THE BUSINESS OF PURPOSE TRUSTS

Abstract

In an age of increased awareness around climate change, wealth inequality and employee well-being, many private business owners are rethinking the fundamentals of corporate ownership. This has prompted a rise in the popularity of long-term “purpose” trusts as an alternative ownership strategy, particularly in the US. The recent decision in Fletcher’s Fields Ltd. v Ontario Rugger Union has served as a timely review of the law of purpose trusts in Ontario. Meanwhile, the recognition of non-charitable purpose trusts in Alberta’s new Trustee Act could provide a pathway for other Canadian jurisdictions to follow.

In light of these developments, greater discussion about the opportunities and challenges of the law of purpose trusts is warranted. Part one of this paper considers the development of the purpose trust, a concept rooted in common law. Part two draws attention to Patagonia, Inc.’s conversion to a purpose trust, which is a high-profile example of the broader movement towards an emerging form of corporate ownership. Part three applies the current Canadian law to the concept of purpose trusts, highlighting the possibilities and conflicts. Part four considers alternative structures for purposeful business ownership in Canada, offering up two key structures: not-for-profit organizations and employee ownership trusts. Finally, in Part five, the author suggests how legislators in Canada’s provinces and territories can modernize their respective trust statutes to facilitate the use of non-charitable purpose trusts as a viable alternative business ownership strategy for socially minded founders.