Hackerspace incorporation patterns

Walter | Posted 2011.09.26 at 4:50 pm | Perma

As a mere participant of Revelation Space, a hackerspace (or makerspace, if you will) in The Hague, who also happens to practice law (but not corporate law), I found this article on hackerspaces.org interesting. Interesting but incomplete. Incomplete because it doesn’t really explore perfectly reasonable combinations of the patterns described. Also incomplete, because it reeks of a reinventing the wheel, but poorly.

Why so harsh? For the simple reason that at a certain abstraction level hackerspaces are not that new and unique. They are semi-permanent gatherings of people who share a common interest, namely technology for the sake of technology and unorthodox uses of it. Semi-permanent in the sense that the group has a certain continuity, with obvious turnover of the participants of that group. They also have assets and often liabilities. The assets tend not to be very liquid, meaning that often they cannot be easily sold. After all, take a look around in a typical hackerspace and you see lots of stuff that is not easily replaced but not easily sold either. Which is the same for your average rowing society, student union or scouting club. The liabilities tend to be less complex, usually a long-term lease for the space itself, but sometimes a bit more than that, for example some financing arrangement with particular participants that was needed to buy really fancy equipment such as a lasercutter. Which again is not terribly different from a rowing club (you do not want to know what a carbon composite rowing boat costs nowadays).

One caveat however: I am using the terms foundations and associations a bit loosely and from a mostly civil law perspective. In common law countries other than England, Wales and Ireland (Scotland is a civil law country) your mileage may vary a bit more. Your mileage may vary anyway, even within continental Europe.

First of all look at the problems the typical not-for-profit corporations (foundations and associations)  face:

Especially associations are vulnerable to disproportionate power wielded by a small group of members, or even worse, to a newly elected board that turns out not to be competent to run a prudent ship. Especially student associations are vulnerable to that phenomenon because they tend to rotate boards on an annual basis. On the other hand, the democratic nature of associations fit in much better with anything you want maximum participation from outside the board in.

Foundations are fundamentally problematic because the board is accountable to none but themselves (and the founding charter, but this only becomes an issue when a foundation enters bankruptcy). So you end up with a, in the option of some, arbitrary, group of people who get to decide on issues that have a major impact on the not-for-profit.

Another issue is limited liability. In most jurisdictions being a board member of either an association or a foundation you’re personally and jointly liable together with all other board members. However, being a board member of an association has a slight advantage: if the members of the association decide to overrule the board, which they can to a certain extent, board members cannot be held liable for such a decision. On the other hand, telling board members of a foundation that they should take a certain decision is not unlikely to be met with ‘and will you be held liable for any negative consequences?’, or at least the thought of it.

Basically it is a trade-off between accountability and (certain level of) stability.  But also of participation versus consumption. The nice thing is that it is not an either-or decision. And the issue has been reasonably well solved by my earlier examples: student unions and scouting clubs. The typical pattern used there is that of two entities that work together: a foundation and an association. The foundation typically has one or more seats reserved for representatives, if not board members, of the association. All activities that need lots of participation in terms of time take place under the flag of the assocations. Assets and long-term obligations that are best served by a foundation are put under the flag of the foundation. In case of scouting clubs the club house is typically owned or rented by a foundation, which lets the association use it while the association typically transfers  financial surpluses above a certain level to the foundation in order to let it invest in the club house and associated expenditures.

Translated to a hackerspace the foundation would be:

  • renter or owner of the real estate;
  • owner of the equipment that would otherwise be called ‘capital goods’, for example CNC equipment, lasercutters;
  • provider of said real estate and equipment to the association and in return being funded by the association.

The association would exist for the actual activities, e.g. the actual hacking, running the bar, organising events. Accountability can be introduced by having the foundation’s board having one or more seats appointed by the association. It is however preferable not to have an intersection between the foundation’s and the associations board in order to keep roles clear, if only inside peoples’ heads.

And yes, it is a bit of a hack. It is not terribly elegant, it needs specific bylaws and statutes for both the foundation and the association involved. But it allows for a modicum of accountability for the foundation and a reasonable amount of stability for the association. It works elsewhere, for non-profits faced with rather similar problems as faced by hackerspaces. If you are involved in starting a new hackerspace or running into governance issues at an existing one, consider this option. Why limit yourself to one entity if you can solve issues by having multiple?