Other Conversions

The Non-Wholly-Owned For-Profit Subsidiary: Transfer of Nonprofit Assets to a Publicly-Traded For-Profit Subsidiary: A nonprofit transfers assets to a for-profit subsidiary and the subsidiary sells stock to the public. The sale of stock effectively transfers control and/or interest from the nonprofit to stockholders. Moreover, as a for-profit stock company, the directors focus first on stockholders’ interests - profit - not the charitable mission of the nonprofit. For example, Blue Cross and Blue Shield of Missouri created a publicly-traded for-profit stock subsidiary, RightCHOICE Inc., and moved more than 80% of its assets to RightCHOICE. RightCHOICE sold stock to outside investors, thereby allowing private ownership of nonprofit assets.
RightCHOICE Press Releases (PDF)
RightCHOICE Court Decision (PDF)

 

The Wholly-Owned For-Profit Subsidiary: Transfer of High Growth Business into a For-Profit Subsidiary: A nonprofit corporation transfers a small, but growing part of its business into a for-profit subsidiary. The nonprofit, while moving its profitable business, retains the business with less potential. If the profits generated by the for-profit are returned to the nonprofit to further its charitable purposes, the nonprofit will continue to fulfill its obligations. However, if the profits generated are reinvested in the for-profit corporation, the assets are possibly being used inconsistently with their nonprofit purposes. For example, Empire Blue Cross and Blue Shield in New York originally proposed to create for-profit subsidiaries and move all their managed care business to the subsidiaries, leaving their fee-for-service coverage in the nonprofit.