AG Jennings completes review of OpenAI recapitalization

Delaware secures structural reform and action on safety from global AI leader

Attorney General Kathy Jennings announced today that her office has issued a Statement of No Objection to the proposed corporate recapitalization transaction of Open AI, Inc., a Delaware nonprofit corporation. Today's announcement comes over a year after Attorney General Jennings began her review of OpenAI's proposed transaction. OpenAI initially proposed a restructuring that would remove the current nonprofit entity from overseeing the for-profit activities of OpenAI. After engagement and prompting by Jennings and her colleague, California AG Rob Bonta, OpenAI announced earlier this year that it would instead create a separate public benefit corporation (PBC) within the nonprofit corporation (NFP). The Attorney General then spent the months since this announcement reviewing the new plan and working to ensure the nonprofit's interests were well represented. Today, in connection with her decision not to object to the recapitalization, Attorney General Jennings secured commitments from the company that will ensure the ongoing primacy of the nonprofit's public safety mission throughout the OpenAI enterprise, as well as additional provisions to ensure the ability of the nonprofit to sustain its mission far into the future.

"OpenAI, as a Delaware nonprofit corporation, is the world leader in the artificial intelligence industry. OpenAI's commitments under this transaction allow it to remain a global innovator and one of the world's largest nonprofits, while reinforcing guardrails that will guide this potent technology to humanity's benefit," said Attorney General Kathy Jennings. "These reforms are designed to help this technology realize its extraordinary potential to benefit humanity-from unlocking unprecedented access to information for underserved communities, to accelerating advances in scientific and medical research-rather than to harm it. This was a long and intensive negotiation-but I am pleased that OpenAI committed to a governance structure going forward that requires primacy for safety and security, and to utilize this technology and this corporation's resources to benefit the public. I'm grateful for the critical partnership of my colleague, Attorney General Bonta, and his staff in this effort. Both of us are committed to our ongoing duty to hold OpenAI accountable to its responsibilities, including and especially safety."

OpenAI, Inc. was incorporated as a Delaware nonprofit corporation in 2015, with its mission of ensuring that artificial general intelligence benefits all of humanity, including through the safe development and distribution of such technology. Under Delaware law, the Attorney General serves as the representative of beneficiaries of nonprofit entities (i.e., "all of humanity" in the case of OpenAI).

On October 9, 2024, Attorney General Jennings initiated her review in reaction to news that OpenAI planned to convert the OpenAI nonprofit corporation ("NFP") into a for-profit Public Benefit Corporation ("PBC"). The Attorney General's office conducted a rigorous review, including retaining independent counsel and an independent financial advisor, Moelis & Company LLC, to fully analyze the proposed transaction. The Attorney General's office also coordinated with California Attorney General Rob Bonta and his office.

Since the initial announcement of this transaction and the inception of her review, Attorney General Jennings has been focused on (1) ensuring Open AI's public safety mission has primacy, not to be diluted by the pecuniary interests of the PBC, (2) maintaining the NFP's control over the PBC, and (3) ensuring the NFP be treated fairly in this recapitalization transaction, both financially and in terms of access to OpenAI's technology to advance its mission. As a condition to issuing her Statement of No Objection, Attorney General Jennings secured the following commitments:

• The NFP will retain control and oversight over the newly formed PBC, including the sole power and authority to appoint members of the PBC Board of Directors, as well as the power to remove those Directors.
• The mission of the PBC will be identical to the NFP's current mission, which will remain in place after the recapitalization. This will include the PBC using the principles in the "OpenAI Charter," available at openai.com/charter, to execute the mission.
• PBC directors will be required to consider only the mission (and may not consider the pecuniary interests of stockholders or any other interest) with respect to safety and security issues related to the OpenAI enterprise and its technology.
• The NFP's board-level Safety and Security Committee, which is a critical decision maker on safety and security issues for the OpenAI enterprise, will remain a committee of the NFP and not be moved to the PBC. The committee will have the authority to oversee and review the safety and security processes and practices of OpenAI and its controlled affiliates with respect to model development and deployment. It will have the power and authority to require mitigation measures-up to and including halting the release of models or AI systems-even where the applicable risk thresholds would otherwise permit release.
• The Chair of the Safety and Security Committee will be a director on the NFP Board and will not be a member of the PBC Board. Initially, this will be the current committee chair, Mr. Zico Kolter. As chair, he will have full observation rights to attend all PBC Board and committee meetings and will receive all information regularly shared with PBC directors and any additional information shared with PBC directors related to safety and security.
• With the intent of advancing the mission, the NFP will have access to the PBC's advanced research, intellectual property, products and platforms, including artificial intelligence models, Application Program Interfaces (APIs), and related tools and technologies, as well as ongoing operational and programmatic support, and access to employees of the PBC.
• Within one year of the recapitalization, the NFP Board will have at least two directors (including the Chair of the Safety and Security Committee) who will not serve on the PBC Board.
• The Attorney General will be provided with advance notice of significant changes in corporate governance.

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