article.

(a) Committee Member. “Committee Member” means a member of the Board of Directors who serves on the Committee pursuant to Section 3 of this Article. Only Committee Members may vote or act for the Committee.

(b) Committee Participant. “Committee Participant” means any officer, employee, worker representative, Subsidiary representative, advisor, or other person who attends a Committee meeting or provides information or support to the Committee in a nonvoting capacity. A Committee Participant is not a Committee Member and has no Committee decision authority.

(c) Executive Director. “Executive Director” includes any individual serving as Executive Director, Chief Executive Officer, President, or in any substantially equivalent senior executive role of the Commons Corporation.

(d) Executive Director Appointee. “Executive Director Appointee” means any director whose position on the Board of Directors results from appointment by the Executive Director under the Articles of Incorporation, bylaws, or any Board policy or resolution establishing an Executive Director appointment power.

(e) Letter of Intent. “Letter of Intent” includes any letter of intent, term sheet, memorandum of understanding, indication of interest, or similar preliminary document relating to an acquisition, conversion, or other transaction, regardless of title.

Section 3. Committee Composition, Automatic Membership, Chair, and Voting.

(a) Committee Automatically Constituted. The Committee is hereby constituted as a standing committee of the Board of Directors. The following directors, by virtue of holding the indicated Board seats, shall be the Committee Members and shall serve on the Committee automatically and without further Board action: (1) Subsidiary Director; (2) Reinvestment and Acquisitions Director; (3) Independent Director One; (4) Independent Director Two; and (5) Retiree Director.

(b) Chair. The Reinvestment and Acquisitions Director shall serve as chair of the Committee and shall lead and coordinate the Committee’s work, including agenda-setting (subject to Committee direction), pipeline oversight, and reporting to the Board of Directors.

(c) Ineligibility of Executive Director and Executive Director Appointees. Notwithstanding subsection (a), the Executive Director and any Executive Director Appointee are ineligible to serve as a Committee Member and shall have no vote on any matter before the Committee. If any person described in the preceding sentence holds one of the seats listed in subsection (a), that person shall be deemed disqualified from Committee service.

(d) Vacancies, Disqualification, and Continued Operation. If any seat listed in subsection (a) is vacant, or if the occupant is disqualified under subsection (c), or if the occupant is unable or unwilling to serve on the Committee, the Committee shall continue to operate with the remaining eligible Committee Members. No vacancy or disqualification shall require, authorize, or imply appointment of a substitute Committee Member for that seat, and the Board shall not fill any such vacancy on the Committee by designating another director to serve in place of the absent or disqualified Committee Member.

(e) Quorum, Voting, and Tie Votes. A majority of the then-serving eligible Committee Members shall constitute a quorum for the transaction of Committee business, provided that the quorum shall not be fewer than three Committee Members. The affirmative vote of a majority of the Committee Members present at a meeting at which a quorum is present shall be required for Committee action. If a vote results in a tie, the motion shall fail, the Committee shall be deemed to have made no recommendation, and the matter shall be referred to the Board of Directors for determination together with a written report describing the competing views and the reasons for each position.

(f) No Voting by Committee Participants. No Committee Participant may vote.

Section 4. Direct Reporting to Board of Directors.

(a) Direct Reporting Line. The Committee reports directly to the Board of Directors and shall not report through the Executive Director or any other officer.

(b) Committee Reports. The Committee shall deliver its reports, recommendations, and any dissenting views directly to the Board of Directors in written form or by presentation at a Board meeting.

(c) Agenda Access. The chair of the Committee is authorized to place Committee matters on the Board agenda and to request Board action on Committee recommendations. No officer shall have authority to veto, delay, or condition the Committee’s communications to the Board.

(d) Information Requests. The Committee may request information, documentation, and analyses from officers, employees, Subsidiary representatives, and advisors as reasonably necessary for Committee work. Such requests shall be satisfied promptly, subject to lawful confidentiality constraints and privilege protections.

(e) Executive Sessions. The Committee may meet in executive session without the Executive Director or other management present and may report the results of any executive session directly to the Board.

Section 5. Scope of Authority and Decision Gates.

(a) Recommendations and Delegations. The Committee shall recommend to the Board: (1) reinvestment priorities and policies; (2) material reinvestment deployments; and (3) acquisitions, conversions, integrations, and reorganizations, except to the extent the Board delegates limited approval authority to the Committee by written resolution.

(b) Decision Gates. The Committee shall define and apply decision gates for acquisitions and reinvestment initiatives, which may include initial screening, authorization of diligence spending above set limits, authorization to negotiate preliminary terms, authorization to execute a Letter of Intent that satisfies Section 11 of this Article, approval to sign definitive agreements, and approval to close, as assigned by the Board.

(c) Documentation as a Condition of Action. The Committee shall not recommend, and shall not approve under any delegated authority, any material acquisition or reinvestment deployment unless the standardized decision package required by Section 12 has been provided in materially complete form.

Section 6. Reinvestment Oversight and Alternatives Discipline.

(a) Reinvestment Fund Coverage. The Committee shall oversee proposed deployments of the Reinvestment Fund for acquisitions, integration costs, organic growth, modernization, technology adoption, capacity expansion, turnaround capital for Subsidiaries, and other reinvestment initiatives authorized by the Articles of Incorporation.

(b) Comparative Evaluation. For each material proposed acquisition, the Committee shall require an alternatives analysis that compares the acquisition to plausible reinvestment alternatives, including internal reinvestment in one or more Subsidiaries, and shall require identification of the principal reasons supporting the acquisition relative to those alternatives.

(c) No Presumption Against Internal Reinvestment. Nothing in this Article creates a presumption that acquisitions are preferred over internal reinvestment, or that internal reinvestment is preferred over acquisitions. The Committee shall apply the decision-package discipline required by this Article and recommend the action that best supports long-term consolidated competitiveness and viability.

Section 7. Cannibalization and Competitive Disruption Policy.

(a) Cannibalization Not Disqualifying. A proposed acquisition or reinvestment initiative shall not be disfavored or rejected solely because it may reduce the revenues, margins, market share, or growth prospects of one or more existing Subsidiaries. The Commons Corporation may approve acquisitions and reinvestment initiatives that materially disrupt, displace, or cannibalize existing Subsidiary products, services, or business lines when the Board determines in good faith that the action strengthens long-term consolidated competitiveness, viability, or strategic positioning, including by preempting competitor displacement.

(b) Required Analysis. If material cannibalization is reasonably expected, the standardized decision package shall describe: (1) expected cannibalization effects; (2) expected consolidated benefits; (3) principal risks of inaction, including displacement by competitors; and (4) a transition plan addressing integration, operational changes, and workforce impacts to the extent practicable.

(c) No Duty to Preserve Legacy Lines. Nothing in this Article shall be construed to impose any duty to preserve legacy products, services, or business lines of any Subsidiary when the Board determines that competitive conditions favor transition, modernization, replacement, or consolidation.

Section 8. Coordination With Permitted Uses Committee.

(a) Referral for Limited Conflict Review. If the Committee identifies a reasonable and specific basis to believe that a proposed acquisition or reinvestment deployment materially conflicts with an existing or proposed permitted-use allocation policy, parent-funded program, or Reasonable Net Returns policy, the Committee may request a limited conflict review from the Permitted Uses Committee consistent with the conflict review limitations contained in that Article.

(b) No Delegation of Acquisition Merits. Any conflict review requested under this Section 8 is limited to identifying and mitigating conflicts with permitted-use policies and is not a delegation of acquisition evaluation on the merits.

Section 9. Committee Participants, Pipeline Work, and Deal Management.

(a) Regular Nonvoting Participants. The Committee may receive presentations and documentation from Committee Participants, including the Treasurer, finance staff, counsel, Subsidiary personnel, and other advisors, provided that such participation is nonvoting.

(b) Pipeline Sourcing and Screening. Under the direction of the Committee and subject to budgets and limits approved by the Board, Committee Participants may source, receive, and screen potential acquisitions, conversions, and other transactions and may develop reinvestment initiatives intended to strengthen long-term consolidated competitiveness.

(c) Diligence and Development. Under the direction of the Committee and subject to budgets and limits approved by the Board, Committee Participants may coordinate business, financial, operational, and legal diligence and may develop proposed structures and integration approaches consistent with the Articles of Incorporation and structural constraints.

(d) Weekly Pipeline Meetings and Deal Log. The chair may convene regular pipeline meetings, ordinarily weekly, with appropriate Committee Participants to review pipeline status, diligence progress, and next steps. The Committee shall cause to be maintained a confidential deal log reflecting, at a minimum, identity of opportunities, stage status, key dates, anticipated decision gates, projected costs of diligence, and assigned responsibilities.

(e) Preparation of Decision Packages. Committee Participants shall prepare and submit decision packages required by Section 12 for Committee and Board review, together with such supplemental schedules, analyses, and workpapers as the Committee may reasonably request.

Section 10. Limits on Authority and Permitted Preliminary Actions.

(a) No Approval Power Except as Delegated. Except to the extent of a written Board delegation under Section 5(a), the Committee shall not approve, enter into, or consummate any acquisition or material reinvestment deployment.

(b) Permitted Preliminary Actions. Subject to budget and delegation limits established by the Board, the Committee (acting through Committee Members, and supported by Committee Participants) may authorize customary preliminary actions, including execution of customary confidentiality agreements, preliminary discussions, requests for information for diligence, and retention of advisors within Board-approved limits.

(c) No Designation as Subsidiary by Default. The Committee shall not treat any acquired or newly formed entity as a Subsidiary unless and until it has been affirmatively designated as a Subsidiary by Board resolution in accordance with the Articles of Incorporation.

Section 11. Letters of Intent and Other Preliminary Transaction Documents.

(a) Nonbinding Requirement for Committee Authorization. The Committee shall have no authority, and shall not approve under any Board delegation, the execution of any Letter of Intent unless the Letter of Intent states clearly and conspicuously that it is nonbinding and that neither party has any obligation to consummate the transaction unless and until definitive agreements are executed and delivered by authorized parties.

(b) Conspicuous Legend. Any Letter of Intent presented for execution pursuant to subsection (a) shall include a prominent nonbinding legend on its first page.

(c) Binding Commitments and Material Exclusivity. No binding commitment, and no Letter of Intent (or similar document) involving material exclusivity, material expenditures, material liabilities, or closing obligations, shall be executed unless expressly authorized by the Board of Directors by written resolution.

(d) No Circumvention. The Committee shall not authorize any document or course of conduct intended to circumvent the requirements of this Section 11 by recharacterizing a binding commitment as “customary,” “preliminary,” or “administrative.”

Section 12. Standardized Decision Package.

(a) Package Requirement. For any proposed acquisition or material reinvestment initiative presented for Board or Committee action, a written decision package reasonably sufficient to allow informed decision-making shall be provided.

(b) Minimum Contents. The decision package shall, at a minimum, address: (1) transaction type or initiative description and proposed structure; (2) strategic rationale and expected competitive effects; (3) valuation approach and key financial assumptions for acquisitions; (4) sources and uses of funds, including expected impacts on the Reinvestment Fund and liquidity; (5) diligence findings and material risks with mitigations; (6) proposed post-closing governance and confirmation of one hundred percent (100%) direct ownership by the Commons Corporation if the entity is to be designated as a Subsidiary; (7) integration plan and expected operational impacts on existing Subsidiaries; (8) material legal and regulatory considerations; (9) alternatives analysis comparing plausible reinvestment alternatives; and (10) any anticipated conflicts with permitted-use policies or parent-funded program commitments.

(c) Cannibalization Analysis. If material cannibalization of an existing Subsidiary is reasonably expected, the decision package shall include the analysis described in Section 7 of this Article.

Section 13. Submission of Materials, Reporting, and No Management Gatekeeping.

(a) Submission to Committee and Board. For each matter requiring Board or Committee action, the decision package shall be submitted to the Committee and to the Board (or to the Board’s designated secretary for distribution to directors). Delivery shall not be conditioned on permission by the Executive Director.

(b) Right to Supplement. The Executive Director may submit written comments or supplemental materials, but such comments shall not substitute for, delay, or prevent delivery of the decision package to the Committee and the Board.

(c) Regular Reporting. The Committee shall provide regular reports to the Board at intervals established by the Board, summarizing pipeline activity, diligence status, expected decision gates, and material risks.

(d) Escalation of Material Issues. The Committee shall promptly elevate to the Board any material issue that could reasonably affect feasibility, valuation, timing, regulatory posture, or consistency with the Articles of Incorporation and structural constraints.

(e) No Management Gatekeeping. No officer shall have authority to veto, delay, or condition delivery of documentation to the Committee or the Board when requested by the Committee pursuant to this Article, subject to lawful confidentiality constraints and privilege protections.

Section 14. Conflicts and Recusal.

(a) Conflicts. A Committee Member shall recuse from deliberation and voting on any matter in which the Committee Member has a material personal interest or a material relationship with a counterparty or beneficiary.

(b) Record of Recusals. The Committee shall maintain in the corporate records a written record of recusals and the general basis for each recusal.

Section 15. Records, Confidentiality, and Privilege.

(a) Records. The Committee shall ensure that decision packages, recommendations, and material reports are maintained in the corporate records, subject to confidentiality and privilege protections.

(b) Confidentiality. Pipeline materials, diligence materials, deal logs, and decision packages shall be treated as confidential and disclosed only to persons with a legitimate need to know, subject to applicable law.

(c) Privilege. The Committee and Committee Participants shall cooperate with counsel to preserve attorney-client privilege and work-product protections where applicable.

Comments

Section 1. Establishment and Status.

(a) Office Created. The Corporation shall have an officer titled Subsidiary Performance Officer and Liaison (the “SPOL”).

(b) Officer of the Corporation. The SPOL is an officer of the Corporation and shall serve only the Board in the limited capacity set forth in this Article.

(c) No Subsidiary Management Role. The SPOL is not a manager of any Subsidiary and shall not be deemed to have managerial authority over any Subsidiary by reason of this office.

(d) No Fund Administration Role. The SPOL is not a Fund Administrator of any Fund and shall not be deemed to have authority to administer, approve, or control any Fund by reason of this office.

Section 2. Exclusive Reporting Line and Independence.

(a) Exclusive Reporting. The SPOL shall report solely and directly to the Board and, if established by Board resolution, to a Board committee authorized to receive performance reports (a “Subsidiary Liaison Committee”).

(b) Independence from Executive Director. The Executive Director shall have no authority to direct, supervise, evaluate, discipline, suspend, or remove the SPOL, and shall have no authority to control the SPOL’s communications with the Board or any Subsidiary Liaison Committee.

(c) Direct Access. The SPOL may communicate directly with the Board (and any Subsidiary Liaison Committee) and may request executive-session meetings without the Executive Director present.

Section 3. Appointment, Removal, and Compensation.

(a) Appointment. The SPOL shall be appointed by the Board by Supermajority Vote.

(b) Removal and Replacement. The SPOL may be removed or replaced only by the Board by Supermajority Vote. No other person or body may remove or replace the SPOL.

(c) Compensation. The SPOL’s compensation, incentives, and benefits shall be set solely by the Board (or a Board committee authorized by Board resolution) and shall not be set or administered by the Executive Director.

Section 4. Limited Mandate and Duties.

(a) Subsidiary Performance Measurement and Reporting. The SPOL shall collect, compile, and present to the Board (and any Subsidiary Liaison Committee) periodic reports regarding Subsidiary performance, including financial and operational metrics, comparative benchmarking, and trend analyses, in a form and cadence approved by the Board.

(b) Liaison Function. The SPOL shall serve as a liaison between (1) the Board and the Corporation, on the one hand, and (2) the Subsidiaries and their boards and management, on the other hand, for the limited purposes of:

(1) Facilitating Accurate Information Flow. facilitating accurate information flow;

(2) Clarifying Board-Level Requests for Information. clarifying Board-level requests for information; and

(3) Communicating Subsidiary Perspectives to the Board. communicating Subsidiary perspectives to the Board.

(c) Facilitation. At the request of the Board or any Subsidiary board, the SPOL may facilitate meetings and exchanges of information among the Corporation and Subsidiaries regarding reporting protocols, compliance updates, and operational learnings; provided, however, that the SPOL shall not direct Subsidiary operations.

(d) Fund Performance Monitoring and Reporting. The SPOL shall collect, compile, and present to the Board (and any Subsidiary Liaison Committee) periodic reports regarding the performance of each Fund, including the Reinvestment Fund, the Social Benefits Fund, the Education Fund, and the Reserve Fund. Such reports may include, as applicable to each Fund:

(1) Financial Condition. balances, inflows, outflows, and material commitments and trends;

(2) Policy Adherence and Controls. adherence to Board-adopted policies, delegation limits, and internal-control requirements applicable to the Fund;

(3) Operational Execution. timeliness, completeness, and administrative integrity of disbursements and other Fund activity, as measured against standards approved by the Board;

(4) Sustainability Indicators. projected needs and sustainability indicators, including scenario analyses if the Board so requires; and

(5) Exceptions and Escalations. identification of material variances, anomalies, control failures, suspected misuse, or material noncompliance, together with prompt escalation to the Board.

Section 5. Express Limitations.

(a) No Authority to Manage. The SPOL shall have no authority to hire, fire, discipline, set compensation, assign work, set schedules, control operations, approve expenditures, or otherwise manage the personnel, property, business, or affairs of any Subsidiary.

(b) No Supervisory Authority. The SPOL shall not supervise any Subsidiary officer, manager, or employee.

(c) No Authority to Bind. The SPOL shall have no authority to bind the Corporation or any Subsidiary by contract, commitment, policy, operational directive, or public statement, except to the extent expressly authorized by a written Board resolution that specifies the purpose and scope of such authority.

(d) No Fund Spending, Allocation, Eligibility, or Benefit-Design Authority. The SPOL shall have no authority to:

(1) Disbursement Control. approve, deny, delay, or direct any disbursement from any Fund;

(2) Allocations and Transfers. allocate amounts to any Fund, reallocate amounts among Funds, authorize transfers, or otherwise control Fund allocations or Fund balances;

(3) Eligibility and Benefit Levels. set, amend, interpret, or enforce eligibility criteria or benefit levels for the Social Benefits Fund or the Education Fund, except to the limited extent necessary to test administrative compliance for reporting purposes;

(4) Vendors and Administrators. approve, negotiate, or select providers, administrators, investment managers, custodians, or vendors for any Fund; or

(5) Control of Fund Assets. control, redirect, encumber, or otherwise alienate assets of any Fund.

(e) No Diminution of Subsidiary Board Authority. Nothing in this Article shall be construed to diminish the legal authority of any Subsidiary board over that Subsidiary.

Section 6. Information Access for Limited Purposes.

(a) Reporting Protocols. The Board may require Subsidiaries and Fund Administrators to provide the SPOL such reports, metrics, and supporting materials as are reasonably necessary to perform Section 4, through reporting protocols approved by the Board and implemented through lawful governance instruments applicable to each Subsidiary and through policies applicable to each Fund.

(b) Access Boundaries. The SPOL’s access shall be limited to information reasonably related to performance measurement and liaison duties, subject to confidentiality, privilege, and applicable law, and shall not be used to direct operations or to administer or control any Fund.

(c) Escalation. The SPOL shall promptly inform the Board of any material inability to obtain reporting information required by Board-approved protocols.

Section 7. No Individual-Director Direction; Void Acts.

(a) Direction Only by Board or Authorized Committee. The SPOL shall take direction only from (1) the Board acting by duly adopted resolution or (2) a Board committee expressly authorized by Board resolution to receive and oversee SPOL reports, acting within the scope of its delegated authority.

(b) Prohibition on Individual Direction. No individual director, including any Subsidiary-Elected Director, may direct, command, or require the SPOL to take or refrain from taking any action.

(c) Void and of No Effect. Any purported directive or instruction by an individual director to control or constrain the SPOL, other than through action authorized under subsection (a), shall be void and of no effect (and not merely voidable) unless ratified by the Board or an authorized committee acting within its authority.

Section 8. Definitions.

(a) Subsidiary. “Subsidiary” means a legal entity that (i) the Corporation directly owns one hundred percent (100%) of (whether by shares, membership interests, partnership interests, or other ownership interests recognized by applicable law), (ii) conducts market-facing operations, and (iii) has been expressly designated as a “Subsidiary” by resolution of the Board. For clarity, an entity (or other business interest) shall not be deemed a Subsidiary unless and until such Board designation occurs, even if the Corporation directly owns one hundred percent (100%) of it.

(b) Fund. “Fund” means each of the following funds established and maintained by the Corporation: the Reinvestment Fund, the Social Benefits Fund, the Education Fund, and the Reserve Fund.

(c) Fund Administrator. “Fund Administrator” means the person or persons designated by the Board to administer a Fund under the Article titled Establishment of Funds (or any successor Article), subject to the limitations and oversight set forth in the Articles and Board policies.

(d) Supermajority Vote. “Supermajority Vote” means the affirmative vote of at least [__]% of the directors then in office.

Comments

Overview and Purpose of the Office

This article creates the office of “Subsidiary Performance Officer and Liaison” (SPOL) as an officer of the Corporation whose role is to serve the Board in a limited, Board-defined capacity, without becoming part of Subsidiary management.

Reporting Line and Structural Independence

The SPOL reports solely and directly to the Board and, if created by Board resolution, to a Board committee authorized to receive Subsidiary performance reports. The Executive Director is expressly denied authority to supervise, evaluate, discipline, suspend, remove, or otherwise control the SPOL or the SPOL’s communications with the Board or any authorized committee. The SPOL may communicate directly with the Board and may request executive-session meetings without the Executive Director present.

Appointment, Removal, and Compensation Controls

Appointment of the SPOL requires a Supermajority Vote of the Board. Removal or replacement likewise requires a Supermajority Vote, and no other person or body may remove or replace the SPOL. The Board (or an authorized Board committee) sets the SPOL’s compensation, incentives, and benefits, and the Executive Director does not set or administer them.

Limited Mandate and Core Duties

The SPOL’s mandate is confined to performance measurement and reporting and a liaison function. The SPOL collects, compiles, and presents periodic reports regarding Subsidiary performance, including financial and operational metrics, comparative benchmarking, and trend analyses, in the form and cadence approved by the Board. As liaison, the SPOL facilitates accurate information flow, clarifies Board-level information requests, and communicates Subsidiary perspectives to the Board. The SPOL may facilitate meetings and information exchanges regarding reporting protocols, compliance updates, and operational learnings, but may not direct Subsidiary operations.

Express Limitations on Authority and Noninterference With Subsidiary Boards

The article is drafted to prevent accidental creation of managerial or supervisory authority. The SPOL has no authority to manage Subsidiary personnel or operations, including hiring, firing, discipline, compensation-setting, work assignment, scheduling, operational control, expenditure approval, or similar managerial acts. The SPOL may not supervise Subsidiary officers, managers, or employees. The SPOL also may not bind the Corporation or any Subsidiary by contract, commitment, policy, operational directive, or public statement, unless expressly authorized by a written Board resolution specifying scope and purpose. Nothing in the article diminishes the legal authority of any Subsidiary board over that Subsidiary.

Information Access and Escalation Mechanism

The Board may require Subsidiaries to provide the SPOL reports, metrics, and supporting materials reasonably necessary to perform the reporting function, through Board-approved reporting protocols implemented through lawful governance instruments applicable to each Subsidiary. The SPOL’s access is limited to information reasonably related to performance measurement and liaison duties, subject to confidentiality, privilege, and applicable law, and may not be used to direct operations. If the SPOL cannot obtain information required by Board-approved protocols, the SPOL must promptly inform the Board.

Governance Discipline and Consequences for Improper Direction

The SPOL may take direction only from the Board acting by duly adopted resolution or from an expressly authorized Board committee acting within delegated authority. Individual directors, including any Subsidiary-Elected Director, are prohibited from directing the SPOL. Any attempted directive by an individual director outside the authorized channels is void and of no effect, not merely voidable, unless ratified by the Board or an authorized committee acting within its authority.

Key Definitions Used to Limit Scope

“Subsidiary” is defined narrowly to mean a legal entity that the Corporation directly owns 100 percent of (including by shares, membership interests, partnership interests, or other ownership interests recognized by applicable law), that conducts market-facing operations, and that has been expressly designated a “Subsidiary” by Board resolution; full ownership alone does not make an entity a Subsidiary absent Board designation. “Supermajority Vote” is defined as the affirmative vote of at least a stated percentage of the directors then in office.

Section 1. Purpose and Scope.

(a) Purpose of this Article. This Article establishes the principal structures and rules for polycentric governance of the Commons Corporation and its Subsidiaries. It organizes decision-making, monitoring, and dispute resolution in nested layers and multiple centers rather than a single centralized authority.

(b) Scope of Governance. This Article governs, without limitation, (1) the relationship between the Commons Corporation and its Subsidiaries, (2) the certification and use of operating reserves, (3) the stewardship of Consolidated Surplus, and (4) the allocation and use of the Four Funds.

(c) Coordination with Related Articles. This Article is intended to operate in coordination with the Article establishing the Standing Budget and Allocation Committee, the Article establishing the Office of the Ombudsman, the Article establishing the Worker Veto over Alienation, and the Article establishing the purposes and baseline allocation rules for the Four Funds. To the extent feasible, these Articles shall be interpreted as a coherent polycentric system.

Section 2. Definitions.

(a) Subsidiary. “Subsidiary” has the meaning stated in the Article titled Commons Capitalism Entity Structure and Subsidiaries, including the requirements of one hundred percent (100%) direct ownership, market-facing operations, and affirmative designation by resolution of the Board of Directors. Entities that are controlled but not wholly owned by the Commons Corporation are not Subsidiaries for any purpose under these Articles. Entities that are wholly owned but not designated as Subsidiaries by Board resolution are not Subsidiaries for any purpose under these Articles.

(b) Net Profits. “Net Profits” means the net income of a Subsidiary determined in accordance with generally accepted accounting principles or other accounting standard adopted by the Commons Corporation and applicable law, after provision for taxes to the extent not already reflected in net income, and after reduction for the amount of operating reserves that are required and certified to be retained at that Subsidiary under this Article and any companion Articles addressing reserves.

(c) Consolidated Surplus. “Consolidated Surplus” means aggregate Net Profits retained at the Commons Corporation level after (1) satisfaction of third-party obligations and statutory liabilities and (2) certified retention of operating reserves at each Subsidiary.

(d) Four Funds. The “Four Funds” are the Reserve Fund, the Education Fund, the Social Benefits Fund, and the Reinvestment Fund established in the Article on Establishment of Funds. Each Fund’s purpose is stated in that Article and in any companion Articles on funds and allocations.

(e) Governance Centers. For purposes of this Article, “Governance Centers” include the Board of Directors, Subsidiary boards and managers, the Standing Budget and Allocation Committee, designated fund directors or offices, Worker Committees, and the Office of the Ombudsman, each acting within the scope of its authority in these Articles.

(f) Worker Committees. “Worker Committees” means the Corporation Worker Committee and the Subsidiary Worker Committees established under the Article on Worker Veto over Alienation and any related governing instruments.

(g) Baseline Allocation Rules. “Baseline Allocation Rules” means the default allocation rules for Consolidated Surplus among the Four Funds, including any fixed percentages, priority ordering, or thresholds established in these Articles.

Section 3. Boundaries and Demarcation.

(a) Membership and Eligibility. The Corporation shall adopt and maintain clear rules that identify who is entitled to (1) access benefits funded by the Commons Corporation and its Subsidiaries, (2) participate in governance processes, and (3) receive allocations or support from the Four Funds. These boundary rules shall be documented in Subsidiary charters or bylaws and in a consolidated register maintained by the Corporation.

(b) Resource and Benefit Demarcation. Assets, accounts, streams of revenue, workforce entitlements, and fund incomes shall be segregated and recorded so that (1) allocations are traceable to defined internal beneficiaries and Subsidiaries and (2) resources held in common at the consolidated level are distinguishable from operating assets and reserves of each Subsidiary.

Section 7. Graduated Sanctions and Corrective Measures.

(a) Graduated Enforcement. The Corporation shall establish graduated, proportionate sanctions for noncompliance with reserve, reporting, and fund-governance rules that aim to restore compliance and preserve participation. Sanctions may escalate from corrective guidance and warnings to temporary restrictions on distributions or access to particular fund support, and, in the final instance, remedial financial adjustments enforced at consolidation.

(b) Notice and Opportunity to Be Heard. Before imposing material sanctions, the Corporation shall provide notice and an opportunity for the affected Subsidiary or internal body to be heard, except where emergency action is required to prevent substantial harm to the Corporation, a Subsidiary, or their workers.

(c) Corrective Incentives. Sanctions shall be designed to promote repair of institutional capacity rather than immediate exclusion. Remedies may include mandated technical assistance, conditional access to Education Fund support to improve governance or accounting capacity, or temporarily reallocated Reinvestment Fund support for operational stabilization, where consistent with fund purposes.

(d) Coordination With Worker Veto and Ombudsman. Where sanctions or corrective measures materially affect personnel, property, or core functions at a Subsidiary, such actions shall be coordinated with any applicable Worker Veto rights and may be subject to review or inquiry by the Ombudsman as provided in the relevant Articles.

Section 8. Nested Governance of Consolidated Surplus and the Four Funds.

(a) Sequential Priority of Uses. Subject to applicable law and creditor protections, Subsidiary net income shall be applied in the following order:

(1) satisfaction of third-party obligations and statutory liabilities;

(2) retention of certified Subsidiary operating reserves;

(3) transfer of certified surplus to the Commons Corporation as Consolidated Surplus; and

(4) allocation of Consolidated Surplus among the Four Funds consistent with Baseline Allocation Rules as established in the Article on Establishment of Funds and any variance adopted under Section 9 of this Article.

(b) Fund Purposes. The Four Funds shall be used for the following general purposes, subject to more detailed provisions in the Article on Establishment of Funds and any companion Articles on funds and allocations:

(1) Reinvestment Fund. Supports the Corporation’s growth, expansion, and strategic objectives, including reinvestment in existing operations and the acquisition and conversion of new Subsidiaries, businesses, assets, or technologies.

(2) Social Benefits Fund. Funds premium wages, enhanced benefits, and comparable worker-facing commitments consistent with controlling directives of the Corporation.

(3) Education Fund. Supports training, governance education, and institutional capacity building to strengthen local rulemaking, monitoring, and participation.

(4) Reserve Fund. Maintains consolidated liquidity beyond Subsidiary reserves and may provide conditional support to Subsidiaries in order to preserve system-wide stability and the functionality of nested governance.

(c) Governance Centers for Funds. Governance over Consolidated Surplus and the Four Funds shall be exercised in nested layers as follows:

(1) Board of Directors. The Board holds stewardship authority over Consolidated Surplus, adopts Baseline Allocation Rules, approves budgets and allocations, and may authorize temporary variance under Section 9.

(2) Standing Budget and Allocation Committee. The Standing Budget and Allocation Committee reviews, formulates, and recommends budgets, cash-flow plans, and allocations of Net Profits and Consolidated Surplus among the Four Funds, including recommendations regarding any deviations from Baseline Allocation Rules, all as provided in the Article establishing that Committee.

(3) Fund directors or offices. Each Fund may be administered by a designated director or office with day-to-day authority to implement Board policies and Committee recommendations for that Fund, within the limits of fund purposes and adopted policies.

(4) Subsidiary boards and representatives. Subsidiary boards, managers, and designated representatives shall participate in deliberations affecting notional subaccounts or allocations associated with that Subsidiary, particularly with respect to Social Benefits and Education Fund support that materially affects its workforce.

(5) Worker Committees. Worker Committees shall have the participatory and veto roles specified in the Article establishing Worker Veto and in the Article establishing the Standing Budget and Allocation Committee, including any powers to veto budgets or budget items that materially affect workers, subject to any override or abuse provisions in those Articles.

(6) Ombudsman. The Ombudsman participates in Committee deliberations as a non-voting member where provided in the Standing Budget and Allocation Committee Article, monitors fund-related practices, and may investigate or report on concerns relating to allocation and use of the Four Funds.

(d) Cross-Fund Coordination. The Board or a designated cross-fund body may coordinate among the Four Funds where obligations or purposes interact, subject to (1) honoring stated fund purposes, (2) compliance with Baseline Allocation Rules and variance procedures, and (3) protection of core worker-facing commitments.

Section 9. Variance From Baseline Allocation Rules.

(a) Principle of Stability. Baseline Allocation Rules are intended to provide stable, predictable funding for each Fund and to protect worker-facing commitments and long-term reserves from ad hoc or opportunistic reallocation.

(b) Extraordinary Variance. The Board may approve temporary variance from Baseline Allocation Rules only upon a finding that extraordinary circumstances exist, such as severe economic disruption, systemic risk to the Corporation or its Subsidiaries, or legally mandated obligations that cannot be met without such variance.

(c) Supermajority and Written Findings. Any such variance shall require a supermajority vote of the Board as specified in the bylaws and shall be accompanied by written findings that (1) describe the extraordinary circumstances, (2) explain why the variance is necessary and proportionate, and (3) state the expected duration of the variance and the plan for returning to Baseline Allocation Rules when conditions normalize. The findings shall be recorded in the minutes and made available internally to affected governance bodies.

(d) Role of the Standing Budget and Allocation Committee. The Standing Budget and Allocation Committee may recommend variance from Baseline Allocation Rules in its written recommendations to the Board, supported by financial projections and analysis. Any deviation recommended by the Committee shall be clearly identified as such and shall not become effective unless approved by the Board in accordance with subsection (c).

(e) Restoration. Variances shall be treated as temporary. The Board shall periodically review whether conditions justifying variance continue to exist and shall restore allocations to Baseline Allocation Rules as soon as reasonably practicable when those conditions no longer prevail.

(f) Oversight and Review. Worker Committees, Subsidiary boards, and the Ombudsman may review and comment on variance decisions and may invoke any complaint or review mechanisms provided in the Ombudsman Article or Worker Veto Article, where applicable.

Section 10. Dispute Resolution, Ombudsman, and Oversight.

(a) Local Dispute Mechanisms. Each Subsidiary shall maintain rapid, low-cost procedures for resolving disputes among participants or between participants and managers, including disputes relating to application of local appropriation rules, reserve practices, or local use of Education Fund or Social Benefits Fund support. These procedures shall be designed to minimize transaction costs and to preserve local engagement, subject to the Corporation’s overarching obligations.

(b) Role of the Ombudsman. The Office of the Ombudsman shall serve as an independent, confidential channel for concerns relating to governance, stewardship, and compliance with this Article, including concerns about (1) certification of reserves, (2) allocation and use of the Four Funds, (3) application of sanctions under Section 7, and (4) interactions among Governance Centers. The Ombudsman may examine records, conduct interviews, retain external advisors, and issue reports to the Board as provided in the Ombudsman Article.

(c) Escalation and Recommendations. Where local or committee-level mechanisms do not resolve a dispute affecting polycentric governance, the Ombudsman may recommend remedial measures to management and the Board, including policy changes, adjustments to monitoring or reporting regimes, or corrective use of Education Fund or Reserve Fund resources, all within existing fund purposes.

(d) Coordination With Worker Veto and Other Articles. Disputes involving Worker Veto rights over Alienation, budget vetoes, or emergency actions shall be handled primarily under the Articles establishing those rights and procedures.

Comments

Purpose and Governing Principle

This article governs the relationship between a Subsidiary-Elected Director and the Subsidiary Performance Officer and Liaison (SPOL). It is drafted to preserve Board-level collective decision-making, to prevent any individual director from controlling the SPOL, and to confirm that the SPOL is accountable to the Board and is not within the Executive Director’s supervisory chain of command, except for limited non-supervisory administrative coordination expressly authorized by collective Board action.

Distinct Roles and Separation of Authority

The Subsidiary-Elected Director serves as a director with the same fiduciary duties and obligations as other directors and acts only as part of the Board acting collectively. The SPOL is an officer with limited duties focused on performance measurement, reporting, and liaison functions, and is not a manager of any Subsidiary and has no authority to direct Subsidiary operations or personnel. The article further states that neither the Subsidiary-Elected Director nor the SPOL supervises the other, and that the Executive Director does not supervise or control the SPOL.

Communications, Information Requests, and Equal Access

The Subsidiary-Elected Director may request performance reports and related context from the SPOL in the director’s capacity as a Board member, subject to confidentiality, privilege, and applicable law. To avoid asymmetric access, material performance information provided by the SPOL to any one director must be made available on substantially similar terms to the Board or an authorized committee, unless limited distribution is necessary to preserve privilege or confidentiality. The SPOL may also communicate summaries of Subsidiary perspectives and operational context to assist Board oversight, but such communications do not create operational authority.

No Individual-Director Direction and Void Acts

The SPOL may take direction only from the Board acting collectively or from an authorized Board committee acting within delegated authority. The article prohibits any individual director, including the Subsidiary-Elected Director, and any officer, including the Executive Director, from directing or constraining the SPOL. Any attempted instruction outside proper Board or committee action is declared void and of no effect, not merely voidable, unless later ratified by the Board or an authorized committee acting within its authority.

Committee Interface and Collective Oversight

The Board may create a Subsidiary Liaison Committee to receive SPOL reports and recommend Board-level actions regarding reporting standards and performance transparency. The Board may appoint the Subsidiary-Elected Director to that committee, but any committee oversight must occur through committee action rather than by any individual member, and committee oversight may not be construed to place the SPOL within any officer’s supervisory chain of command.

Conflicts and Recusal Parameters

If the Subsidiary-Elected Director becomes an officer, director, employee, consultant, or other service provider of a Subsidiary, the Board is directed to apply conflict identification and recusal procedures for matters uniquely affecting that Subsidiary. Recusal is not automatically required for enterprise-wide reporting standards or performance frameworks of general application unless a material conflict exists under the circumstances.

Defined Terms Used for Administration

The article defines “Subsidiary-Elected Director” as any Board seat filled through nomination, designation, or election processes in which one or more Subsidiaries, their boards, or their workers have a formal role. It also defines “SPOL” by cross reference to the separate charter article establishing the Subsidiary Performance Officer and Liaison role.

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Section 1. Veto Right.

(a) Worker Veto. The workers of the Corporation and each Subsidiary shall have the right (the “Worker Veto Right”) to veto any Proposed Alienation Action, as defined in Section 2, subject to the procedures and limitations set forth in this Article. The Worker Veto Right shall be exercised, as applicable, by (i) the Corporation Worker Committee with respect to Corporation-level Proposed Alienation Actions and (ii) the Subsidiary Worker Committee for the Subsidiary affected by a Subsidiary-level Proposed Alienation Action.

(b) Condition to Effectiveness. No Proposed Alienation Action shall be effected unless either (i) the applicable Worker Committee (Corporation Worker Committee or Subsidiary Worker Committee, as the case may be) declines to veto it in accordance with Section 4, or (ii) following a valid veto, the veto is overridden only pursuant to Section 6.

Section 2. Definitions.

(a) “Alienation” means any of the following actions materially affecting the Corporation’s or a Subsidiary’s personnel or property:

(1) the sale, lease, pledge, transfer, or other disposing of real property or tangible or intangible assets having a book value or fair-market value exceeding a materiality threshold (as established in the bylaws);

(2) the outsourcing, contracting out, or permanent transfer of a core business function involving a material portion of the workforce (as defined in the bylaws); and

(3) mass layoffs, terminations, replacement, reassignment or removal of one or more workers, other than actions involving only Probationary Workers.

(b) “Proposed Alienation Action” means an Alienation that (i) the Executive Director proposes to take at the Corporation level or (ii) the manager of a Subsidiary proposes to take at the Subsidiary level, and for which the notice requirements in Section 4 apply.

(c) “Materiality Thresholds” means the objective thresholds (dollar or percentage) set by the Board in the bylaws or in Board-adopted policy that delineate which Alienation Actions qualify as “material” for purposes of this Article.

(d) “Worker Committee” means a committee established under Section 3 of this Article to exercise the veto power on behalf of workers. For purposes of this Article, the term includes both the Corporation Worker Committee and each Subsidiary Worker Committee.

(e) “Corporation Worker Committee” means the Worker Committee established under Section 3 to exercise the Worker Veto Right with respect to Corporation-level Proposed Alienation Actions.

(f) “Subsidiary Worker Committee” means, with respect to each Subsidiary, the Worker Committee established under Section 3 (and the corresponding governing documents of such Subsidiary) to exercise the Worker Veto Right with respect to Proposed Alienation Actions at that Subsidiary.

(g) “Eligible Workers” means those workers eligible to nominate, stand for, and vote in elections for the applicable Worker Committee, as defined by the bylaws for the Corporation Worker Committee and by the Subsidiary’s bylaws or policies for each Subsidiary Worker Committee.

(h) “Supermajority Vote” means the affirmative vote of at least two-thirds of the seated members of the applicable Worker Committee, provided a quorum as defined in Section 4.

(i) “Override Threshold” means the vote requirement on the Board to override a valid veto, as defined in Section 6.

(j) “Probationary Workers” means workers of the Corporation or any Subsidiary who are within an initial trial, introductory, or probationary period of employment, as defined in Corporation-wide or Subsidiary employment policies, and shall be deemed to include workers engaged through arrangements with independent employment agencies or other third-party staffing providers.

Section 3. Worker Committees: Composition, Election, Term.

(a) Corporation Worker Committee. The Corporation shall maintain a Corporation Worker Committee to consider and act on Corporation-level Proposed Alienation Actions. The Corporation Worker Committee shall consist of three (3) or five (5) members, as determined by the Board. Members must be Eligible Workers employed by the Corporation or by any Subsidiary, as defined in the bylaws.

(b) Subsidiary Worker Committees. Each Subsidiary shall maintain a Subsidiary Worker Committee to consider and act on Proposed Alienation Actions at that Subsidiary. Each Subsidiary Worker Committee shall consist of three (3) or five (5) members, as determined by the Board or the Subsidiary’s governing documents, and members must be Eligible Workers employed by that Subsidiary, as defined in the governing documents of such Subsidiary.

(c) Eligibility and Nomination. To be eligible to serve on a Worker Committee, a candidate must have at least two (2) years of continuous employment immediately preceding the call for nominations with the Corporation (for the Corporation Worker Committee) or with the relevant Subsidiary (for the Subsidiary Worker Committee) and may not currently hold an elected officer position. The Board, or the applicable Subsidiary board or manager, shall solicit nominations from Eligible Workers.

(d) Election. Members of each Worker Committee shall be elected by Eligible Workers of the Corporation (for the Corporation Worker Committee) or of the relevant Subsidiary (for that Subsidiary Worker Committee) via secret ballot. Elections shall be held at least every two (2) years, with staggered terms so that not all members are elected at once. Members may serve a maximum of two (2) consecutive full terms but may be re-eligible following a one-term absence, as further defined in the bylaws and applicable Subsidiary governing documents.

(e) Vacancy and Removal. If a seat on any Worker Committee becomes vacant, the applicable Worker Committee may appoint an interim member (by majority vote of remaining Committee members) to serve until a special election is held. Removal of a Committee member may occur only for good cause, in a process defined in the bylaws or the relevant Subsidiary’s governing documents.

Section 4. Veto Procedures.

(a) Notice for Corporation-Level Actions. Before undertaking a Corporation-level Proposed Alienation Action, the Board must provide written notice to the Corporation Worker Committee describing in reasonable detail the proposed action, its business justification, and its timing. Notice shall be given as soon as reasonably practicable and, in any event, not less than ten (10) business days prior to execution for Proposed Alienation Actions under Section 2(a)(1) or (2), and not less than five (5) business days prior to execution for Proposed Alienation Actions under Section 2(a)(3), or such other periods specified in the bylaws.

(b) Notice for Subsidiary-Level Actions. Before undertaking a Subsidiary-level Proposed Alienation Action, the Subsidiary’s board (if any) or the manager of the Subsidiary, as applicable, must provide written notice to that Subsidiary’s Subsidiary Worker Committee describing in reasonable detail the proposed action, its business justification, and its timing. Notice shall be given as soon as reasonably practicable and, in any event, not less than ten (10) business days prior to execution for Proposed Alienation Actions under Section 2(a)(1) or (2), and not less than five (5) business days prior to execution for Proposed Alienation Actions under Section 2(a)(3), or such other periods specified in the bylaws or applicable Subsidiary policies.

(c) Committee Deliberation. Upon receipt of notice under subsection (a) or (b), the applicable Worker Committee shall convene a meeting (in person or virtually) to consider the Proposed Alienation Action, with reasonable opportunity to solicit input from the affected workforce and management.

(d) Vote. The applicable Worker Committee may veto the Proposed Alienation Action only by Supermajority Vote, with a quorum defined in the bylaws or, for a Subsidiary Worker Committee, in the Subsidiary’s governing documents (which may, for example, set quorum at a majority of Committee members). If the applicable Worker Committee fails to vote (for instance, lacks quorum within the required time), the veto does not apply, and the Board or Subsidiary may proceed, subject to the override and dispute-resolution procedures of this Article.

(e) Decision Report. The applicable Worker Committee shall provide its written decision (veto or no veto) to the Board (and, in the case of a Subsidiary-level Proposed Alienation Action, to the Subsidiary’s manager), including a brief explanation of its reasoning. That report must be delivered within a timeframe (for example, five business days from the Committee’s initial meeting) specified in the bylaws or Subsidiary governing documents.

Section 5. Mediation, Dispute Resolution, and Subsidiary Appeals.

(a) Mediation After Veto. If the applicable Worker Committee issues a veto of a Proposed Alienation Action, and the Proposed Alienation Action is (i) a Subsidiary-level Proposed Alienation Action or (ii) a Corporation-level Proposed Alienation Action that consists primarily of personnel actions under Section 2(a)(3), then the Ombudsman shall serve as mediator or shall select a mediator to conduct mediation between the applicable Worker Committee and, as applicable, the Board or the Subsidiary’s board or manager. Mediation under this Section shall be provided only in those two circumstances. The Ombudsman shall commence mediation as soon as reasonably practicable and shall establish a timetable for the mediation. All mediation shall be conducted with reasonable dispatch in light of the nature and circumstances of the Proposed Alienation Action.

(b) Ombudsman Recommendations or Decisions. At the conclusion of mediation under this Section 5, the Ombudsman shall issue a written statement summarizing any agreement reached or, if no agreement is reached, the Ombudsman’s recommendation or decision regarding the Proposed Alienation Action which shall be binding on the applicable Worker Committee and manager. The Ombudsman promptly shall give such written statement to the applicable Worker Committee and manager.

(c) Appeal. The time period for submitting any Notice of Appeal under this Article shall commence on the date the Ombudsman transmits such written statement to the parties. The Ombudsman’s recommendation or decision may be appealed by the Subsidiary’s manager or the applicable Worker Committee to the Subsidiary’s board, in the case of a Subsidiary-level Proposed Alienation Action. The decision of the Subsidiary’s board on such appeal shall be final for purposes of this Article. No separate arbitration process is required or allowed under this Article.

Section 6. Board Override.

If, after a valid veto, the Board nonetheless believes the Proposed Alienation Action is essential for the long-term success of the Corporation or the affected Subsidiary (in the sole discretion of the Board), the Board may override the applicable Worker Committee’s veto only by a heightened supermajority (the “Override Threshold”) defined in the bylaws (for example, 80% of all directors including independent directors). Any override vote must record in the minutes the basis for the override and the reasons why the Board judges the action necessary notwithstanding the veto. Any override vote shall be conclusive regardless of the reasons for the override vote.

Section 7. Carve-Outs and Exceptions.

This Article does not apply to:

(a) routine operations adjustments to property or assets not meeting the applicable Materiality Threshold;

(b) ordinary procurement contracts below the asset Materiality Threshold;

(c) acquisitions, investments, or strategy decisions that, pursuant to the Corporation’s Articles of Incorporation, are expressly reserved to the Acquisition Director; and

(d) emergency actions that the Board reasonably determines (in the sole discretion of the Board), by a supermajority vote of all directors then in office, require immediate execution to avert substantial harm or risk; provided, however, that any such emergency Alienation may be authorized and implemented regardless of whether any Committee has attempted or is attempting to void or otherwise challenge the contemplated action under this Article, and further provided that the Board must report any such emergency Alienation to the Corporation Worker Committee (and, where applicable, the relevant Subsidiary Worker Committee) promptly.

Section 8. Subsidiary Implementation.

The Board shall require each Subsidiary to adopt provisions in its own charter or bylaws substantially identical in terms, definitions, thresholds, and procedures to those contained in this Article, including the establishment and maintenance of a Subsidiary Worker Committee, subject only to adjustments for lawful local conditions and scale. The Board shall provide a model form (template) for such provisions and monitor compliance via periodic reporting.

Section 9. Audit, Review, and Amendment.

(a) The Board shall cause periodic audits (at least biennial) of how vetoes, attempted vetoes, appeals, and overrides have operated in practice at both the Corporation and Subsidiary levels, and shall report the results to the full Board and to the Corporation Worker Committee and the Subsidiary Worker Committees.

(b) Based on those audits, the Board and the Worker Committees may recommend adjustments to definitions, materiality thresholds, timing, or procedures for Corporation-level and Subsidiary-level actions.

(c) Any amendment to this Article must be approved (i) by at least two-thirds of the Corporation Worker Committee, (ii) by at least two-thirds of the aggregate Subsidiary Worker Committees voting by such procedure as may be prescribed in the bylaws, and (iii) by the Board by supermajority (as defined in the bylaws).

Section 10. Abuse of Worker Committee Powers.

If, in the sole discretion of the Board, any Worker Committee abuses or persistently misuses the powers conferred by this Article, the Board may, by supermajority vote (as defined in the bylaws), suspend that Worker Committee’s authority to exercise the Worker Veto Right in whole or in part, or may impose reasonable limitations on the scope, procedures, or effect of that Worker Committee’s powers under this Article, to the extent necessary to prevent or remedy such abuse. Any such suspension or limitation shall be recorded in the minutes of the Board and promptly communicated in writing to the affected Worker Committee and the workforce to which that Worker Committee is accountable. The Board may modify or lift any suspension or limitation in its discretion, subject to the same supermajority vote requirement.

Comments

Overview

Article X establishes a structured worker veto right over certain significant decisions that affect personnel and key assets at both the commons corporation and subsidiary levels. It does this by empowering elected Worker Committees to review and potentially block defined “alienation” actions, while preserving a high-threshold board override and clear safeguards against misuse. The framework is designed to give workers a meaningful, formal voice without converting the entity into a worker cooperative or displacing the board’s ultimate fiduciary responsibility.

Scope Of Alienation Decisions

The Article uses a broad but carefully delimited concept of “Alienation.” It covers material transfers or encumbrances of important assets, outsourcing of core functions involving a substantial portion of the workforce, and significant workforce changes such as mass layoffs, terminations, or reassignments. Probationary workers and workers supplied by independent agencies are expressly excluded from the protection of the veto. Materiality thresholds for assets and personnel are set by bylaws or policy, so only significant actions trigger the veto regime. No covered action becomes effective unless either the workers decline to veto or the board subsequently overrides a veto using a heightened vote.

Worker Committees And Elections

The system relies on two levels of worker representation: a Corporation Worker Committee covering corporate-level actions and separate Worker Committees for each subsidiary covering subsidiary-level actions. Members are rank-and-file workers with a minimum tenure requirement, elected by eligible workers through secret ballot. Terms are staggered, there are limits on consecutive service, and removal requires good cause under procedures set in governance documents. In practice, these committees function as standing internal bodies with democratic legitimacy, dedicated to reviewing major alienation proposals.

Procedures For Notice And Veto

Before any covered alienation action proceeds, management must give the appropriate Worker Committee written notice describing the proposed action, its rationale, and timing. The notice periods are deliberately short but specific, with tighter timelines for personnel actions so that decisions affecting jobs are not unduly delayed. The Committee then meets to review the proposal, hear from management, and, where appropriate, affected workers. A veto requires a supermajority vote of the committee members, and if the committee fails to act within the prescribed time, the opportunity to veto lapses. This structure encourages genuine deliberation, discourages gamesmanship by non-participation, and preserves a predictable business timetable.

Mediation, Appeals, And Board Override

If a veto is issued in certain categories of cases, particularly at the subsidiary level or for corporation-level personnel decisions, the matter proceeds to mediation under the oversight of an Ombudsman. The Ombudsman either conducts or arranges the mediation, sets the timetable, and must move with reasonable dispatch. At the end of the process, the Ombudsman issues a written recommendation or decision and provides that to the parties, triggering the time to appeal. For subsidiary matters, appeals go to the subsidiary board, whose decision is final within this regime. The Article expressly keeps dispute resolution inside the corporate governance structure and excludes outside arbitration.

Separately, the commons corporation board retains a narrow but decisive override power. If the board determines that a vetoed action is essential for the long-term success or stability of the corporation or a subsidiary, it may override the veto only by a heightened supermajority vote, with reasons recorded in the minutes. This is a classic “safety valve” that protects the board’s fiduciary role while making overrides rare and politically costly.

Safeguards, Carve Outs, And Emergency Powers

The Article limits the scope of the veto so that it does not swallow ordinary management. Routine operational adjustments, ordinary procurement below the asset thresholds, and certain strategic acquisition or investment decisions expressly reserved elsewhere are carved out. The board is required to ensure that subsidiaries adopt substantially parallel provisions, with room for scaling and local law differences, and must monitor how the veto is functioning through regular reporting and periodic review.

There is also an explicit emergency power. When a supermajority of the board reasonably concludes that immediate action is necessary to prevent substantial harm or risk, it may authorize an alienation action without waiting for the full worker-veto process, even if a committee attempts to veto. Any such emergency action must be promptly reported to the relevant Worker Committees, and the board’s determination must meet the elevated voting standard.

To address potential misuse by Worker Committees, the Article authorizes the board, again by supermajority, to suspend or narrow a committee’s powers if the committee is abusing its veto authority. Any such action must be documented and communicated to the affected workers and can be revisited by the board under the same elevated standard.

Practical Takeaways For Attorneys And Clients

For attorneys, Article X offers a detailed model for embedding worker participation rights into corporate governance in a way that is legally structured, procedurally clear, and compatible with board-centric fiduciary norms. It combines: clear definitions of covered actions, objective materiality thresholds, short but real notice and deliberation periods, supermajority veto and override rules, targeted mediation and appeals, and explicit safeguards against both board overreach and committee abuse.

For potential clients, the message is straightforward. Major decisions that materially affect jobs or critical assets cannot be quietly pushed through; they must pass through a transparent process in which elected worker representatives have genuine veto power. At the same time, the board retains the ability to act decisively in extraordinary circumstances, subject to strict supermajority and documentation requirements. The result is a governance structure intended to promote trust, reduce conflict over major workforce and asset decisions, and align long-term institutional stability with the interests of the people who work in the enterprise.

Section 1. Adoption and Minimum Standard.

(a) Purpose. This Article establishes mandatory minimum termination thresholds and procedures for (i) the commons corporation (the “Corporation”) as an employer and (ii) each Subsidiary as an employer, consistent with the entity’s governance design and the operational need for lawful flexibility and reliable workforce protections.

(b) Minimum Standard; More Protective Policies Permitted. The Corporation and each Subsidiary shall adopt and maintain written policies and procedures that meet or exceed the requirements of this Article. A Covered Entity may adopt more protective employee standards if not inconsistent with this Article.

(c) No Private Returns. These standards shall be administered without regard to private returns for managers, investors, or other stakeholders, because none exist other than the commons corporation.

Section 2. Definitions.

(a) Covered Entity. “Covered Entity” means the Corporation and each Subsidiary.

(b) Covered Worker. “Covered Worker” means any employee of a Covered Entity other than a Probationary Worker.

(c) Probationary Worker. “Probationary Worker” means an employee in an initial evaluation period of ninety calendar days from the employee’s start date or rehire date with the applicable Covered Entity, or such other period as that Covered Entity may establish, provided it is uniformly applied.

(d) Termination. “Termination” includes discharge, involuntary separation, and constructive discharge recognized under applicable law, but does not include voluntary resignation.

(e) Just Cause. “Just Cause” means a substantiated reason for discharge based on the employee’s conduct or performance that materially affects the Covered Entity’s operations, workforce, customers, safety, compliance, or lawful business objectives. Just Cause exists if, based on documented facts, one or more of the following applies:

(1) The employee materially fails to meet job-related performance standards, expectations, or essential functions after notice of the deficiency and an opportunity to improve.

(2) The employee commits misconduct, including serious policy violations, dishonesty, insubordination, harassment, violence, unsafe conduct, unlawful conduct, or comparable behavior inconsistent with continued employment.

(3) The employee repeatedly fails to meet job-related expectations or commits repeated lesser policy violations after prior corrective action.

Just Cause does not require perfect performance management. Disagreement with managerial judgment, alternative interpretations of performance, minor documentation gaps, or immaterial procedural deviations shall not constitute Arbitrary action or Pretext.

(f) Business Necessity Termination. “Business Necessity Termination” means an involuntary separation that is not primarily based on individual fault, but is required by documented operational, economic, restructuring, integration, workforce planning, role redesign, skills realignment, product, market, customer, technological, or regulatory necessity, and is implemented using objective selection criteria and lawful procedures.

(g) Gross Misconduct. “Gross Misconduct” means conduct of such severity that immediate termination is justified under applicable law and internal policy.

(h) Prohibited Reason. “Prohibited Reason” means unlawful discrimination, unlawful retaliation, interference with protected rights, or any other reason prohibited by applicable law.

(i) Arbitrary. “Arbitrary” means an action taken without a rational connection between the stated ground and the contemporaneously documented facts.

(j) Pretext. “Pretext” means a knowingly false stated ground used to conceal a Prohibited Reason.

(k) Improper Preferential Motive. “Improper Preferential Motive” means favoritism, personal animus, or replacement preference that is not job-related and that materially motivates a Termination or a Material Adverse Action.

(l) Individual Personnel Action. “Individual Personnel Action” means any action relating to a specific employee or applicant, including hiring, discipline, performance management, reassignment, demotion, promotion, compensation adjustments, suspension, termination, separation, or settlement of an individual employment claim.

(m) Collective Personnel Action. “Collective Personnel Action” means a workforce action that is not primarily directed to a particular individual and that materially affects multiple positions or groups.

(n) Material Adverse Action. “Material Adverse Action” means any Individual Personnel Action that:

(1) reduces base compensation;
(2) reduces job level, grade, or title;
(3) materially reduces core responsibilities or supervisory authority;
(4) results in an involuntary transfer to a materially less desirable role, shift, or location; or
(5) is reasonably expected to lead to Termination.

(o) Worker Veto Mechanism. “Worker Veto Mechanism” means any worker committee veto power, voiding power, suspension power, or comparable worker-driven governance process relating to Alienation of Personnel or similar concepts.

Section 3. Governing Threshold.

(a) General Rule. A Covered Entity may terminate a Covered Worker only upon Just Cause or Business Necessity Termination, subject to this Article and applicable law.

(b) Probationary Rule. A Covered Entity may terminate a Probationary Worker for any lawful, non-prohibited reason, provided documentation of the stated basis is maintained.

(c) No Termination for Prohibited Reasons. No Covered Entity shall terminate any employee for a Prohibited Reason.

Section 4. Just Cause Process Requirements.

(a) Notice of Expectations. Each Covered Entity shall maintain written job expectations, policies, and performance standards communicated to employees.

(b) Progressive Discipline. Except in cases involving Gross Misconduct or circumstances where progressive discipline is not practicable or would materially impair operational efficiency, a Covered Entity shall use progressive discipline.

(c) Investigation. Before termination for conduct or alleged misconduct, the Covered Entity shall conduct an investigation proportionate to the circumstances.

(d) Opportunity to Respond. Before termination, the employee shall be given an opportunity to respond to the stated grounds.

(e) Written Decision. The Covered Entity shall provide written notice of termination stating the specific ground relied upon and the effective date.

(f) Consistency and Proportionality. Comparable discipline shall be applied for comparable conduct or performance issues, subject to legitimate distinctions supported by documented facts.

(g) Gross Misconduct. Gross Misconduct may result in immediate termination subject to post-termination appeal as provided in this Article.

Section 5. Business Necessity Termination Process.

Business Necessity Terminations shall be supported by documented necessity and implemented using objective, lawful selection criteria.

Section 6. Appeals of Terminations.

A Covered Worker may appeal a Termination in accordance with implementing procedures adopted under this Article. A Termination shall be upheld unless the Covered Worker establishes Arbitrary action, Pretext, or Improper Preferential Motive.

Section 7. Controls Against Improper Material Adverse Actions.

(a) Coverage. A Covered Entity may impose a Material Adverse Action only upon documented facts that would constitute Just Cause, as adapted to the action taken, or a documented operational necessity consistent with lawful business objectives.

(b) Written Action Statement. Before implementing a Material Adverse Action, the Covered Entity shall prepare a written Action Statement identifying the action, the specific job-related grounds, the contemporaneous facts relied upon, any comparators considered, and the proportionality of the action.

(c) Conflict and Preference Screen. The Action Statement shall include a certification by a reviewer other than the initiating manager that favoritism, personal animus, or replacement preference has been considered and rejected as a motivating basis for the action.

(d) Limited Internal Review. A Covered Worker may request review of a Material Adverse Action within seven (7) calendar days after receipt of the Action Statement, stating with specificity any claim of Arbitrary action, Pretext, or Improper Preferential Motive.

(e) Decisionmaker. Review shall be decided only by the Office of the Ombudsman or an independent Subsidiary board committee designated in implementing policies.

(f) Standard of Review. The action shall be upheld if supported by substantial evidence. The action shall be reversed or modified if Arbitrary action, Pretext, or Improper Preferential Motive is established.

(g) Remedies. Remedies may include correction of records and reinstatement to prior level, compensation, or responsibilities, subject to applicable law and internal remedial limits.

(h) No Worker Veto. No Material Adverse Action is subject to review or veto under any Worker Veto Mechanism.

Section 8. Documentation and Records.

Each Covered Entity shall maintain records sufficient to demonstrate compliance with this Article.

Section 9. Governance Oversight and Enforcement.

The Corporation may audit compliance and require corrective action for systemic noncompliance.

Section 10. Coordination With Worker Veto Mechanisms.

No Individual Personnel Action shall be subject to review or veto under any Worker Veto Mechanism. This Article provides the exclusive internal standards for Terminations and Material Adverse Actions.

Section 11. Construction.

This Article shall be interpreted to require genuine Just Cause or Business Necessity standards exceeding at-will employment, while preserving lawful operational flexibility and preventing arbitrary, pretextual, or improperly preferential actions.

Comments

Purpose and Minimum Baseline

This Article imposes mandatory, minimum employment termination standards that apply both to the commons corporation as an employer and to each Subsidiary as an employer. It requires each covered employer to maintain written policies and procedures that meet or exceed the Article’s requirements, while permitting more protective standards so long as they are not inconsistent with the Article. The Article is expressly administered without regard to private returns for managers, investors, or other stakeholders.

Key Definitions and Structural Concepts

The Article defines the “Covered Entity” as the corporation and each Subsidiary, and it distinguishes “Covered Workers” from “Probationary Workers,” who are subject to a different rule during an initial evaluation period. “Termination” is defined broadly to include discharge, involuntary separation, and constructive discharge recognized by law, but not voluntary resignation. The Article defines “Just Cause” as a substantiated, documented reason tied to conduct or performance that materially affects operations, safety, compliance, customers, workforce functioning, or lawful business objectives, and it describes core categories of just cause, including material performance failure after notice and opportunity to improve, serious misconduct, and repeated lesser failures after corrective action. The Article also defines “Business Necessity Termination” as a fault-neutral separation driven by documented operational or economic needs implemented through objective criteria and lawful procedures, and it defines “Gross Misconduct” to support immediate termination with a tailored post-termination record and appeal process. Additional definitions constrain internal review by defining “Arbitrary,” “Pretext,” and “Prohibited Reason,” and by defining “Good Cause” narrowly for limited deadline extensions. The Article also distinguishes “Individual Personnel Actions” from “Collective Personnel Actions” and defines “Worker Veto Mechanism” for coordination purposes.

Governing Termination Thresholds

For Covered Workers, a Covered Entity may terminate only for just cause or business necessity, and all terminations remain subject to prohibited-reason restrictions and applicable law. For probationary workers, termination is permitted for any lawful, non-prohibited reason, with required documentation of the stated basis. The Article reiterates a categorical prohibition on termination for prohibited reasons, including unlawful discrimination, retaliation, or interference with protected rights.

Just Cause Process and Procedural Requirements

The Article requires foundational employment infrastructure, including written job expectations, policies, and performance standards communicated to employees. It generally requires progressive discipline unless gross misconduct is involved or progressive discipline is impracticable or would materially impair operational efficiency, competitiveness, or lawful business objectives. Before termination for conduct or alleged misconduct, the Covered Entity must conduct an investigation proportionate to the circumstances and provide the employee an opportunity to respond, subject to the gross misconduct modifications. The Covered Entity must deliver a written termination notice stating the specific ground and effective date, and it must apply discipline consistently and proportionately for comparable conduct or performance issues, allowing for documented legitimate distinctions.

Gross Misconduct Summary Termination and Post-Termination Record Development

If conduct is classified as gross misconduct, the Covered Entity may terminate immediately upon classification, without using administrative leave as a substitute for immediate separation. The classification must be supported by a contemporaneous written statement describing the alleged conduct with specificity and stating the factual basis then known, prepared on the termination date or, at the latest, within one business day. The termination notice must also disclose that the termination is immediately effective and must describe appeal rights, deadlines, and method. After termination, the Covered Entity must complete a proportionate investigation and preserve relevant evidence to support the appeal record. The Article treats the post-termination investigation and appeal process as the mechanism that satisfies investigation and response requirements in gross misconduct cases. The Article also provides that, absent legal or contractual requirements, no wages, salary, or benefits accrue after the termination effective time while an appeal is pending, while preserving final pay and statutory continuation rights.

Business Necessity Termination Requirements

For business necessity terminations, the Covered Entity must prepare a written statement of the business rationale supported by operational facts. It must adopt and apply objective selection criteria tied to the necessity, with examples such as skills, credentials, productivity, performance history, safety history, job-related attendance, seniority, and cross-training. The Article requires adverse impact review where required by law or prudent given the circumstances, encourages evaluation of redeployment into available roles to the extent practicable, and allows recall preferences consistent with operational needs. It also mandates compliance with applicable notice obligations, including those triggered by mass layoffs or plant closings.

Mandatory Compliance with Law and Protected Rights

The Article requires compliance with anti-discrimination and equal opportunity laws, prohibits retaliation for legally protected activity, and prohibits termination for protected labor activity and other protected rights. Where a collective bargaining agreement or other enforceable commitment imposes higher standards, the higher standard governs. The Article also confirms that nothing in it authorizes action inconsistent with applicable law.

Internal Review and Appeal Framework

Each Covered Entity must adopt an internal appeal procedure for Covered Workers, requiring a written notice of appeal within seven calendar days after receipt of the written termination notice. The appeal must state specific grounds and requested relief, and unspecified grounds may be treated as waived for internal purposes. The Article imposes strict controls to prevent dilatory or sprawling appeals, including page limits, limits on the number of discrete grounds, exhibit listing requirements, and authority for summary denial of untimely or noncompliant appeals.

Exclusive Appellate Decisionmakers and Allocation of Authority

For Subsidiary employees, the appeal is decided either by the Subsidiary board, or an authorized committee, or by the Office of the Ombudsman, as specified in the Subsidiary’s implementing policies. For corporation employees, the appeal is decided by the Office of the Ombudsman. This structure centralizes review for the parent’s own employment actions while permitting Subsidiary-level governance assignment, or Ombudsman assignment, for Subsidiary employment decisions.

Scope, Standard of Review, and Limits on Second-Guessing

Appeal review is confined to whether the termination satisfied the applicable threshold, the required process for just cause or business necessity, and the legal compliance requirements. The decision is upheld if supported by documented facts constituting substantial evidence of the applicable ground. Managerial judgments on performance standards, operational needs, role requirements, and comparative assessments receive deference and are upheld unless the employee establishes “Arbitrary” action as narrowly defined. The appellate decisionmaker is directed not to rehear ordinary discretion or substitute judgment on close performance calls where substantial evidence supports the decision. Procedural errors are treated as harmless unless they materially affected the outcome. The decisionmaker must maintain a written record of the appeal, including the outcome and reasons.

Effect of Appeal and Available Internal Remedies

Filing an appeal does not stay the effective date of termination, and gross misconduct terminations remain immediately effective while the appeal is pending. If the termination is found deficient, the appellate decisionmaker may grant internal remedies consistent with law and enforceable commitments, but interim reinstatement and restoration of pay or benefits pending the decision are prohibited. If termination is affirmed, no post-termination compensation is owed except as required by law or enforceable commitments. If termination is reversed, reinstatement may be ordered and back pay and benefits may be awarded only for the defined period between the effective termination time and the reversal decision, reduced by interim earnings and mitigation, and subject to additional policy limits and applicable law. The Article permits policies that deny severance for gross misconduct terminations except where law or enforceable commitments require otherwise, and it authorizes record correction and non-monetary corrective measures.

Appeal Timetable and Narrow Extension Standard

The appellate decision must be issued as soon as practicable and, in all events, within thirty calendar days after receipt of a complete appeal submission, with a limited extension of up to fourteen days allowed only for documented “Good Cause,” which is narrowly defined and excludes workload and administrative convenience.

Documentation, Recordkeeping, and Retention

Each Covered Entity must maintain documentation sufficient to demonstrate compliance, including performance records, investigation summaries, selection criteria, adverse impact reviews where applicable, the written termination notice, and the appeal record. Records must be retained for a stated minimum period or longer if required by law or by the corporation’s record retention policy.

Governance Oversight, Compliance Audits, and Enforcement Tools

The corporation is authorized to require Subsidiaries to adopt, update, and certify implementing policies consistent with the Article, and the corporation must maintain its own implementing policies. The corporation may conduct compliance audits of any Covered Entity and require corrective action plans if systemic noncompliance is identified. The Article preserves the board authority otherwise granted under the governance instruments, subject to the requirement that termination decisions comply with the Article’s thresholds and procedures.

Coordination With Worker Veto Mechanisms and Exclusivity of Process

The Article draws a strict boundary between individual and collective personnel governance. No individual personnel action, including termination and related discipline and settlement of individual employment claims, may be reviewed, vetoed, voided, suspended, delayed, or reversed through any worker veto mechanism. The Article’s procedures and remedies are designated as the exclusive internal governance process for individual terminations, including gross misconduct terminations, and it prohibits parallel or subsequent internal challenges through worker veto mechanisms. Worker veto mechanisms may apply only to collective personnel actions, and only to the extent those actions are expressly defined in the governing instruments as subject to such mechanisms. The Article also provides that no worker veto process, even when applicable to a collective action, creates a right to continued pay or benefits during any review or related process, except as required by law or enforceable commitments.

Construction and Operating Balance

The Article includes severability and an interpretive directive that termination protections must exceed at-will standards but must be drafted and administered to avoid materially impairing a Subsidiary’s operational efficiency, competitiveness, or ability to pursue lawful business objectives, and must not require retention of personnel for mission-based reasons inconsistent with those objectives. The Article is administered to prevent arbitrary or pretextual terminations while preserving lawful operational flexibility.

Section 1. Nonprofit Status and Policy Statement.

(a) Nonprofit Corporation. The Commons Corporation is a nonprofit corporation governed by the applicable nonprofit corporation statute.

(b) Policy Purpose. This Article establishes conflicts of interest standards and related party transaction procedures intended to protect the Commons Corporation from private capture, self dealing, and improper influence, while permitting lawful transactions that are demonstrably fair to the Commons Corporation.

(c) Supplement to Fiduciary Duties. This Article supplements, and does not replace, the duties of care, loyalty, and good faith imposed by applicable law.

Section 2. Definitions.

(a) Interested Person. An “Interested Person” means any Director, officer, key employee, or any other person who is in a position to exercise substantial influence over the affairs of the Commons Corporation.

(b) Related Person. A “Related Person” means, with respect to an Interested Person, any of the following: (1) a spouse or domestic partner; (2) an ancestor, sibling, child, grandchild, or other lineal descendant; (3) any person sharing the same household; and (4) any entity in which an Interested Person or Related Person has a material financial interest or serves as a director, manager, officer, or in an equivalent role.

(c) Related Party. A “Related Party” means an Interested Person or a Related Person.

(d) Related Party Transaction. A “Related Party Transaction” means any transaction, arrangement, or relationship in which the Commons Corporation is a participant and in which a Related Party has a direct or indirect financial interest, including through compensation, property interests, or business relationships.

(e) Conflict of Interest. A “Conflict of Interest” exists when an Interested Person has a direct or indirect financial interest, or a competing duty or loyalty, that could reasonably be expected to impair that person’s independence of judgment with respect to a decision, transaction, or other action of the Commons Corporation.

(f) Material Financial Interest. A “Material Financial Interest” means a financial interest that could reasonably be expected to influence an Interested Person’s judgment, including any ownership, investment, compensation arrangement, indebtedness, or other economic benefit, whether direct or indirect.

Section 3. Duty of Disclosure.

(a) Initial and Ongoing Disclosure. Each Director and officer shall disclose to the Commons Corporation any actual or potential Conflict of Interest and any actual or proposed Related Party Transaction promptly after becoming aware of it.

(b) Annual Disclosure Statement. The Commons Corporation may require annual written disclosures from Directors and officers identifying relationships and interests that could give rise to a Conflict of Interest or Related Party Transaction.

(c) Duty to Update. Each person subject to this Article shall update disclosures as circumstances materially change.

Section 4. Review and Approval of Related Party Transactions.

(a) Required Approval. The Commons Corporation shall not enter into a Related Party Transaction unless the transaction is approved in advance in accordance with this Section, or is ratified in accordance with Section 5 if prior approval was not obtained.

(b) Disinterested Decision Makers. A Related Party Transaction shall be considered and approved only by Directors who do not have a Conflict of Interest with respect to the transaction.

(c) Recusal. An Interested Person with respect to the Related Party Transaction shall not participate in deliberations or voting on the transaction, except that the Interested Person may provide factual information at the request of the disinterested Directors.

(d) Fairness Standard. The disinterested Directors may approve a Related Party Transaction only if they determine, in good faith, after reasonable inquiry, that: (1) the transaction is fair to the Commons Corporation; (2) the transaction is on terms no less favorable to the Commons Corporation than could be obtained in a comparable arm’s length transaction under similar circumstances; and (3) the transaction is in the best interests of the Commons Corporation.

(e) Alternative Transactions. Before approving a Related Party Transaction, the disinterested Directors shall consider reasonably available alternatives, including whether the Commons Corporation can obtain comparable goods, services, financing, or other benefits from an unrelated party on terms more favorable to the Commons Corporation.

(f) Use of Advisors. The disinterested Directors may rely on legal counsel, financial advisors, valuation experts, or other qualified advisors to evaluate fairness, comparability, and other relevant considerations.

(g) Documentation. The Commons Corporation shall contemporaneously document: (1) the nature of the interest; (2) the information considered; (3) any alternatives evaluated; (4) the vote or consent of the disinterested Directors; and (5) the basis for the determinations required by subsection (d).

Section 5. Ratification of Unapproved Transactions.

(a) Prompt Submission. If the Commons Corporation enters into a Related Party Transaction without prior approval, the transaction shall be promptly disclosed to the Board or the appropriate committee of disinterested Directors.

(b) Ratification Standard. The disinterested Directors may ratify the transaction only if they make the determinations required by Section 4(d).

(c) Corrective Action. If the transaction is not ratified, the disinterested Directors shall take appropriate corrective action consistent with applicable law, which may include modification, rescission if practicable, restitution, or other remedies.

Section 6. Conflicts in Nontransactional Matters.

(a) Conflicted Decisions. If a Conflict of Interest arises in a decision that is not a Related Party Transaction, the Interested Person shall disclose the conflict and shall not participate in deliberation or voting on the matter, except to provide factual information at the request of the disinterested Directors.

(b) Disinterested Determination. The disinterested Directors shall determine, in good faith, whether the relationship or interest constitutes a Conflict of Interest and what limitations, if any, are required to protect the Commons Corporation’s interests.

Section 7. Compensation Matters.

(a) Directors and Officers. Any decision regarding compensation of a Director or officer shall be made only by disinterested Directors.

(b) Process. In determining compensation, the disinterested Directors shall act in good faith, consider appropriate comparability data when reasonably available, and document the basis for the decision.

(c) No Participation by Recipient. The individual whose compensation is being determined shall not be present during deliberation or voting on that compensation, except to provide factual information at the request of the disinterested Directors.

Section 8. Enforcement and Remedies.

(a) Policy Violations. A violation of this Article may result in appropriate action by the Board, consistent with applicable law and the governing documents, including removal from office if lawful, rescission of approvals, or referral for further review.

(b) No Limitation of Remedies. This Article does not limit any remedies available under applicable law for breach of fiduciary duty, self dealing, or other misconduct.

Section 9. Delegation to Committees.

(a) Committee Authority. The Board may delegate review and approval functions under this Article to a committee composed solely of disinterested Directors, to the extent permitted by applicable law and the Articles of Incorporation.

(b) Board Oversight. Any committee action under this Section shall be reported to the Board and recorded in the corporate records.

Section 10. Records and Administration.

(a) Recordkeeping. The Commons Corporation shall maintain records of disclosures, approvals, and ratifications under this Article as part of its corporate records.

(b) Construction. This Article shall be construed to promote compliance with the applicable nonprofit corporation statute and to ensure that Related Party Transactions, if permitted, are handled in a manner that protects the Commons Corporation from private capture.

Comments

Purpose and Policy Function

This article establishes a conflicts of interest and related party transaction framework for a nonprofit Commons Corporation. It is designed to prevent private capture, self dealing, and improper influence, while still permitting lawful transactions when they are demonstrably fair to the Commons Corporation. It is expressly framed as a supplement to, not a replacement for, fiduciary duties imposed by applicable law.

Key Definitions That Drive the Compliance Regime

The article defines the core categories that trigger disclosure and review, including Interested Persons, Related Persons, Related Parties, Related Party Transactions, Conflicts of Interest, and Material Financial Interests. The definitions are drafted broadly to capture both direct and indirect interests, including interests held through household members and through entities where a covered person holds a material financial interest or serves in a governance or managerial role.

Disclosure Duties

Directors and officers must disclose actual or potential conflicts and any actual or proposed related party transactions promptly after becoming aware of them. The article also authorizes annual written disclosure statements and imposes a continuing duty to update disclosures when circumstances materially change.

Advance Approval Framework for Related Party Transactions

The Commons Corporation may not enter into a related party transaction unless it is approved in advance, or later ratified under the article’s ratification provisions. Approval is reserved to disinterested directors, and the interested person must be recused from deliberations and voting, with a limited ability to provide factual information if requested. The approval standard requires a good faith determination, after reasonable inquiry, that the transaction is fair to the Commons Corporation, is on terms no less favorable than a comparable arm’s length transaction, and is in the corporation’s best interests. The article also requires consideration of reasonably available alternatives and permits reliance on professional advisors to evaluate fairness and comparability. A documentation requirement obligates contemporaneous records of the interest, information reviewed, alternatives considered, the disinterested vote or consent, and the basis for the required determinations.

Ratification of Transactions Entered Without Prior Approval

If a related party transaction occurs without advance approval, it must be promptly disclosed to the Board or an appropriate disinterested committee. Ratification is permitted only if the same fairness and best interests determinations required for advance approval are made. If the transaction is not ratified, the disinterested decision makers must take appropriate corrective action consistent with applicable law, including potential modification, rescission if practicable, restitution, or other remedies.

Conflicts Outside the Transaction Context

For conflicts that arise in nontransactional decisions, the article applies a similar disclosure and recusal structure. The disinterested directors determine in good faith whether a conflict exists and what limitations are necessary to protect the Commons Corporation’s interests, while allowing the conflicted person to provide factual information if requested.

Compensation Decisions

Compensation of directors and officers must be decided solely by disinterested directors. The process requires good faith decision making, consideration of appropriate comparability data when reasonably available, and documentation of the basis for compensation. The recipient may not be present during deliberation or voting, except to provide factual information at the request of the disinterested decision makers.

Enforcement and Remedies

The article authorizes the Board to respond to violations with appropriate actions consistent with applicable law and the governing documents, including removal from office if lawful, rescission of approvals, or referral for further review. It also clarifies that the article does not limit any remedies available under law for breach of fiduciary duty or related misconduct.

Delegation to Disinterested Committees

The Board may delegate review and approval functions to a committee composed solely of disinterested directors, to the extent permitted by applicable law and the Articles of Incorporation. Committee actions must be reported to the Board and recorded in the corporate records.

Recordkeeping and Construction

The Commons Corporation must maintain records of disclosures, approvals, and ratifications as part of its corporate records. The article directs that its provisions be construed to promote compliance with nonprofit corporation law and to ensure that any permitted related party transactions are handled in a manner that protects the Commons Corporation from private capture.

1. Status and purpose.

(a) Nonprofit Status. The corporation is a nonprofit corporation organized under the nonprofit corporation statute of its jurisdiction of incorporation. This Article governs internal dispute resolution among directors and is intended solely for internal corporate governance purposes.

(b) Purpose of This Article. This Article establishes a defined process for resolving disagreements among directors regarding the interpretation, application, allocation, and funding of the Four Funds established in the Articles of Incorporation and any related corporate purposes. It is intended to preserve the integrity of the Four Funds, the commons purposes of the corporation, and the polycentric governance structure established elsewhere in the Articles.

(c) Relationship to Other Articles. This Article shall be interpreted in coordination with the Articles on corporate purposes, polycentric governance, the Four Funds, the Standing Budget and Allocation Committee, the Office of the Ombudsman, and any related provisions. In the event of a conflict between this Article and any internal policy, charter, or committee procedure, this Article shall control.

2. Scope of Covered Disputes.

(a) Covered Disputes. This Article applies only to disputes among directors, in their capacity as directors, that concern one or more of the following matters:

(1) the interpretation of Articles or bylaws governing the establishment, purposes, allocation, funding, or use of the Four Funds;

(2) the legality or propriety of Board decisions or proposed decisions concerning allocation or funding among the Four Funds, including any temporary variance from baseline allocation rules;

(3) the interpretation or application of Articles or bylaws that define the commons purposes of the corporation or the internal treatment of surplus; or

(4) the processes and procedures by which the Board, the Standing Budget and Allocation Committee, any Fund administrator, or any relevant committee exercises authority with respect to the Four Funds or the commons purposes of the corporation.

(b) Excluded Matters. This Article does not govern:

(1) disputes between directors and workers, Worker Committees, or Subsidiary personnel, which are governed by other Articles or bylaws;

(2) disputes that relate solely to matters unrelated to the Four Funds or the commons purposes of the corporation; or

(3) any external dispute involving third parties, creditors, regulators, or governmental authorities, which shall be governed by applicable law and by other Articles or bylaws.

(c) Preservation of fiduciary Duties. Nothing in this Article alters or diminishes any fiduciary duty of a director under applicable law. All actions taken under this Article shall be consistent with the duty of care, duty of loyalty, and any other statutory or common law duties owed by directors of a nonprofit corporation.

3. Internal Consultation among Directors.

(a) Duty to Confer in Good Faith. When a dispute within the scope of Section 2 arises among directors, the directors shall first attempt in good faith to resolve the matter through direct discussion at a Board meeting or, where appropriate, through a designated Board committee with authority over the subject matter.

(b) Placement on Agenda. Any director who believes that such a dispute exists may request that the issue be placed on the agenda for a Board meeting. The Board shall provide a reasonable opportunity for the presentation of relevant facts, legal and policy positions, and proposed resolutions.

(c) Record of Positions. If the dispute is not resolved through consultation, the Board shall ensure that the nature of the dispute and the positions of the directors are reasonably reflected in the minutes. Any director may request that a concise written statement of that director’s position be appended to the minutes for purposes of any subsequent mediation or judicial proceeding.

4. Mediation and Facilitated Resolution.

(a) Availability of Mediation. If good faith consultation under Section 3 does not resolve the dispute, the participating directors may agree to seek nonbinding mediation as a means of facilitated resolution. Mediation shall be confidential to the extent permitted by law.

(b) Ombudsman as Mediator. The directors may jointly request that the Ombudsman serve as mediator, subject to the Ombudsman’s consent and to any limitations set forth in the Article establishing the Office of the Ombudsman. In considering such a request, the Ombudsman may take into account workload, independence, perceived pressure, and potential conflicts of interest.

(c) Independent Third-party Mediator. If the Ombudsman does not serve as mediator, or if the directors prefer an independent neutral, the participating directors may jointly select a third party mediator who is not an officer, director, employee, or agent of the corporation or any Subsidiary. The mediator should have experience in nonprofit governance, complex financial structures, allocation disputes, or comparable matters.

(d) Mediation Procedures. The mediator shall have discretion, in consultation with the participating directors, to structure the mediation process, including any exchange of written statements, joint sessions, and separate meetings with individual directors. The mediator shall not have authority to impose a binding resolution. Any agreement reached in mediation shall be documented in writing and, where required, presented to the Board for formal approval.

(e) Costs of Mediation. Unless the directors agree otherwise, the reasonable fees and expenses of the mediator shall be borne by the corporation as a cost of governance, and each director shall bear that director’s own costs, including legal fees, incurred in connection with the mediation, subject to any right of advancement or reimbursement provided elsewhere in the Articles or bylaws.

5. Preservation of Statutory Rights and Remedies.

(a) Statutory Remedies Preserved. Nothing in this Article limits or waives any right or remedy available to a director under applicable nonprofit corporation law, including but not limited to rights relating to inspection of books and records, enforcement of fiduciary duties, or challenge to unauthorized or ultra vires acts.

(b) Derivative Actions. To the extent permitted by applicable law, directors may avail themselves of any derivative action rights granted by statute, including the right to commence or maintain a proceeding in the right of the corporation to address alleged breaches of duty relating to allocation or funding decisions concerning the Four Funds or the commons purposes of the corporation.

(c) Coordination with Internal Processes. Directors are encouraged, but not required, to complete the consultation and mediation processes described in Sections 3 and 4 before commencing a derivative or other statutory proceeding, except where delay would reasonably risk irreparable harm to the corporation, the Four Funds, or the commons purposes of the corporation.

6. Prohibition of Arbitration.

(a) No Arbitration of Covered Disputes. Disputes covered by this Article shall not be submitted to binding or nonbinding arbitration, whether pursuant to private rules, statutory schemes, or otherwise, unless the Articles are amended to authorize such arbitration in a manner consistent with applicable law.

(b) Invalidity of Contrary Provisions. Any agreement, policy, or provision purporting to require arbitration of disputes covered by this Article, if adopted without a conforming amendment of the Articles, shall be void and of no effect as between the corporation and its directors with respect to such disputes.

7. Declaratory Judgment and Equitable Relief by Directors.

(a) Right to Seek Declaratory and Related Relief. In addition to any statutory rights, each director shall have the right to bring an action for declaratory judgment, and for related injunctive or other equitable relief where appropriate, in a court of competent jurisdiction to obtain a judicial determination regarding the interpretation or application of any Articles or bylaws governing the establishment, purposes, allocation, funding, or use of the Four Funds or the commons purposes of the corporation, including the validity of Board actions or proposed actions in that regard.

(b) Contractual Nature of Standing. The right described in subsection (a) is contractual in nature as among the directors and between each director and the corporation. By accepting office as a director, each director agrees that any director may, in good faith, invoke this right to enforce the Articles, the bylaws, and the corporate purposes relating to the Four Funds and the commons purposes of the corporation, and that the corporation shall be bound by the final judgment of the court, subject to any rights of appeal.

(c) Binding Effect of Judgment. A final, nonappealable judgment of a court of competent jurisdiction in a declaratory judgment action brought under this Section shall be binding upon the corporation and all persons who are then serving as directors with respect to the issues actually decided. The Board shall take such actions as are reasonably necessary to implement the judgment, consistent with applicable law and fiduciary duties.

(d) Venue and Governing Law. Unless otherwise required by applicable law, any action brought under this Section shall be filed in a court of competent jurisdiction in the jurisdiction of incorporation of the corporation and shall be governed by the nonprofit corporation law and other applicable law of that jurisdiction.

(e) Attorneys’ Fees and Costs. The corporation shall advance or reimburse the reasonable attorneys’ fees and costs incurred by any director in connection with any action brought under this Section, provided that the director acted in good faith and in a manner the director reasonably believed to be in the best interests of the corporation and for the principal purpose of enforcing the Articles, the bylaws, or the corporate purposes relating to the Four Funds or the commons purposes of the corporation. Advancement or reimbursement may be conditioned on the director’s written undertaking to repay such amounts if it is finally determined that the director did not so act in good faith. Nothing in this Section limits the authority of a court, under applicable law, to order a different allocation of fees and costs upon a finding of bad faith or abuse of process.

(f) Good Faith and Fiduciary Duties. The good faith exercise by a director of the rights described in this Section, including the commencement or maintenance of an action reasonably intended to obtain declaratory or related equitable relief with respect to the Four Funds or the commons purposes of the corporation, shall be deemed consistent with, and not adverse to, the director’s fiduciary duties to the corporation and shall not, by itself, be grounds to deny advancement or indemnification of expenses otherwise available under the Articles, the bylaws, or applicable law.

8. Effect of Dispute Resolution Outcomes.

(a) Implementation by the Board. Any resolution of a dispute under this Article, whether achieved through consultation, mediation, derivative proceedings, or judicial determination, shall be implemented by the Board in a manner consistent with applicable law, the Articles, and the bylaws, including provisions governing the Four Funds, the commons purposes of the corporation, and polycentric governance.

(b) No Expansion of Substantive Authority. Nothing in this Article shall be construed to expand the substantive authority of the Board, any committee, or any director with respect to allocation or funding of the Four Funds or the commons purposes of the corporation beyond that granted by other Articles, the bylaws, or applicable law. This Article addresses procedures and enforcement mechanisms, not the underlying allocation rules.

(c) Consistency with Nonprofit Character. All actions taken under this Article shall be interpreted and applied in a manner consistent with the nonprofit character of the corporation and the requirement that no part of its net earnings inure to the benefit of any private individual, except as permitted by law for reasonable compensation and benefits.

9. Amendment and Severability.

(a) Amendment of This Article. This Article may be amended only in the manner provided for amendment of the Articles of Incorporation of the corporation and consistent with applicable nonprofit corporation law. Any amendment shall preserve, to the extent reasonably practicable, the availability of judicial declaratory relief and the contractual right of directors to seek such relief.

(b) Severability. If any provision of this Article is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect, and this Article shall be interpreted to give effect to its purposes to the maximum extent permitted by law.

Comments

Status and Purpose

This Article confirms the Corporation’s nonprofit status and establishes an internal, governance-only process to resolve disputes among directors regarding the interpretation, application, allocation, and funding of the Four Funds and related commons purposes. It is intended to protect the integrity of the Four Funds and the polycentric governance structure, and it controls over conflicting internal policies, charters, or committee procedures.

Scope of Covered Disputes and Exclusions

The Article applies only to disputes among directors, acting in their capacity as directors, that concern the governance of the Four Funds and related commons purposes. Covered matters include interpretation and application of Four Fund rules, Board allocation and funding decisions (including temporary variances), internal treatment of surplus, and the procedures by which the Board, the Standing Budget and Allocation Committee, fund administrators, and related committees exercise authority over the Four Funds and commons purposes. The Article excludes disputes involving workers, Worker Committees, Subsidiary personnel, matters unrelated to the Four Funds or commons purposes, and external disputes with third parties or government actors.

Preservation of Fiduciary Duties

The Article expressly preserves directors’ fiduciary duties under applicable law and provides that actions taken under the Article must remain consistent with those duties.

Internal Consultation and Board Recordkeeping

The process begins with a required good-faith effort by directors to resolve covered disputes through direct discussion at a Board meeting or, where appropriate, through a Board committee with relevant authority. Any director may request that the issue be placed on the Board agenda, and the Board must provide a reasonable opportunity for the presentation of relevant facts, legal and policy positions, and proposed resolutions. If consultation does not resolve the dispute, the Board must ensure the dispute and the directors’ positions are reasonably reflected in the minutes, and a director may append a concise written statement to the minutes.

Mediation and Mediator Selection

If consultation fails, the directors may jointly agree to nonbinding mediation. Mediation is confidential to the extent permitted by law. The Ombudsman may serve as mediator if jointly requested and if the Ombudsman consents, with consideration given to workload, independence, perceived pressure, and conflicts. Alternatively, the directors may jointly select an independent third-party mediator with relevant governance and financial-structure experience. The mediator controls the structure and timetable of the process but cannot impose a binding result. Any mediated agreement must be reduced to writing and, where required, submitted for Board approval.

Allocation of Mediation Costs

Unless the directors agree otherwise, mediator fees and expenses are borne by the Corporation as a governance cost, while each director bears that director’s own costs, including legal fees, subject to any separate advancement or reimbursement rights provided elsewhere.

Preservation of Statutory Rights and Derivative Actions

The Article preserves directors’ statutory rights and remedies under nonprofit corporation law, including inspection rights and the ability to challenge unauthorized or ultra vires acts. It also recognizes directors’ ability, to the extent permitted by law, to pursue derivative actions in the right of the Corporation for alleged breaches of duty relating to Four Fund allocation or commons purposes. Directors are encouraged, but not required, to complete consultation and mediation before commencing statutory proceedings, except where delay would risk irreparable harm to the Corporation, the Four Funds, or commons purposes.

No Arbitration and Void Contrary Provisions

Covered disputes may not be submitted to arbitration, binding or nonbinding, unless the Articles are amended to authorize arbitration consistently with applicable law. Any policy or agreement attempting to mandate arbitration for covered disputes without a conforming Articles amendment is declared void and of no effect as between the Corporation and its directors for those disputes.

Declaratory Judgment and Equitable Relief

Each director is granted a contractual right, in addition to statutory rights, to bring an action for declaratory judgment and related equitable relief to obtain a judicial determination concerning Four Fund governance and commons purpose provisions, including the validity of Board actions or proposed actions. The Article characterizes standing as contractual among directors and between each director and the Corporation. It provides that final judgments are binding on the Corporation and then-serving directors as to the issues decided and requires the Board to take reasonably necessary implementation steps consistent with law and fiduciary duties. Venue is directed to a court of competent jurisdiction in the jurisdiction of incorporation applying that jurisdiction’s nonprofit corporation law and other applicable law.

Attorneys’ Fees, Costs, and Good Faith Protections

For declaratory and related actions brought under the Article, the Corporation must advance or reimburse a director’s reasonable attorneys’ fees and costs when the director acts in good faith, reasonably believes the action is in the Corporation’s best interests, and pursues enforcement of Four Fund and commons purpose provisions. Advancement or reimbursement may be conditioned on a written repayment undertaking if it is finally determined the director did not act in good faith. The Article also preserves a court’s ability to allocate fees differently upon a finding of bad faith or abuse of process and clarifies that a director’s good-faith pursuit of these rights is consistent with fiduciary duties and should not, by itself, be grounds to deny advancement or indemnification otherwise available.

Effect of Outcomes and Limits on Substantive Authority

Any resolution, whether achieved through consultation, mediation, derivative proceedings, or judicial determination, must be implemented by the Board consistent with applicable law, the Articles, and bylaws, including provisions governing the Four Funds, commons purposes, and polycentric governance. The Article emphasizes it is procedural and enforcement-focused and does not expand the substantive allocation authority of the Board, committees, or directors beyond what is granted elsewhere. It also requires application consistent with the Corporation’s nonprofit character and non-inurement principles, except as permitted by law for reasonable compensation and benefits.

Amendment and Severability

The Article may be amended only through the Articles amendment process and in compliance with applicable nonprofit corporation law, with an express expectation that amendments preserve, to the extent reasonably practicable, the availability of judicial declaratory relief and directors’ contractual right to seek it. If any provision is held invalid, the remainder remains effective and is to be interpreted to effectuate the Article’s purposes to the maximum extent permitted by law.

Article __. Indemnification and Directors and Officers Insurance

Section 1. Application and Definitions.

(a) Covered Persons. For purposes of this Article, “Covered Person” means any individual who is or was a director or officer of the corporation and any individual who, at the request of the corporation, is or was serving as a director, officer, or in a substantially equivalent governing capacity of another entity, whether for profit or nonprofit. The Board may, by resolution, extend some or all of the benefits of this Article to employees, committee members, or agents of the corporation or any Subsidiary, to the extent permitted by applicable nonprofit corporation law.

(b) Proceedings. “Proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, and whether formal or informal, to which a Covered Person is or was a party or is or was threatened to be made a party by reason of serving, or having served, as a Covered Person.

(c) Expenses. “Expenses” means all reasonable attorneys’ fees, costs, and other expenses actually and reasonably incurred in connection with a Proceeding, including any appeals, but does not include amounts paid in settlement or judgments except as expressly provided in this Article.

Section 2. General Right to Indemnification.

(a) Indemnification to the Fullest Extent. The corporation shall indemnify each Covered Person to the fullest extent permitted by applicable nonprofit corporation law, as such law may be amended from time to time, against all Expenses, judgments, fines, penalties, and amounts paid in settlement reasonably incurred in connection with any Proceeding, provided that the Covered Person’s conduct met the applicable standard of conduct set forth in this Article and in applicable law.

(b) Standard of Conduct. Except as otherwise provided in Section 2(c), indemnification shall be available only if the Covered Person:

(1) acted in good faith; and

(2) acted in a manner the Covered Person reasonably believed to be in, or at least not opposed to, the best interests of the corporation; and

(3) in the case of any criminal Proceeding, had no reasonable cause to believe the conduct was unlawful.

(c) Proceedings by or in the Right of the Corporation. In the case of a Proceeding by or in the right of the corporation, indemnification shall not extend to any claim, issue, or matter in which the Covered Person is adjudged liable to the corporation, except to the extent that a court of competent jurisdiction determines that the Covered Person is fairly and reasonably entitled to indemnity for specific Expenses in view of all the circumstances.

(d) Personal Benefit and Improper Conduct. No indemnification shall be made to or on behalf of any Covered Person with respect to any claim, issue, or matter as to which the Covered Person is adjudged liable for receiving an improper personal benefit, for intentional misconduct, or for a knowing violation of law.

Section 3. Mandatory Indemnification Upon Successful Defense.

To the extent that a Covered Person has been wholly successful on the merits or otherwise in defense of any Proceeding, or in defense of any claim, issue, or matter in such a Proceeding, the corporation shall indemnify that Covered Person against all reasonable Expenses incurred in connection therewith, regardless of whether the standards of conduct set forth in Section 2(b) have been satisfied.

Section 4. Advancement of Expenses.

(a) Advancement Right. The corporation shall advance Expenses to any Covered Person in connection with any Proceeding, prior to the final disposition of such Proceeding, upon receipt of:

(1) a written request from the Covered Person; and

(2) a written undertaking by or on behalf of the Covered Person to repay such amounts if it is ultimately determined that the Covered Person is not entitled to indemnification under this Article or applicable law.

(b) Presumption for Directors and Officers. Advancement for directors and officers shall be made as a matter of right, subject only to the undertaking referenced in subsection (a). Advancement for other persons to whom the Board has extended coverage under Section 1(a) may be made as a matter of right or in the Board’s discretion, as specified in the applicable Board resolution.

(c) No Presumption Against Advancement. The existence of questions about the Covered Person’s conduct or ultimate entitlement to indemnification shall not, by itself, be a basis to deny advancement, so long as the undertaking in subsection (a) is provided.

Section 5. Determination of Entitlement to Indemnification.

(a) Required Determination. Except in the case of mandatory indemnification under Section 3, any indemnification under Section 2 shall be made only upon a determination that the applicable standard of conduct has been met.

(b) Authorized Decision Makers. Such determination shall be made:

(1) by a majority vote of the disinterested directors, even though less than a quorum; or

(2) by a committee of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum; or

(3) if there are no disinterested directors, or if so directed by the disinterested directors, by independent legal counsel in a written opinion; or

(4) by a court of competent jurisdiction in a final, nonappealable judgment or order.

(c) Burden of Proof. In any Proceeding to determine a Covered Person’s right to indemnification, the corporation shall bear the burden of showing that the standards for indemnification have not been met, unless applicable law requires otherwise.

Section 6. Relation to Dispute Resolution Among Directors Article and Commons Enforcement.

(a) Enforcement of Articles and Commons Purposes. For purposes of this Article, a director who, in good faith, brings, maintains, or participates in a Proceeding seeking declaratory, injunctive, or other equitable relief to interpret or enforce the Articles, the bylaws, the Four Funds, the worker veto provisions, or the commons purposes of the corporation shall be deemed to be acting in a manner reasonably believed to be in the best interests of the corporation, provided that the director’s actions are not primarily for personal gain or to harass another person.

(b) Coordination with Dispute Resolution Among Directors Article. The rights of directors to seek declaratory or related equitable relief, and to receive advancement and reimbursement of fees and costs, as set forth in the Dispute Resolution Among Directors Article of the Articles of Incorporation, are intended to be consistent with and supplemented by this Article. In the event of any ambiguity, this Dispute Resolution Among Directors Article shall be interpreted together to favor protection of directors who, in good faith, act to enforce the Articles, the bylaws, and the commons purposes of the corporation.

(c) No Adverse Inference. The commencement or maintenance, in good faith, of any Proceeding authorized by the Articles or bylaws to enforce the purposes, surplus rules, or governance structures of the corporation shall not, by itself, be treated as evidence of conduct that is opposed to the best interests of the corporation.

Section 7. Nonexclusivity and Continuation of Rights.

(a) Nonexclusivity. The rights to indemnification and advancement of Expenses provided by this Article shall not be exclusive of any other rights to which a Covered Person may be entitled under any statute, Articles provision, bylaw, Board resolution, agreement, vote of disinterested directors, or otherwise, both as to actions in an official capacity and as to actions in any other capacity while holding such office.

(b) Continuation After Service. The rights of a Covered Person under this Article shall continue as to a person who has ceased to be a Covered Person and shall inure to the benefit of the Covered Person’s heirs, executors, and administrators.

(c) Contract Rights. The rights of a Covered Person to indemnification and advancement under this Article shall be deemed to be contractual rights, vested as to acts or omissions occurring during the Covered Person’s service in such capacity, and no amendment or repeal of this Article shall adversely affect any such rights with respect to any act or omission occurring prior to such amendment or repeal.

Section 8. Insurance and Other Arrangements.

(a) Authority to Purchase Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a Covered Person against any liability asserted against and incurred by such person in that capacity, or arising out of that person’s status as such, whether or not the corporation would have the power to indemnify the person against such liability under this Article or applicable law.

(b) Other Financial Arrangements. To the extent permitted by applicable nonprofit corporation law, the corporation may enter into indemnification agreements, establish trust funds, grant security interests, or use other financial arrangements to secure its obligations under this Article.

Section 9. Severability and Amendment.

(a) Severability. If any provision of this Article or the application of any provision to any Covered Person or circumstance is held invalid, illegal, or unenforceable by a court of competent jurisdiction, the remainder of this Article shall not be affected and shall be interpreted to give effect to the intent of providing broad indemnification and advancement to the fullest extent permitted by law.

(b) Amendment. This Article may be amended or repealed only in the manner provided for amendment of the Articles of Incorporation and in compliance with applicable nonprofit corporation law. Any such amendment or repeal shall not, without the consent of the affected Covered Person, adversely affect that Covered Person’s rights with respect to acts or omissions occurring before the effective date of the amendment or repeal.

Comments

Purpose and Overall Effect

This Article establishes a broad indemnification, expense advancement, and insurance framework intended to protect directors, officers, and other covered fiduciaries from personal financial exposure arising out of their service, while retaining standard nonprofit-law limitations for improper conduct.

Who Is Covered and What Matters Are Covered

The Article defines “Covered Person” to include current and former directors and officers and individuals serving, at the corporation’s request, in comparable governing capacities for other entities. It authorizes the Board to extend some or all protections to employees, committee members, or agents of the corporation or any Subsidiary to the extent permitted by applicable law. “Proceeding” is defined expansively to include threatened, pending, or completed civil, criminal, administrative, arbitrative, or investigative matters, whether formal or informal. “Expenses” generally include reasonable attorneys’ fees and costs incurred in connection with a Proceeding, including appeals, while treating settlements and judgments as covered only where expressly provided.

General Indemnification Commitment and Standard of Conduct

The corporation commits to indemnify Covered Persons to the fullest extent permitted by applicable nonprofit corporation law for Expenses and other liabilities (including judgments, fines, penalties, and settlement amounts) incurred in connection with a Proceeding, provided the Covered Person satisfies the required standard of conduct. Indemnification is conditioned on good faith, acting in a manner reasonably believed to be in, or at least not opposed to, the corporation’s best interests, and, in criminal matters, lacking reasonable cause to believe the conduct was unlawful.

Limits on Indemnification

For proceedings brought by or in the right of the corporation, indemnification is generally unavailable for matters in which the Covered Person is adjudged liable to the corporation, except to the extent a court determines indemnity is fair and reasonable for specific Expenses in view of all circumstances. Indemnification is also barred for matters where the Covered Person is adjudged liable for receiving an improper personal benefit, for intentional misconduct, or for a knowing violation of law.

Mandatory Indemnification After Successful Defense

Where a Covered Person is wholly successful on the merits or otherwise in defending a Proceeding, or a claim, issue, or matter within a Proceeding, the corporation must indemnify that person for reasonable Expenses incurred, without requiring satisfaction of the general standard of conduct.

Advancement of Expenses Before Final Disposition

The corporation must advance Expenses to a Covered Person before final resolution of a Proceeding upon receipt of a written request and a written undertaking to repay the amounts advanced if it is ultimately determined that the Covered Person is not entitled to indemnification. Advancement for directors and officers is treated as a matter of right (subject to the undertaking). Advancement for other persons to whom coverage is extended may be mandatory or discretionary depending on the applicable Board resolution. Questions regarding the Covered Person’s conduct or ultimate entitlement do not, by themselves, justify denying advancement if the undertaking is provided.

How Entitlement Is Determined and Who Decides

Except for mandatory indemnification after successful defense, indemnification requires an affirmative determination that the applicable standard of conduct has been met. The Article authorizes several decision makers, including disinterested directors (even if fewer than a quorum), a committee of disinterested directors, independent legal counsel when disinterested directors are unavailable or so direct, or a court of competent jurisdiction. In proceedings to determine indemnification entitlement, the corporation generally bears the burden of proving the standards for indemnification have not been satisfied, unless applicable law requires otherwise.

Interaction With Director Enforcement Actions and Dispute Resolution

The Article is structured to protect directors who, in good faith, pursue declaratory, injunctive, or other equitable relief to interpret or enforce the Articles, bylaws, the Four Funds, worker veto provisions, or the commons purposes of the corporation, treating such actions as aligned with the corporation’s best interests when not primarily for personal gain or harassment. It also states that these protections are intended to be consistent with and supplemental to the Dispute Resolution article, and that both provisions should be interpreted together to favor protection of directors acting in good faith to enforce the governance and purpose architecture. Good-faith enforcement proceedings are not, by themselves, to be treated as evidence of conduct opposed to the corporation’s best interests.

Nonexclusive, Continuing, and Contractual Nature of Rights

Indemnification and advancement rights are expressly nonexclusive and may exist alongside statutory rights, Articles provisions, bylaws, Board resolutions, agreements, or votes of disinterested directors. The protections continue after service and extend to a Covered Person’s heirs, executors, and administrators. The Article characterizes these protections as contractual and vested with respect to acts or omissions during service, and it restricts amendments or repeal from impairing those rights as to prior acts or omissions.

Insurance and Other Protective Arrangements

The corporation may purchase and maintain insurance covering Covered Persons for liabilities incurred by reason of their service, even where indemnification might not otherwise be available. The corporation may also use other lawful mechanisms to secure indemnification obligations, including indemnification agreements, trust arrangements, security interests, or other financial structures, to the extent permitted by applicable nonprofit corporation law.

Severability and Amendment Controls

If any provision is held invalid or unenforceable, the remainder remains effective and is to be interpreted to preserve the intent of providing broad protection to the fullest extent permitted by law. Amendments or repeal must follow the Articles amendment process and applicable nonprofit corporation law, and may not, without the affected Covered Person’s consent, adversely affect rights relating to acts or omissions occurring before the amendment or repeal becomes effective.

Section 1. Corporate Division Authorized.

(a) Authority to Divide. The Corporation is expressly authorized, subject to applicable law and this Article, to separate, divide, or otherwise restructure its organization so that its business, assets, liabilities, and Subsidiaries are allocated between or among two or more commons corporations that each continue the purposes and structural constraints set forth in these Articles.

(b) Forms of Division. A division under this Article may be effected through one or more transactions permitted under applicable nonprofit corporation law, including without limitation the formation of one or more new commons corporations, the transfer of assets and liabilities to such entities, and the adoption of such mergers, consolidations, or reorganizations as may be required to implement the division.

(c) No Members or Owners. Any commons corporation created or continued as part of a division under this Article shall have no members, shareholders, or other equity owners, and shall adhere to the same prohibition on private residual claims as the Corporation.

Section 2. Plan of Division.

(a) Board Approval. Any division under this Article shall be implemented pursuant to a written plan of division approved by the Board of Directors in accordance with these Articles, the Bylaws, and applicable law.

(b) Required Contents. The plan of division shall, at a minimum, address the following:

(1) the identification of each successor commons corporation that will exist upon completion of the division.

(2) the allocation of the Corporation’s assets, liabilities, contractual rights and obligations, and Subsidiaries among the successor commons corporations.

(3) the proposed governance structure of each successor commons corporation, including the composition and appointment of directors and officers consistent with the structural principles of the Corporation.

(4) the treatment of existing committees, worker bodies, advisory bodies, and ombuds functions, including whether and how they will be replicated, modified, or allocated among successor commons corporations.

(5) the manner in which existing policies, protocols, and internal governance instruments will be assigned, replicated, amended, or superseded.

(6) the steps to be taken to obtain any required regulatory approvals and to comply with federal, state, and local law, including federal tax law and any applicable attorney general oversight.

(c) Corporate Business Purpose. The Board shall adopt the plan of division only upon making a good faith determination that the division serves one or more bona fide corporate business purposes of the Corporation and is consistent with its purposes and structural constraints as set forth in these Articles.

Section 3. Successor Commons Corporations.

(a) Preservation of Purposes and Constraints. Each successor commons corporation resulting from a division under this Article shall:

(1) be organized as a commons corporation under substantially similar articles of incorporation that preserve the core purposes and structural constraints of the Corporation, including the absence of shareholders or members and the prohibition on private residual claims.

(2) be governed by a board of directors structured to maintain polycentric governance and worker protections substantially consistent with these Articles, subject to such adjustments as are reasonably necessary to reflect the division and the scope of operations of each successor.

(b) Adoption of Articles and Bylaws. The Board is authorized to approve and execute, or cause to be approved and executed, the articles of incorporation, bylaws, and other governing instruments of any successor commons corporation that are necessary or appropriate to implement the plan of division, provided that such instruments remain consistent with the purposes and structural constraints of the Corporation as set forth in these Articles.

Section 4. Federal Tax Compliance and Structuring.

(a) Authority to Structure Transactions. The Board is authorized to structure any division under this Article, and any related transfers of assets, liabilities, and Subsidiaries, in a manner intended to qualify for nonrecognition or other favorable treatment under applicable federal income tax law, including but not limited to provisions governing tax free transfers to controlled corporations and corporate reorganizations.

(b) Tax Elections and Filings. The Corporation is authorized to make, or cause to be made, any tax elections, consents, and filings that the Board reasonably determines to be necessary or appropriate to implement the division and to achieve the intended federal, state, and local tax treatment, including obtaining tax identification numbers for any successor commons corporations and filing any required information returns.

(c) Opinions and Rulings. The Board may engage tax counsel and other professional advisors, obtain written tax opinions, and request private letter rulings or other determinations from tax authorities, and may modify the structure or timing of the division within the limits of this Article in order to secure or preserve favorable tax treatment, so long as the division remains consistent with the purposes and structural constraints of the Corporation.

Section 5. Regulatory and Attorney General Approvals.

(a) Attorney General and Court Approvals. The Board is authorized to seek and obtain, on behalf of the Corporation, any approvals, consents, or orders that may be required or advisable from any state attorney general, court of competent jurisdiction, or other regulatory authority in connection with a division under this Article, including approvals relating to transfers of assets or changes in corporate structure.

(b) Amendments to Plan to Satisfy Authorities. The Board may modify the plan of division to comply with conditions imposed by a state attorney general, court, or other regulatory authority, provided that:

(1) the modifications do not introduce shareholders, members, or other private owners.

(2) the modifications do not authorize the distribution of net assets for private benefit.

(3) the modifications remain consistent, in substance, with the purposes and structural constraints set forth in these Articles.

(c) Filings and Notices. The Corporation is authorized to prepare, execute, and file all certificates, notices, and other documents with any governmental authority that are necessary or appropriate to effectuate the division, including articles of incorporation or amendments, certificates of division, and any required regulatory reports.

Section 6. Allocation of Assets, Liabilities, and Subsidiaries.

(a) Transfers Authorized. In furtherance of a division under this Article, the Corporation may transfer, assign, convey, and deliver to any successor commons corporation such of its assets, liabilities, contractual rights and obligations, and Subsidiaries as are provided for in the plan of division, subject to applicable law and any required third party consents.

(b) Subsidiaries. The Corporation may transfer to any successor commons corporation all of the equity or governance interests in any Subsidiary, or may cause a Subsidiary to be restructured so that it becomes a Subsidiary of a successor commons corporation, provided that each Subsidiary remains wholly owned, directly, by a commons corporation within the applicable commons capitalism structure.

(c) Assumption of Liabilities. Each successor commons corporation may assume such liabilities, obligations, and commitments of the Corporation or of any Subsidiary as are allocated to it under the plan of division, and the Corporation is authorized to enter into assumption agreements or other instruments to evidence such allocations.

Section 7. Implementation Authority.

(a) Actions by Officers and Directors. The Board may authorize any officer or director of the Corporation to execute and deliver all agreements, instruments, certificates, and other documents, and to take all actions, that the Board determines to be necessary or appropriate to implement the division, including without limitation:

(1) organizational documents for successor commons corporations.

(2) transfer, assignment, and assumption agreements.

(3) intercompany agreements.

(4) regulatory and tax filings.

(b) Professional Advisors. The Corporation may retain, compensate, and rely upon legal counsel, tax advisors, accountants, valuation experts, and other professional advisors in connection with any division under this Article, and may pay all reasonable fees and expenses incurred in connection with such division.

(c) Further Assurances. The Corporation and any successor commons corporations are authorized to perform all such further acts and to execute all such further documents as may be reasonably necessary or appropriate to carry out fully the intent and purposes of this Article and any plan of division adopted under it.

Section 8. Continuity of Obligations and Protections.

(a) Continuity of Worker and Benefit Protections. To the extent reasonably practicable, any plan of division shall provide for the continuation or equitable allocation among successor commons corporations of the Corporation’s existing worker protections, wage and benefits structures, and commons based surplus policies, including any budgetary or fund allocations and worker veto protections established under these Articles.

(b) No Private Distributions. No division under this Article shall authorize or result in the distribution of net assets for the private benefit of any director, officer, worker, or other individual, except for reasonable compensation for services rendered or reimbursement of reasonable expenses.

(c) Successor Obligations. Each successor commons corporation shall, to the extent provided in the plan of division, succeed to and honor the obligations of the Corporation with respect to workers, benefit arrangements, and long term commitments, consistent with the purposes and structural constraints of these Articles.

Section 9. Interpretation.

(a) Consistency With Other Articles. This Article shall be interpreted in a manner consistent with the Corporation’s purposes and structural constraints as set forth elsewhere in these Articles. In the event of any conflict between this Article and other provisions of the Articles, the provisions that more strictly preserve the commons structure and prohibit private residual claims shall govern.

(b) Supplemental Authority. The authority granted by this Article is intended to supplement, and not to limit, any power of division, reorganization, merger, or asset transfer that the Corporation may have under applicable law or under other provisions of these Articles, so long as such powers are exercised in a manner consistent with the purposes and structural constraints set forth herein.

Comments

Corporate Division Authority and Core Guardrails

This Article expressly authorizes the Corporation, subject to applicable law, to separate, divide, or otherwise restructure so that its business, assets, liabilities, and Subsidiaries may be allocated among two or more successor commons corporations. The authority is framed to preserve continuity of the Corporation’s purposes and structural constraints, including the prohibition on private residual claims. Any successor commons corporation formed or continued in the division must have no members, shareholders, or other equity owners.

Permitted Transaction Structures

A division may be implemented through one or more transactions permitted under applicable nonprofit corporation law, including formation of one or more new commons corporations, transfers of assets and liabilities, and any mergers, consolidations, or reorganizations necessary to effectuate the division.

Plan of Division Requirement and Board Findings

Any division must be carried out under a written plan of division approved by the Board in accordance with the Articles, Bylaws, and applicable law. The plan must address, at a minimum, the identity of each successor commons corporation, the allocation of assets, liabilities, contractual rights and obligations, and Subsidiaries, and the proposed governance structure of each successor in a manner consistent with the Corporation’s structural principles. The plan must also address how existing committees, worker bodies, advisory bodies, and ombuds functions will be replicated, modified, or allocated, and how policies and internal governance instruments will be assigned, replicated, amended, or superseded. The Board may adopt a plan only upon a good faith determination that the division serves one or more bona fide corporate business purposes and remains consistent with the Corporation’s purposes and constraints.

Successor Entity Continuity and Governance Design

Each successor commons corporation must be organized under substantially similar organizing instruments that preserve the core commons features, including no members or shareholders and no private residual claims. Each successor must be governed by a board structure designed to maintain polycentric governance and worker protections substantially consistent with the Articles, subject to reasonable adjustments needed to reflect the division and the scope of each successor’s operations. The Board is expressly empowered to approve and execute the organizing documents and governance instruments for successor commons corporations as necessary to implement the plan, so long as those documents remain consistent with the Corporation’s purposes and structural constraints.

Federal Tax Structuring Authority

The Board is authorized to structure the division and related transfers to pursue nonrecognition or other favorable treatment under applicable federal income tax law, including transaction forms addressed in tax-free transfer and reorganization provisions. The Corporation may make necessary tax elections and filings, obtain tax identification numbers for successor corporations, and file required information returns. The Board may retain tax counsel and other advisors, obtain written tax opinions, and seek private letter rulings or comparable determinations, and may adjust structure or timing within the Article’s limits to preserve intended tax treatment.

Regulatory, Attorney General, and Court Approvals

The Board is authorized to seek and obtain any approvals, consents, or orders from state attorneys general, courts, or other regulators that may be required or advisable in connection with the division, including approvals relating to asset transfers or structural changes. The Board may modify the plan of division to satisfy conditions imposed by authorities, provided the modifications do not introduce private owners, do not authorize private-benefit distributions of net assets, and remain consistent in substance with the Corporation’s purposes and constraints. The Corporation is authorized to prepare and file all necessary governmental filings and notices to effectuate the division.

Allocation Mechanics for Assets, Liabilities, and Subsidiaries

The Corporation may transfer, assign, convey, and deliver assets, liabilities, contractual rights and obligations, and Subsidiaries to successor commons corporations as provided in the plan of division, subject to applicable law and required third-party consents. Subsidiary equity or governance interests may be transferred so that Subsidiaries become Subsidiaries of successor commons corporations, with the continuing requirement that each Subsidiary remain wholly owned, directly, by a commons corporation within the applicable structure. Successor commons corporations may assume liabilities allocated under the plan, and the Corporation may execute assumption agreements and related instruments to evidence the allocations.

Implementation Powers and Use of Professional Advisors

The Board may authorize officers or directors to execute documents and take actions necessary to implement the division, including successor organizational documents, transfer and assumption agreements, intercompany agreements, and regulatory and tax filings. The Corporation may retain and compensate legal counsel, tax advisors, accountants, valuation experts, and other professionals, and may pay reasonable fees and expenses incurred in the division process. The Corporation and successor commons corporations may take further actions and execute further documents reasonably necessary to carry out the Article and any adopted plan.

Continuity of Worker Protections and No Private Distributions

To the extent reasonably practicable, the plan of division must provide for continuation or equitable allocation of existing worker protections, wage and benefits structures, and commons-based surplus policies, including fund-related allocations and worker veto protections established under the Articles. The Article prohibits any division from authorizing or resulting in distributions of net assets for private benefit, except reasonable compensation for services or reimbursement of expenses. Successor commons corporations must honor, as provided in the plan, the Corporation’s obligations relating to workers, benefit arrangements, and long-term commitments, consistent with the Articles’ purposes and constraints.

Interpretation and Priority of Commons-Protective Provisions

This Article is to be construed consistently with the Corporation’s purposes and structural constraints stated elsewhere in the Articles. If a conflict arises, the provisions that more strictly preserve the commons structure and prohibit private residual claims control. The Article is intended to supplement, not limit, other lawful powers of division, reorganization, merger, or asset transfer, provided such powers are exercised consistently with the purposes and constraints set forth in the Articles.

Section 1. Authority and Scope

(a) The Corporation is authorized, directly and through any Subsidiary, to undertake the actions described in this Article (each, a “Covered Action”), solely as an incidental and subordinate exercise of corporate power.

(b) A Covered Action is permitted only if it (i) does not alter, dilute, supersede, or frustrate the ultimate purposes and mission of the CCE as set forth in these Articles and the Bylaws and (ii) is approved in strict compliance with this Article.

Section 2. Definitions

(a) “Charitable Contribution” means any gift, grant, sponsorship, donation, or other transfer of money, property, or services, without expectation of financial return, to or for the benefit of a Charitable Recipient.

(b) “Charitable Recipient” means (1) a nonprofit corporation, charitable trust, or other nonprofit entity organized and operated for charitable, educational, scientific, civic, or humanitarian purposes, or (2) a governmental unit or instrumentality, in each case as determined by the Board in good faith.

(c) “Nonprofit Affiliate” means any nonprofit corporation or other nonprofit entity that is created, organized, or caused to be organized by the Corporation or any Subsidiary, whether or not controlled by the Corporation.

(d) “General Welfare Distribution” means any distribution, transfer, program expenditure, or in-kind support intended to promote the general welfare outside the CCE, including support of public or community-oriented initiatives, but excluding internal worker wages, internal worker benefits, internal funds, internal reserves, and internal acquisition, reinvestment, and expansion activity.

(e) “Supermajority Vote” means the affirmative vote of not less than TWO-THIRDS (2/3) of all directors then in office (or such higher standard as may be specified elsewhere in these Articles, in which case the higher standard governs).

(f) “Worker Veto” means the worker veto right and related procedures established in these Articles and the Bylaws (and any implementing policies authorized by these Articles and the Bylaws), including any successor or amended worker veto provisions adopted by amendment to these Articles.

(g) “Ombudsman” means the Ombudsman office or officer established under these Articles and the Bylaws (and any successor office or officer established by amendment to these Articles).

(h) “Subsidiary” has the meaning stated in these Articles and, for avoidance of doubt, means a legal entity directly wholly owned (100%) by the Corporation that conducts market-facing operations.

Section 3. Covered Actions

(a) The following are Covered Actions:

(1) making any Charitable Contribution;

(2) making any General Welfare Distribution;

(3) forming, creating, or causing the creation of any Nonprofit Affiliate;

(4) making any capital contribution to, grant to, or other material support of a Nonprofit Affiliate;

(5) transferring, selling for less than fair market value, donating, dedicating, or otherwise distributing any Corporation or Subsidiary assets to a Charitable Recipient or for a general-welfare purpose; and

(6) entering into any binding multi-year commitment to do any of the foregoing.

(b) No Covered Action is authorized unless all conditions in Sections 4 through 10 are satisfied.

Section 4. Mission Preservation Limitations

(a) The Corporation shall not undertake any Covered Action if the Board determines in good faith that the Covered Action would, individually or in the aggregate with other Covered Actions:

(1) materially impair, frustrate, or create a substantial risk of frustration of the ultimate purposes and mission of the CCE;

(2) materially reduce the CCE’s capacity to sustain its required internal wage and benefit architecture as set forth in the governing documents;

(3) materially reduce the CCE’s capacity to acquire, convert, capitalize, or otherwise expand through additional Subsidiaries or reinvestment activity as contemplated by the governing documents;

(4) create any private residual claim, private return, investor-like interest, or other prohibited private benefit in any person; or

(5) create governance rights or contractual constraints in any third party that could reasonably be expected to limit the Board’s discretion in carrying out the ultimate purposes and mission of the CCE.

(b) Compliance with this Section 4 is a condition precedent to authorization and implementation of any Covered Action.

Section 5. Required Board Findings

(a) As a condition to approval of any Covered Action, the Board shall adopt written findings (the “Mission Preservation Findings”) stating with reasonable specificity that:

(1) the Covered Action is incidental and subordinate to the ultimate purposes and mission of the CCE;

(2) the Covered Action does not alter, dilute, supersede, or frustrate the ultimate purposes and mission of the CCE;

(3) the Covered Action is reasonably expected not to materially impair the CCE’s ability to fund and maintain its required internal wage, benefit, reserve, and acquisition/reinvestment architecture as set forth in the governing documents;

(4) the Covered Action does not create any prohibited private residual claim, private return, investor-like interest, or other prohibited private benefit; and

(5) the Covered Action is in the best interests of the Corporation, considered as a commons steward, and is consistent with the Board’s fiduciary obligations under applicable law.

(b) The Mission Preservation Findings shall be maintained with the corporate records.

Section 6. Supermajority Approval Requirement

(a) Any Covered Action requires approval by Supermajority Vote at a duly called meeting of the Board (or by unanimous written consent if permitted under the governing statute), with the Covered Action and proposed Mission Preservation Findings included in the notice or materials delivered to directors.

(b) The Board may impose additional conditions on any Covered Action, including caps, staged funding, re-approval triggers, reporting covenants, termination rights, and clawback, reversion, or refund provisions to the extent legally enforceable.

Section 7. Worker Veto Applies Without Threshold; Notice Served on Ombudsman

(a) Each Covered Action is expressly subject to the Worker Veto, regardless of amount, materiality, or any threshold otherwise applicable to worker-veto processes.

(b) For purposes of the Worker Veto, any reference in the Worker Veto provisions to a “Materiality Threshold” or similar trigger shall be deemed satisfied for every Covered Action.

(c) Any notice required to commence, support, or validate the Worker Veto process for a Covered Action (including notice of the proposed Covered Action, supporting materials, updates, and notice of final Board approval) shall be served on the Ombudsman, and service on the Ombudsman shall constitute service for all purposes under this Article.

(d) The Ombudsman shall promptly transmit the notice and accompanying materials to the applicable worker committee or committees in accordance with the Worker Veto provisions and any implementing policies authorized under the governing documents.

(e) No Covered Action may be implemented, funded, closed, consummated, or otherwise carried out unless and until the Worker Veto process applicable to the Covered Action has been completed and has not resulted in a valid veto, or any valid veto has been resolved in a manner permitting the Covered Action under the governing documents.

Section 8. Limits on Delegation and Commitments; Unauthorized Acts Void

(a) The Board may not delegate final authority to approve any Covered Action, nor may any officer, director, committee, or agent bind the Corporation or any Subsidiary to a Covered Action, except pursuant to a prior Supermajority Vote and completion of the Worker Veto process under Section 7.

(b) Any purported Covered Action taken, committed to, funded, or consummated without strict compliance with this Article is unauthorized and shall be void and of no force or effect to the maximum extent permitted by law.

(c) No ratification of an unauthorized Covered Action is effective unless (1) the Board re-approves the Covered Action by Supermajority Vote, (2) the Board adopts Mission Preservation Findings complying with Section 5, (3) the Worker Veto process under Section 7 is completed without a valid veto (or any valid veto is resolved in a manner permitting the Covered Action), and (4) ratification is legally permissible under the governing statute and applicable law.

Section 9. Non-Charitable Status of the CCE; Permissible Qualification of Recipients and Gifts

(a) The powers granted by this Article are adopted as incidental corporate powers and do not create, imply, or evidence any public or charitable purpose of the Corporation or the CCE.

(b) Nothing in this Article authorizes, requires, or contemplates that the Corporation (or any Subsidiary) will qualify, be organized, or be operated as an organization described in IRC Section 501(c)(3) or 501(c)(4).

(c) The Corporation may, however, structure Charitable Contributions and other Covered Actions so that (1) the recipient qualifies under IRC Section 501(c)(3) (or another applicable exempt-category provision) and (2) the gift, grant, or transfer itself qualifies as a charitable contribution or other qualifying transfer under applicable federal tax law, in each case to the extent consistent with Section 4 and the Mission Preservation Findings required by Section 5.

Section 10. Reporting and Records

(a) At least annually, the Board shall cause a written report to be prepared summarizing Covered Actions authorized, completed, or continued during the period, including amounts, recipients, purposes, key conditions, and the status of any ongoing commitments.

(b) The report shall be made available to directors and, through the Ombudsman, to the applicable worker committee or committees, in a manner consistent with the governing documents and any confidentiality constraints.

Section 11. Construction

(a) This Article shall be construed to preserve and protect the ultimate purposes and mission of the CCE.

(b) If any provision of this Article is held invalid, the remaining provisions shall remain in effect to the maximum extent permitted by law and shall be construed to preserve, to the fullest extent legally permissible, (1) the Supermajority Vote requirement and (2) Worker Veto coverage without regard to any threshold for all Covered Actions.

Comments

Authority and Scope

This Article authorizes the Corporation, directly and through any Subsidiary, to undertake specified charitable and general welfare actions solely as an incidental and subordinate exercise of corporate power, and only if the action does not alter, dilute, supersede, or frustrate the ultimate purposes and mission of the CCE and is approved in strict compliance with this Article.

Key Definitions

The Article defines the main covered concepts, including “Charitable Contribution,” “Charitable Recipient,” “Nonprofit Affiliate,” and “General Welfare Distribution,” with the latter limited to outward-facing welfare activity and expressly excluding internal wages, benefits, funds, reserves, and internal acquisition or reinvestment activity. “Subsidiary” is reaffirmed as a directly wholly owned (100%) market-facing entity.

Covered Actions

The “Covered Actions” subject to the Article’s restrictions include making charitable contributions, making general welfare distributions, forming or causing the formation of nonprofit affiliates, providing material support to nonprofit affiliates, transferring or donating Corporation or Subsidiary assets for less than fair market value for charitable or general welfare purposes, and entering binding multi-year commitments to do any of the foregoing. No covered action is authorized unless all required conditions are satisfied.

Mission Preservation Limitations

A covered action is prohibited if the Board determines in good faith that it would materially impair or risk frustrating the CCE’s mission, materially reduce capacity to sustain the internal wage and benefit architecture, materially reduce capacity to acquire or expand through Subsidiaries or reinvestment, create any private residual claim or investor-like return, or create third-party governance rights or contractual constraints likely to limit the Board’s discretion in carrying out the CCE’s mission. Compliance with these limitations is a condition precedent to authorization and implementation.

Required Board Findings and Supermajority Approval

Approval requires the Board to adopt written “Mission Preservation Findings” stating, with reasonable specificity, that the action is incidental and subordinate, does not frustrate mission, is reasonably expected not to materially impair the internal wage, benefit, reserve, and acquisition or reinvestment architecture, does not create prohibited private benefit, and is in the best interests of the Corporation as commons steward consistent with fiduciary obligations. Each covered action must be approved by supermajority vote at a duly called meeting (or by unanimous written consent if permitted), and the Board may impose additional protective conditions such as caps, staged funding, reapproval triggers, reporting covenants, termination rights, and clawback or reversion provisions where enforceable.

Worker Veto Applies Without Threshold and Ombudsman Notice

Every covered action is expressly subject to the Worker Veto regardless of amount, materiality, or any threshold otherwise applicable. Notices and supporting materials required for the Worker Veto process must be served on the Ombudsman, and implementation is prohibited unless and until the Worker Veto process is completed without a valid veto, or any valid veto is resolved in a manner that permits the action under the governing documents.

Limits on Delegation, Commitments, and Void Acts

The Board may not delegate final approval authority for a covered action, and no officer, director, committee, or agent may bind the Corporation or any Subsidiary except pursuant to prior supermajority approval and completion of the Worker Veto process. Actions taken without strict compliance are unauthorized and void to the maximum extent permitted by law. Any attempted ratification is ineffective unless the Board reapproves by supermajority, adopts compliant Mission Preservation Findings, completes the Worker Veto process without an unresolved valid veto, and ratification is legally permissible.

Non-Charitable Status and Tax-Qualification Flexibility

The Article expressly states that these powers are incidental corporate powers and do not create, imply, or evidence any public or charitable purpose of the Corporation or the CCE, and do not authorize or contemplate qualification under IRC Section 501(c)(3) or 501(c)(4). At the same time, it permits the Corporation to structure covered actions so that recipients qualify under applicable exempt-category provisions and the transfer itself qualifies under federal tax law, to the extent consistent with the mission-preservation limitations and required findings.

Reporting, Records, and Construction

The Board must cause at least annual written reporting summarizing covered actions authorized, completed, or continued, including amounts, recipients, purposes, key conditions, and status of ongoing commitments, and the report must be made available to directors and, through the Ombudsman, to the applicable worker committees subject to confidentiality constraints. The Article is to be construed to preserve and protect the CCE’s mission, and if any provision is held invalid, the remainder continues in effect and is construed to preserve, to the fullest extent legally permissible, supermajority approval and Worker Veto coverage without regard to any threshold for all covered actions.

Section 1. Dissolution and Plan of Dissolution.

(a) Nonprofit Commons Corporation. The corporation is a nonprofit corporation and is designated as a Commons Corporation serving as the apex entity of a Commons Capitalism Entity (CCE).

(b) Dissolution Only Under Applicable Law. The corporation may be dissolved only in accordance with the applicable nonprofit corporation statute and upon the adoption of a plan of dissolution approved in the manner required by that statute and these Articles of Incorporation.

(c) Plan of Dissolution. The plan of dissolution shall provide for the orderly winding up of the corporation’s affairs and shall specify the disposition of assets in conformity with this Article.

(d) Required Filings. The corporation shall execute, file, and deliver all documents required by applicable law to effectuate dissolution and termination of corporate existence.

Section 2. Winding Up and Payment of Liabilities.

(a) Payment and Provision for Claims. Before any distribution of assets, the corporation shall (1) pay or make adequate provision for the payment of all liabilities and obligations of the corporation and (2) address known and reasonably foreseeable claims in the manner permitted by applicable law.

(b) Reserve Authority. The corporation may establish reasonable reserves for contingent, conditional, or unmatured liabilities and for costs of winding up, as determined by the Board of Directors in good faith.

Section 3. Distribution of Remaining Assets.

(a) No Private Distribution. No remaining assets of the corporation shall be distributed to or for the private benefit of any director, officer, employee, member of any governing body, or other individual, except (1) payment of lawful compensation for services rendered, (2) repayment of bona fide indebtedness, and (3) reimbursement of lawful expenses incurred on behalf of the corporation.

(b) Primary Distribution Rule. After satisfaction of Section 2, the remaining assets shall be distributed to one or more nonprofit corporations, nonprofit trusts, or other nonprofit entities that are legally permitted to receive the assets and that are selected by the Board of Directors because each recipient is obligated by its governing documents to hold the received assets as a managed commons.

(c) Preference for a Successor Commons Corporation. In making distributions under subsection (b), the Board of Directors shall give preference to a successor Commons Corporation, or to one or more existing Commons Corporations, that are structured to serve as apex entities of Commons Capitalism Entities and that are legally committed to prevent private capture of retained surplus and to steward assets for the benefit of past, present, and future workers within their respective CCE structures.

(d) Alternative Distribution if No Qualified Commons Recipient Exists. If the Board of Directors determines in good faith that no recipient described in subsection (c) is reasonably available, the Board of Directors shall distribute the remaining assets to one or more nonprofit entities described in subsection (b) that are obligated by their governing documents to apply the assets in a manner that (1) preserves the assets from private capture and (2) maintains the assets in a commons-like stewardship framework consistent with the corporation’s governing documents.

(e) Asset-Specific Terms. Distributions may be made subject to reasonable asset-specific terms, including restrictions required by applicable law or by enforceable contractual obligations, provided that no such terms permit private capture of the distributed assets.

Section 4. Final Accounting and Records.

(a) Final Accounting. The corporation shall prepare a final accounting of winding up, including (1) satisfaction of liabilities, (2) asset dispositions, and (3) the identity of each recipient and the material terms of each distribution.

(b) Records Retention. The corporation shall maintain or cause to be maintained the corporate records of dissolution and distribution in the manner required by applicable law.

Comments

Purpose and Structure of the Article.

This article establishes a nonprofit corporation framework for dissolving the Commons Corporation, requiring a formal plan of dissolution, statutory compliance, orderly winding up, and documented asset dispositions.

Nonprofit Designation and CCE Context.

The article confirms that the entity is a nonprofit corporation and identifies it as a Commons Corporation serving as the apex entity of a Commons Capitalism Entity (CCE), which frames the dissolution provisions that follow.

Dissolution Only by Statutory Process and Adopted Plan.

Dissolution is permitted only in accordance with the applicable nonprofit corporation statute and only after adopting a plan of dissolution approved in the manner required by statute and the Articles of Incorporation. The plan must provide for orderly winding up and must specify asset disposition consistent with the article. The corporation must also execute the filings and take the actions required to terminate corporate existence.

Winding Up and Treatment of Liabilities and Claims.

Before any distributions occur, the corporation must pay, or make adequate provision to pay, all liabilities and obligations, and it must address known and reasonably foreseeable claims as permitted by law. The Board is authorized to establish reasonable reserves for contingent, conditional, or unmatured liabilities and for winding up costs, applying a good faith standard.

Core Distribution Rule and No Private Distribution.

After liabilities and claims are addressed, the article imposes a strict no private distribution rule. Remaining assets may not be distributed to or for the private benefit of directors, officers, employees, or other individuals, subject only to conventional nonprofit carve outs for lawful compensation for services rendered, repayment of bona fide indebtedness, and reimbursement of lawful expenses.

Recipient Eligibility and Commons Stewardship Standard.

The default distribution rule directs remaining assets to nonprofit corporations, nonprofit trusts, or other nonprofit entities that are legally eligible to receive the assets and that are obligated by their governing documents to hold the assets as a managed commons. This centers dissolution distributions on continuity of commons stewardship rather than discretionary or private endpoints.

Preference for Successor Commons Corporations.

In selecting recipients, the Board must give preference to a successor Commons Corporation, or to one or more existing Commons Corporations, that are structured to serve as apex entities of CCEs and are legally committed to preventing private capture of retained surplus while stewarding assets for the benefit of past, present, and future workers within their respective CCE structures.

Fallback Distribution if No Preferred Commons Recipient Is Available.

If no successor or existing Commons Corporation recipient is reasonably available, the Board may distribute to other qualifying nonprofit recipients, but only if their governing documents obligate them to preserve the assets from private capture and maintain a commons-like stewardship framework consistent with the corporation’s governing documents.

Asset Specific Terms and Anti-Capture Constraint.

Distributions may be made subject to asset-specific terms, including restrictions required by law or enforceable contractual obligations, but distribution terms may not permit private capture of distributed assets.

Final Accounting and Records.

The corporation must prepare a final accounting covering satisfaction of liabilities, asset dispositions, and the identity of recipients and the material terms of each distribution. It must also maintain, or cause to be maintained, dissolution and distribution records as required by applicable law.

Section 1. Bylaws.

(a) Authority to Adopt Bylaws. The Board of Directors shall have the power to adopt bylaws for the governance of the Commons Corporation, subject to (i) the Articles of Incorporation, (ii) the applicable nonprofit corporation statute, and (iii) any limitations expressly stated in the governing documents of the CCE.

(b) Scope of Bylaws. The bylaws may contain any provisions for managing and regulating the affairs of the Commons Corporation that are not inconsistent with the Articles of Incorporation or the applicable nonprofit corporation statute.

(c) Internal Consistency. In the event of any inconsistency between the bylaws and the Articles of Incorporation, the Articles of Incorporation shall control.

Section 2. Amendments to Articles of Incorporation.

(a) Authority and Procedure. The Articles of Incorporation may be amended only (1) in the manner required by the applicable nonprofit corporation statute and (2) in compliance with any amendment-related requirements expressly stated in the governing documents of the CCE.

(b) Board Approval. Unless a higher vote requirement is expressly stated in the Articles of Incorporation or required by the applicable nonprofit corporation statute, an amendment to the Articles of Incorporation shall require approval by the Board of Directors in accordance with the Board’s voting rules set forth in the bylaws.

(c) Filing and Effectiveness. Any amendment adopted pursuant to this Section shall be executed, filed, and become effective in the manner required by the applicable nonprofit corporation statute.

Section 3. Amendments to Bylaws.

(a) Authority and Procedure. The bylaws may be amended or repealed, and new bylaws may be adopted, only by the Board of Directors, in each case in accordance with (1) the bylaws’ stated amendment procedures and (2) any limitations expressly stated in the Articles of Incorporation.

(b) No Implied Waiver. The adoption, amendment, or repeal of bylaws shall not be construed to waive compliance with the Articles of Incorporation or the applicable nonprofit corporation statute.

(c) Record of Amendments. The Commons Corporation shall maintain current bylaws and a record of amendments as part of its corporate records.

Section 4. Construction.

(a) Governing Law. This Article shall be construed to implement the lawful adoption and amendment of bylaws and charter provisions for a nonprofit commons corporation under the applicable nonprofit corporation statute.

(b) Severability. If any provision of this Article is determined to be invalid or unenforceable, the remaining provisions shall remain in effect to the fullest extent permitted by law.

Comments

Overview and Function of the Article. This article allocates formal authority for adopting and changing the Commons Corporation’s bylaws, and for amending the Articles of Incorporation, while making clear that both are governed by the applicable nonprofit corporation statute and constrained by any additional requirements stated in the CCE’s governing documents.

Authority to Adopt Bylaws. The Board of Directors is granted express authority to adopt bylaws governing the Commons Corporation. That authority is expressly subject to the Articles of Incorporation, the applicable nonprofit corporation statute, and any express limitations in the CCE governing documents.

Permitted Scope of Bylaws and Priority of the Articles. The bylaws may address management and regulation of corporate affairs only to the extent they are consistent with the Articles of Incorporation and the applicable nonprofit corporation statute. If a conflict exists between the bylaws and the Articles, the Articles control.

Amendments to Articles of Incorporation. Amendments to the Articles are permitted only if adopted in the manner required by the applicable nonprofit corporation statute and in compliance with any amendment requirements contained in the CCE governing documents. Board approval is required unless the Articles or the statute impose a higher voting standard. Any adopted amendment must be executed, filed, and made effective as required by the statute.

Amendments to Bylaws. The power to amend, repeal, or adopt new bylaws is reserved to the Board of Directors and must be exercised in accordance with the bylaws’ own amendment procedures and any limitations stated in the Articles of Incorporation. The article clarifies that bylaw action does not imply any waiver of compliance with the Articles or the applicable nonprofit corporation statute. It also requires the Commons Corporation to maintain current bylaws and a record of amendments as part of the corporate records.

Construction and Severability. The article directs that its provisions be construed to implement lawful adoption and amendment of bylaws and charter provisions for a nonprofit commons corporation under the applicable nonprofit corporation statute. It also includes a severability clause preserving the remainder of the article to the fullest extent permitted by law if any provision is held invalid or unenforceable.

Currently under Construction

Election of Directors

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