Innovation in Uruguayan Business Law: The “Benefit and Collective Interest Companies and Trusts”

Abstract

This contribution deals with the experience of benefit companies in Uruguay. It introduces the concept of a benefit company, compares it to the status of “B companies,” and describes the situation before, and after the approval of Law No. 19.969 (July 2021) on “Benefit and Collective Interest Companies.” This chapter concludes with an attempt to assess the importance of the legislation and comes to some conceptual conclusions on the matter.

We express our thanks to Professor Stathis Banakas of the University of East Anglia for his helpful review of this work.

1 Introduction: Purpose and Context – “Benefit Companies”

The purpose of this chapter is to describe the situation of the so-called “benefit companies” in Uruguay. It does not intend to provide a comprehensive explanation of the social and cooperative enterprises in Uruguay. Thus, its scope is limited to the analysis of benefit companies in Uruguay.

Considering that the Uruguayan Parliament has recently passed a specific regulation on this matter (Law No. 19.969, dated July 2021, called “Ley de sociedades de beneficio e interés colectivo”) it is necessary to introduce the concepts of “benefit companies,” or “triple impact companies,” which—as a result of their novelty—present neither doctrinal development nor jurisprudential treatment, but are the object of increasing attention paid by business, social, and political circles in Uruguay.

In a comparative perspective, it can be said that this type of company is born in the context of two great problems that mankind is experiencing in this postmodern age.

On the one hand, an important global issue is damage to land. Humans consume natural resources in amounts that exceed what can be regenerated by nature. We have gone beyond the planetary eco-systemic limits to the point that if we stopped our present practices, the ecosystem would nevertheless continue to suffer degradation. In this sense, it is no longer enough to stop these consuming practices; it becomes necessary to regenerate.¹

The other major global problem is the increasing inequality in terms of social, economic, and technological development and in terms of the distribution of wealth between people and countries. Since September 2015, when the United Nations 2030 Agenda for Sustainable Development was approved, including the 17 Sustainable Development Goals (SDGs), there has been a clear awareness and strong recognition that the current model of social development is unsustainable and that we must transform the global economy by adopting a development model guided by the paradigm of sustainability.

Meaning, at a global level, that the paradigm adopted by our social and economic organizations is not useful for solving our massive problems. This is why different alternatives and responses to this situation are being tested and rehearsed in different places and areas. In his encyclical “Laudato si,” Pope Francis holds that “we can once more broaden our vision. We have the freedom needed to limit and direct technology; we can put it at the service of another type of progress, one which is healthier, more human, more social, more integral.”²

The category of “benefit companies” is inspired by the need to find new solutions to the challenges mentioned above. On the one hand, there has never been such a large population on the planet; on the other, never has nature been so oppressed.

2 “Benefit Companies (BIC)” and “B” Companies

It is in this context that the so-called “System B”³ was born and consolidated; it aims to redefine the meaning of success in the economy, proposing a model where success is not measured exclusively by economic growth, but by a more complex set of indicators pointing to the well-being of people, society, and nature.⁴ How can this be achieved? Inter alia, by building and strengthening a favorable ecosystem of those companies that use the force of the market to solve social and environmental problems: the “B companies.”

Estimates indicate that there are between 125 million and 160 million companies in the world; therefore, there are at least as many opportunities to solve these challenges.⁵ Companies have the potential to open paths of transformation, to be part of the construction of a new lifestyle that might be more collaborative and produce shared economic growth, just by understanding that financial statements may not only assess the level of profits, billing, or dividends, but may also show how businesses integrate benefits with the impact on the environment and society in a measurable and scalable way.

This is how the model of B companies arises; they are companies that seek to be the best companies “for” the world and not “of” the world.

In other words, we are leaving behind an era in which the focus was exclusively on good products and processes, and we are entering the age of sustainability through economic activity which brings with it the era of good companies, and companies working to create integral value.

3 Characteristics of “B Companies”

We highlight four essential features of all B companies.

3.1 Purpose

The aim of B companies is not only to achieve economic profit. They have a broader purpose and place this purpose as a guideline for the activity of the company, defining it in the company’s articles of incorporation—that is, in its business core. Therefore, as an essential constitutive element, B companies maintain a commitment to create economic, social, and environmental value together with pursuing profit.

A good example could be the “Guayakí” company, which produces yerba mate.⁶ The purpose of this company, as expressed in its articles of incorporation, is “the regeneration of the forest in the region of Misiones (part of Argentine, Paraguay, and Brazil) and the reconstruction of the social fabric of the people who depend on the forest.” It is, therefore, a for-profit company that includes in its articles of incorporation a purpose that goes beyond mere financial gains, thus generating a new market identity (a new business DNA that incorporates the solution of social and environmental problems in its business core). In other words, it uses the force of the market, which is conceived in classic economic theory as neutral to ethical values other than freedom, to reach further objectives on equity and sustainability.

How does it proceed? Yerba mate is a beneficial species that helps regenerate other vegetable species that have disappeared due to monoculture. The Guayakí Company (Certified B) buys yerba, which is cultivated or harvested by small Aboriginal communities in degraded areas, and the company pays four to six times the ordinary market price. This product is exported in bulk to the United States and is used as a raw material to produce 21 different consumer goods, including energy drinks, which compete with others in the market.

What kinds of products do they offer? What is the business model? The product is certainly more expensive than those offered by competitors, but consumers are willing to buy them considering the planetary ecosystem services involved in that purchase. Therefore, the client purchases something that is useful to him—for example, yerba to prepare mates or drinks made from yerba mate - but his microeconomic decision is influenced, for instance, by the fact that half a kilo of yerba is equivalent to 573 grams of sequestered net carbon. Thus, his microeconomic decision is oriented by a purpose that exceeds the mere market consideration of the price/quality relationship, involving the feeling of being a responsible consumer, taking part in the solution to larger problems. The daily satisfaction of the need provided by the sales contract is complemented by the contribution to collective solutions that are external to the balance of demand and offer. “People using business as a force for good.”

3.2 Extension of the Liability of Administrators

The second characteristic of B companies is their administrators. In this type of organization, the fiduciary duties owed by administrators to shareholders are expanded to include all stakeholders as beneficiaries. This is known as “benefit-sharing thinking,” which implies expanding the exclusive consideration of the company’s shareholders to include the interests of all the affected parties or stakeholders. This allows the managers and the board of directors to carry out management strategies in which short-term interests are balanced with long-term ones. Therefore, their actions are not exclusively guided by obtaining short-term financial economic returns, generally expressed as financial earnings in annual income statements.

3.3 Commitment, Reporting, and Transparency (Certification)

To be formally considered a “B company,” the organization must assume a commitment to achieve a positive net impact in three dimensions: the classical economic-financial, the social, and the environmental domain. Furthermore, this commitment must be externally assessed. The management is evaluated by considering the satisfaction of all the interests involved, internal, and external. For this purpose, an “Impact Assessment Tool B” is used which considers the workers, community, environment, governance, and the impact business model.

This tool, used by an organization called “B Lab,”⁷ was designed to determine the impact of management in the social and environmental fields with the same accuracy as the assessment of financial results. It is confidential, free to access, and online; it allows any company to measure the progress of its social and environmental management in all areas of the business from the supply chain to the use of resources, how the company makes decisions, makes donations, and distributes benefits to its employees. The company commits to a certain level of net positive impact in all dimensions. This combination allows for the creation of a new market identity related to the evolution of the economic system.⁸

Today, there is an increasing interest in circular, blue, orange, collaborative economy, common goods, etc. More specifically, this refers to moving from good-quality products and processes to high-quality companies, and companies that create comprehensive value. These are B companies, and they represent a paradigm shift in the business world.

3.4 B corps sign a Declaration of Interdependence as B Corps (which is a registered trademark) as a symbol of their commitment to the shared collective purpose.

4 The “B Companies” and the “BIC Companies” (“Benefit Companies”)

Certified B corporations are often confused with “BIC companies” or “benefit companies.” The name “B companies” is often used mistakenly to refer to “BIC companies” with the intention of abbreviating their name. Indeed, BIC companies are complementary to B companies as they both have the same aims.

However, although they have much in common and may complement each other, they also correspond to distinct concepts: not all certified B companies use the legal structure of BIC companies, and not all BIC companies are certified B companies.

On the one hand, B companies have a market identity, certified by private organizations; their legal characteristics, although they may be coincident with those of BIC companies, are not necessarily identified with them.

On the other hand, BIC companies belong to a legally defined category, enforced in countries that have specific legislative provisions, called BIC companies, benefit companies (or, in the case of Uruguay, “Benefit and Collective Interest Companies”). As explained below, since July 14, 2021, Uruguay has been among the list of countries with such legislative provisions (Law No. 19.969 of Benefit and Collective Interest Companies and Trusts).

Hereinafter, we shall sketch a brief description of their differences and similarities.

The so-called benefit and collective interest companies involve a legal type that recognizes them as a business model in some countries’ positive law; therefore, it is necessary for their existence that a formal law incorporates them in the respective corporate legal typology, with the following characteristics:

• The expansion of the corporate purpose such as to include the obligation to generate a positive social and environmental impact in the community. We use the word “expansion” since it is always essential that the economic interest in profit remains in force. In this way, we speak of triple-impact companies: economic, social, and environmental.

• The requirement that the obligation to ensure a triple impact must be reflected in the original contract or bylaws. This makes it certain that we are in front of a benefit and collective interest company.

• The extension of the duties of the administrators, who are obliged, in the performance of their duties and decision-making, to consider not only the interests of the partners or shareholders, but also those of the dependent employees and, in general, the suppliers of workforce. Additionally, they consider the interests of the communities that they are linked with, the local and global environment, and the long-term expectations of partners and society. Otherwise, administrators not directing their management exclusively according to the maximization of economic profit would be liable to the shareholders.

B corporations are not necessarily incorporated as benefit and collective interest companies. For example, it may be enough to be admitted as a B corporation since the corporation’s policies, practices, and management intends to generate positive impacts, contributing to the solution of social and environmental problems. Additionally, the corporation may commit to improve along this path in a consistent manner.

However, to be considered a “B corporation,” the entity must go through a certification process that evaluates all its dimensions, with high standards of transparency. Therefore, for companies who want to effectively follow a path of permanent improvement, the best possible combination is to be a certified B company, legally incorporated as a BIC company (in those countries where it is allowed by law).

However, the contrary is more common; there are countries where there is no BIC law and whose commercial or corporate regulations are not aligned with the requirements that system B requests from companies to certify them.

In these cases, triple impact companies encounter two difficulties. On the one hand, there is no law that recognizes their existence; on the other hand, internal regulations make it difficult for them to achieve international B Lab certification.

This is the prevailing scenario in Latin America, except for Colombia and Ecuador. There is a lack of legal frameworks that regulate and provide legal certainty for companies that pursue a collective benefit and interest and that do not want, or cannot be, certified by private entities.

In countries with legal provisions, both certified and non-certified companies can take the form of BIC companies, fulfilling legal requirements and obtaining deserved status.

As of January 2020, there were more than 10,000 benefit corporations and 3,200 certified B corporations.⁹

B Lab ¹⁰ began in 2006 with the idea that a different kind of economy was not only possible, but necessary, and that business could lead the way towards a new, stakeholder-driven model. B Lab became known for certifying B corporations, which are companies that meet high standards of social and environmental performance, accountability, and transparency.

However, its aim goes farther beyond. The intention is to build the B corp movement to change our economic system—and to do so, the rules of the game must change. B Lab creates standards, policies, tools, and programs that shift the behavior, culture, and structural underpinnings of capitalism, mobilizing the B corp community towards collective action to address society’s most critical challenges.

By harnessing the power of business, B Lab positively impacts companies around the world, helping them balance profits with purpose. Together, we shift our global economy from a system that profits few to one that benefits all; advancing a new model that moves from concentrating on wealth and power to ensuring equity, from extraction to generation, and from prioritizing individualism to embracing interdependence. Their motto is “We won’t stop until all businesses are a force for good.”

System B asks its members to incorporate certain clauses that refer to the purpose of triple impact in the bylaws of the companies or incorporation contracts and to expand the fiduciary duties of the administrators (hereinafter called Clause B). Clause B has been defined as an essential requirement of B companies due to its purpose, which is to ensure the continuity of the triple impact purpose regardless of the will of the shareholders. Likewise, it allows the administrator to carry out his or her activities and make decisions by assessing aspects that exceed the maximization of profit.¹¹

Certified B corporations are legally required to consider the impact of their decisions on all stakeholders, a model known as stakeholder governance. The B corp legal framework allows companies to protect their mission and ensures that they will continue to practice stakeholder governance even after capital raises and changes in leadership. The legal framework also provides flexibility when evaluating potential sales and liquidity options.

The legal requirement ensures that B corps remain legally accountable to all their stakeholders—workers, communities, customers, suppliers, and the environment—not just shareholders.

Based on the above, the text to be included in the constitutive contract or statute is as follows.

Addendum 1—To be inserted into the clause that establishes the corporate purpose.

Its purpose, which must seek a positive material impact on society and the environment, considered as a whole (which will be evaluated taking into account the standards of an independent third party specialized in the matter), is: [__] … .

Addendum 2—To be inserted into the clause that establishes the powers of the administrative body.

In the performance of their duties, the administrator or the board of directors, as the case may be, must take into account in any decision or action, the effects of such a decision (i) on the employees and the workforce of the company, (ii) its subsidiaries and its suppliers, (iii) the clients and consumers of the company, (iv) the community, (v) the local and global environment, (vi) the performance of the company in the short and long term; and (vii) the capacity of the company to fulfill its corporate purpose, provided that this will not imply the creation of special rights in favor of third parties.

5 “System B” and “B Companies” in Uruguay. Their Status Before Law No. 19.969

On July 10, 2015, the “Civil Association System B Uruguay” was created, governed by a General Assembly, the Board of Directors, which, to date, is made up of five members chaired by two female founders of two B companies in Uruguay and the Fiscal Commission.

It has several communities of practice, such as B Lawyers, B Accountants, B Multipliers, B Academy,¹² and B Business Council.¹³ In addition, in 2020, in response to the coronavirus pandemic, Sistema B Uruguay together with YPO (Young Presidents’ Organization)¹⁴ raised approximately US$ 6 million in record time, to buy medical supplies, respirators, diagnostic tests, and clothing, and together with the public and private sector worked with an interdependent, resilient, and supportive search of the Common Good, responding to the health emergency.

Up to now, there have been ten “B companies” in Uruguay, certified by B Lab: 3 Vectors, Verdeagua, La Cristina, Neto, Gemma, Impulso Creativo, 4 D Lab, Neto, YOUHUB and Ecologito; and a company with “B pending” certification (because it has not yet reached the billing year): Omboo.

However, in Uruguay, at the time they were established, before the approval of Law 19.969 in July 2021, these companies did not have a regulation recognizing, supporting, and granting them legal certainty. The administrators of these companies also did not have sufficient security to allow them a broad exercise of their fiduciary duties to cover purposes other than profit exclusively.

Legislative difficulties, administrative uncertainties, and cost overrun hindered compliance with the requirements. These difficulties have different causes according to the different forms of business organization.

Attempting a form of systematization, it can be affirmed that in Uruguay, commercial enterprises ¹⁵ usually organize themselves in three legal forms: commercial companies, sole proprietorships, and trusts. As such, “B companies” can adopt any (or all) of these legal forms.

(a) “Commercial companies” are regulated mainly by Law 16.060, which recognizes various types of companies. Public-limited and Limited Liability companies are the most common legal structures. Law 16.060, prior to the postmodern conceptions to which we refer, regulates the duties and responsibilities of the administrators of commercial companies based on the standard of a general concept known as “the good businessman.” This is understood as one who carries out the business activity with a degree of professionalism, loyalty, fidelity, and absence of conflict of interest.

Although the General Corporations Law does not contain an express prohibition for the incorporation of B clauses, the Internal Audit,¹⁶ which evaluates public limited companies’ controls, has unofficially stated that these clauses exceed what the law allows,¹⁷ and therefore, their incorporation is not accepted. They maintain that this type of add-on cannot be included in the bylaws because they exceed what the law allows, and that they are corporate objectives that point to the activity to be carried out by the company in its normal operations. Although these may be broad objectives, they do not foresee the possibility of including issues of compliance with social objectives and the environment.

Specifically, this position has been held by the state control and registration bodies of commercial companies in similar cases (e.g., inclusion of corporate governance clauses).

It is important to note that Public Limited Companies in Uruguay are regulated by a public agency called “Auditoria Interna de la Nación,”¹⁸ which allows for the incorporation of all these companies. In effect, the restrictive nature of current legislation makes it difficult for companies whose incorporation process requires the intervention of such an agency to comply with the requirements for B Certification, since the “Auditoría Interna de la Nación” does not admit the incorporation into the bylaws of the provisions required by sistema B.

Other commercial companies, including Limited Liability Companies and recently approved Simplified Joint-Stock Companies (SSC), do not require control of the “Auditoría Interna de la Nación,” but they are under the control (albeit to a lighter extent) of the Commercial Registry. One must keep in mind that all state agencies act under a strict framework of what the law mandates.

For Public Limited Companies, which is the most common legal structure for medium and large companies in Uruguay, it is difficult to assume the statutory changes required to be considered B companies since the change of statute to incorporate B clauses implies a cost. Furthermore, the period for this procedure would take at least one year, with an unlikely result because, as stated, the position of the regulatory bodies is adverse.

(b) In Uruguay, a form of business organization known as a “sole proprietorship” is widely used. It is not a commercial company; thus, it does not have legal personality or property separation. However, for tax purposes, it is considered an independent contributory unit, with a simplified tax regime. These companies do not have a statute in which to incorporate the B clauses, yet they carry out economic activity with a triple impact purpose, for which there is a history of B certification of some sole proprietorships.

(c) “Trusts” are recognized by Law 17.703 of 2004¹⁹ and have been widely used in Uruguay to structure the most diverse economic ventures (commercial operations, real estate projects, energy projects, etc., whether in the private sphere or with public participation).

Through trust, independent wealth is created, which is administered by the Trustee in favor of the beneficiaries, always following the fiduciary mandate included in the constitutive contract. In other words, the constitutive contract must contain orders for the Trustee to administer the estate, achieve the objective, and comply with all the specifications, conditions, or purposes that are included in the contract.

In this case, neither the law nor the control bodies place limitations; therefore, inclusion into the trust constitution contract of clauses on the expansion of fiduciary duties is widely allowed.

In fact, there is a precedent: YOUHUB, a B certified company, is organized under the legal form of trust, which provides co-working and consulting services.

6 Law No. 19.969 of Benefit and Collective Interest Companies and Trusts

The legal and regulatory difficulties outlined above highlight the need for a law that could grant recognition to these companies and provide them with security in their business. Particularly, their administrators encountered legal limitations and inconveniences that hindered their proper development, as the legal structures provided for the business organization did not coincide with the purpose and ways of acting of purpose-driven companies. This is due in part because these companies make their decisions not only seeking to maximize their profits, but also considering other factors to generate a positive impact on society and the environment.

Thus, on August 14, 2017, the Special Committee on Innovation, Science, and Technology of the Chamber of Representatives (Folder C / 2469/17, section 803) received the members of Uruguay’s B Legal Group,²⁰ who presented a draft bill to regulate the benefit and collective interest companies, having taken as a model the bill that was then under study by the National Congress of the Argentine Republic. The team draw on William Clark so that the provisions were aligned with international legislation in this regard.

Finally, in July 2021, the Uruguayan Parliament enacted Law No. 19.969,²¹ regulating benefit and collective interest companies and trusts.

From a political point of view, the Uruguayan bill recognizes and supports triple impact companies or purpose-driven companies in the fulfillment of objectives that seek the common good and are aligned with public interest. It seeks to create conditions and legal support that allow these companies to focus on the creation of long-term economic value, while generating a positive impact on society and the environment. However, according to most BIC legislation, any tax incentive or general comparative advantage with respect to other market participants is envisaged.

The legislative technique of the Uruguayan bill under analysis is characterized by harmonization with laws 16,060 of commercial companies and 17,703 of trusts. It does not modify the general regime of commercial companies and trusts, enacting only an extension of the social types and trusts already defined by former regulations.

Under bill’s Article 1, in the constituent instrument of the company, “the partners - in addition to being obliged to make contributions to be applied to the production or exchange of goods and services with the aim to participate in the profits and bear the losses - are obliged to generate a positive social and environmental impact on the community, in the forms and conditions established by this law and the regulations.”

A peculiarity of the Uruguayan BIC law is that Article 1 allows trusts to be considered subjects of benefit and collective interest when the terms of the trust include generating a positive social and environmental impact in the community under the forms and conditions established by the BIC law and its regulations. In this case, they are called collective benefit and interest trusts (BIC).

Under Article 3, these companies or trusts must include in their statute or constitution contract the obligation to generate a social and environmental impact, positive and verifiable, in addition to the requirements demanded by the regulations of a particular application.

The project asks companies to include in their social contract the requirement of a vote in favor of three-fourths (seventy-five percent) of the partners, with the right to vote for any modification of the objective and social purposes, not corresponding to the plurality of votes.

Article 4 stipulates that, in the performance of their functions, the execution of the acts within their competence and in decision-making, “administrators and trustees must take into account the effects of their actions or omissions regarding: (i) the partners or beneficiaries, (ii) current employees and, in general, the contracted workforce, (iii) the communities with which they are linked, the local and global environment and (iv) the long-term expectations of the partners and of the company, and of the beneficiaries and of the trust, where appropriate, in such a way that the purposes of the company or of the trust are materialized. The responsibility of the administrators and trustee for the fulfillment of the aforementioned obligation may only be enforced by partners and beneficiaries.” In other words, it departs from the exclusive consideration of business profit.

Article 5 adds to the general obligations of accountability and information imposed by other norms an obligation of “preparing an annual report by means of which they provide evidence for the actions aimed at fulfilling the positive social and environmental impact foreseen in its constitutive contract or statute. This report must be publicly accessible and submitted within a maximum period of six months from the close of each year to the body or authority determined by the regulations.”

Finally, for companies that have modified their bylaws to become benefit and collective interest companies, Article 6 of the bill confers the right to withdraw on partners who have voted against such modification, as well as those who are absent but prove to be shareholders at the time of the meeting.

7 Final Reflections and Conclusions

7.1 Introduction

From this description of the state-of-the-art, it is possible to raise some reflections and conclusions.

The legal doctrine has classically considered that the regulation of the way in which goods and services are produced, distributed, and consumed can be twofold: centrally organized or, instead, regulated through private autonomy and initiative.²² A regime based on private autonomy works in a paradigmatic way through contracts and the market. Doctrine usually refers to “acts of commerce,” not so much in the formal sense of commercial law, but in the meaning of legal transactions through which the so-called “legal commerce” or “legal circulation” (production, distribution, and consumption) is channeled.²³

Supply and demand meet in the market, the place where the exchange of goods and services—that is, the contract—becomes perfected.

In this context, the very concept of a contract, especially in the idea of a bilateral and onerous contract, such as the contract of purchase and sale, implies an instrument operating in the market, where supply and demand for products and services meet each other, and autonomous subjects satisfy their needs by exchanging goods through willful agreements. In Uruguay, although Article 1247 of the Civil Code does not include this contextualization in the definition of a contract, it is understood that the essence of the contract is the confrontation between two parties with conflicting interests. Professor Gamarra, a leading teacher in Uruguay, affirms that, for the prevailing doctrine, there is always opposition or conflict of interest between the contracting parties, with the contract representing the voluntary composition of this conflict. Further, he adds that the conflict (opposition or antagonism) of interests is the main idea that determines the emergence of the contracting parties.”²⁴ In monetary economies, the composition of opposed interests is carried out through prices, which consist of sums of money deemed to be the equivalent of goods or services that are exchanged. It is well known that buyers want to buy cheaper products and sellers want to sell more expensive products.

On the tradition in civil law, a contractual law is rooted in the concept of “causa.” Although there is a lot of discussion surrounding this, it is accepted that “causa” is the element that represents the reason both parties enter voluntarily into a contract and accept to be bound.

For legal doctrine in civil law systems, the cause (meaning, the reason why both parties accept to exchange voluntary goods or services) of the onerous contract consists precisely in the consideration of the advantage or profit sought by the other party, which acts as an impulse or motivation for the sacrifice or burden assumed by the other contracting party (e.g., seller or purchaser). That is why price acquires a central relevance in the structure of the onerous contract, constituting one of the expressions of the object of the contract. The relation between price and goods or services purchased configures the essence of the onerous cause. Further, it represents the moment of composition of the opposition or conflict of interest, which is why the breach in its payment radically affects the contract, and is the origin of serious and far-reaching legal consequences, that is, the option of the innocent party either to request the termination of the contract or its forced execution, and compensation for damages.

7.2 The Purchaser’s Side

Let us consider first the purchaser’s side.

Departing from the price, i.e., the sum of money that constitutes the equivalent of any good or service, two types of business can be conceived: investment and disinvestment or liquidation.²⁵ The price paid by the investor (who may be a final consumer or a company that acquires goods or services to incorporate them into the production or distribution cycle) supposes certain information based on which the investor makes his decision to dispose of his money in exchange for goods or services.

Besides onerous exchange, which is based on market negotiation, economic circulation may also be explained by other motivations not grounded in economic profit. In this case, the logic of exchange is not found in the utility provided by the counterpart, but rather in the consideration of disinterest and liberality.

Neither System B nor the entities of benefit and collective interest abandon the dynamics of onerousness; they do not propose adopting a centralized model or a system based on gratuities. They suggest broadening the scope of the information considered by the investor or consumer as a ground for the process of the individual microeconomic decision. Their motivation (meaning the contractual “causa”) incorporates an aspect that is external to the individual monetary utility: the social and environmental impact. In this way, the microeconomic decision of the investor or consumer is based on a more complex and comprehensive perspective, including aspects not only consisting of money (price/quality relationship) but also related to environmental sustainability and equity in income distribution. In a certain sense, this is a repeat of the idea of the Human Development Index by Mahoub ul Haq and Amartya Sen adopted by the United Nations Development Program.

Thus, although certain investors or consumers may choose to stay within the market system, others may decide to acquire goods or services even at a higher price, if they can perceive that in their purchase, there are valuable aspects related to sustainable development and social justice goals.

In a free market system, this consideration cannot be mandatory; however, the legal system must ensure the transparency of information, protect consumer decisions, and guarantee that the production and distribution of goods and services is in accordance with the information provided about them.

We thus aspire to create a more complex, civilized, and evolved market system.

7.3 The Provider’s Side

Let us now look at the provider’s side.

The said considerations about the individual contract are transferable to the whole business system, through which the productive factors are organized: capital, human labor, and information, all of which, are combined, to generate goods and services that will be acquired by investors or consumers.

Companies can assume different legal forms that may or may not imply legal status and a desire for profit. In this sense, we can conceive of two categories.

On the one hand, “not-for-profit organizations”, and on the other, “commercial companies”. In not-for-profit organizations, associates or members do not pursue personal economic interests nor do they have the right to participate; they are not entitled to dividends or the result of the liquidation. In Uruguay, for instance, regarding foundations, there is a rule that determines that they can “pursue an object of general interest, without profit purpose” (Art. 1 Law 17.163).

Not-for-profit organizations do not exclude their own economic profit because they have to support their own financial needs; They do not allow members to make a profit. For instance, in Uruguay, we do not find any restriction involving the association’s profit in the law regarding civil associations. No mention of this can be found in the Model Statute for Civil Associations of the Ministry of Education and Culture of Uruguay. It only mentions that, in the case of dissolution, the assets must be transferred to a non-profit entity. But in fact, they cannot, by nature, imply the profit of the associates.

On the other hand, in the realm of companies, the practical purpose of the owners of the stock is to obtain participation interest in the company’s assets, consisting mainly of the right to withdraw dividends and participate in the result of liquidation. Contractual companies include the mention that the parties contribute goods “with the aim of sharing the benefits among themselves” (Art. 1875 CC, for civil companies), or “participate in the profits and bear the losses” that produce the social activity (Art. 1 Law 16,060, for commercial companies).

This right indirectly implies that the company’s purpose mostly focuses on maximizing the partner’s profit, since the interest of the partner or the stockholder is to have the highest possible yield.

The Italian doctrine has coined an interesting distinction between “objective” profit (which is the eventual profit that an association or foundation can pursue to achieve the fulfillment of the purpose that constitutes its object) and “subjective” profit (which is the profit of the partner or stockholder).²⁶

This implies that while companies, whether civil or commercial, admit subjective profit, this is not allowed in not-for-profit organizations.

Indeed, the protection of the creditors of the companies determines that, in comparative law, it is considered that the traditional “cause” of the companies, namely, obtaining a profit that can be distributed among the partners or stockholders, is opposed to altruistic purposes, which has repercussions in the limitations to the administrators. Spanish jurisprudence has allowed modest, free, but marginal provisions.²⁷

7.4 General Conclusion

It is obvious in predominant perspective that any gratuitous provision is opposed to the onerous goal, both on the side of the provider and on the side of the consumer, which are considered solely from an economic point of view, excluding the so-called cultural, professional, moral, or spiritual benefit.

Indeed, the classic Aristotelian distinction between economics and chrematistics applies to this problem. While economic activity considers material needs, in the context of other values, chrematistics is preached as a case of reductionism: only profit matters, without any restriction or limit.

Therefore, while “chrematistics” excludes any consideration not linked to profit, except, eventually, in a marginal and extraordinary way, the “economic” vision includes purposes added to the increase in profit (e.g., sustainability, environmental protection, and environmental and social ecology, as largely explained in encyclical Laudato Si).

The phenomenon of B or BIC companies connotes the overcoming of the dichotomy between economy and chrematistic as well as between objective profit and subjective profit, both for providers and for investors or consumers. It affirms that business activity—that is, the organization of people with a view to economic activity that in principle leads to subjective profit of its partners—is not incompatible with other aims or purposes which can add to, rather than replace, the profit of the entity and the partner. These additional aims undoubtedly serve as a limit for economic greed yet provide for a more human face of social life.

In other words, in our opinion, it implies the overcoming of the reductionism of the purpose of onerous economic activity, as directed to obtain only monetary profit. This disproportionate and disorderly search is deemed to have produced pernicious effects on the environment, on the well-being of workers, and on society as a whole, as confirmed in the introduction to this article.

From a theoretical approach, the phenomenon of B or BIC companies also implies overcoming (or at least an attempt to redefine) the distinction between contractually onerous versus gratuitous causes to incorporate social and environmental purposes in microeconomic decisions, both by consumers and providers of goods and services.