This is a critical time of evolution for AAPG and its Sections and Regions. As AAPG develops global operations, it may be exposed to increased contractual or even tort legal actions. As a result, the Region offices need to be incorporated to provide liability protection as well as a base for non-U.S. operations and member services. As AAPG continues to grow and conduct activities outside of the U.S., it may be best for AAPG to legally incorporate into a global entity to provide a better "liability shield" and a broader representative governance structure.

What type of incorporation is under consideration?

Basically there are two types of incorporation AAPG can use as a liability shield. The first type is incorporation of non-U.S. AAPG Region offices in country. Currently, AAPG is incorporated in the U.K. and Bahrain and we are processing an office incorporation in Singapore. The second type is a global corporate structure such as a holding company. This incorporation allows for global development.

Why incorporate offices outside of the US?

AAPG is currently incorporating offices in Regions due to increased membership activities. A non-U.S. office provides three advantages—1) liability protection, 2) banking and finance services, and 3) tax avoidance. A key component of non-U.S. offices is to provide an extension of staff support to the Region leadership and general membership.

Why evolve to a global legal structure?

Some countries have friendly laws for global incorporation such at the state of Delaware for U.S. incorporation. Many petroleum companies use this vehicle to increase their ability to provide services and provide a liability shield at the same time. SPE incorporated in Holland to take advantage of corporate rules and taxes through a Dutch holding company. In addition, incorporating through a non-U.S. holding company provides another degree of separation for liability and from unknowingly violating special codes or laws that are not universal between countries.

How will the governance work?

There is no need to change the governance structure for the office incorporations; however, for a global corporate structure this needs be reviewed and determined. In this case it is anticipated that most members will be elected by the whole membership as is true of the current AAPG Executive Committee. Other global board members may be elected representatives from the Regions and Sections. There may be a minimum Active membership requirement for representatives to have a voting seat on the new board; however, there are many different ways to compose the new board and this will be a key component of modifying the Constitution and Bylaws.

Will the HoD, AC and Divisions change?

Whatever the corporate structure the primary control of the organization will be based on the Constitution and Bylaws. The House of Delegates, Advisory Council and Divisions are based on the AAPG bylaws and are not expected to change unless the HoD proposes a modification. They would most likely remain within the current association until a "trigger" (time-based, member-based) is realized that would bring them under the new corporate umbrella.

What about the Sections?

The Sections are each separate legal entities. It is anticipated that the U.S. Sections will ultimately be combined as part of a U.S. or North American Region. At that time the U.S. Sections could incorporate under the AAPG global structure. In any case, the Sections will have strong representation in the governance of AAPG due the number of members within the Sections.

Will the membership have an opportunity to vote on the proposed changes?

If governance structures remain intact throughout the process, change can be achieved through House of Delegates approval via Bylaws amendments. However, other changes in the structure or definition of the Executive Committee, for example, will require a Constitutional amendment, which would require approval of the Association’s voting membership.

How will AAPG assets be protected?

AAPG has a large portfolio and one of the greatest concerns by U.S. members is that they will lose control of AAPG’s finances and assets. The liability shield provided by the office incorporations and ultimately the new global corporate structure will provide protection of the Association’s current assets. Control of these assets will be thought a board with its representation based on membership.

Will dues be distributed differently?

It is anticipated that a certain percent of dues income will be allocated to each Region through the budgetary process. SPE found that keeping part of the dues in their regions helped with membership recruitment.

How will operations be handled?

A key component of this process is to develop and maintain globally coordinated operations. Region offices are designed to be extensions of AAPG Headquarters to provide regional support but also maintain a global professional staff. Operations will be controlled by the annual budgetary process.

Does incorporation help with banking, insurance and taxes?

Yes. Banking and insurance is defined by command and control. Developing a financial relationship is key for non-U.S. operations. In some countries such as the U.K., AAPG is able to incorporate as a charity and avoid certain taxes for educational programs. The incorporation process is critical for AAPG to operate around the world.

How does the new model provide protection from unknowingly violating special codes or laws that are not universal between countries?

AAPG will be conducting more operations in countries around the world. Many times we are conducting an event that may occur in a country every five to ten years such as the International Conference and Exhibition. It is important the AAPG have a liability shield to protect the corporation as we conduct these operations. Office incorporation provides protection from contract lawsuits and global incorporation provides another degree of legal separation.

Should we change the name?

"AAPG” is a recognized brand and as such is a unique set of initials (just Google "AAPG” to see). Nevertheless, one of the leading reasons that international geoscientists give for not joining AAPG is the "American" in the name. This is reality. The other reality is it would be good to have the term "Energy” in the name to reflect the broadening of jobs for AAPG members; however, any new names such as the Association of Energy Geoscientists or "AEG” does not have a unique set of initials and would be years before it would be a recognized brand. This new corporate structure allows us to retain the AAPG acronym for example in the form of "The Association for the Advancement of Petroleum Geoscience” or just simply "AAPG.”

What is the cost?

Region office incorporations cost up to $30,000 each for staff time, professional fees, and registration charges. Developing a global corporate structure is estimated to cost $40,000 for startup and $25,000 per year maintenance plus expenses for the board members.

Why is this good for U.S. members?

The new corporate structure protects the assets and integrity of the AAPG. More importantly, one of the key goal areas the membership recognized in the AAPG Strategic Plan is global development. Most U.S. members recognize that growth, inclusion of new ideas and science, and extension of services are key components of a healthy professional scientific organization.

Why is this good for non-U.S. members?

Of course, the overall incorporation is important to the Regions (although Canada is already incorporated). One of the most important aspects for the Regions is to provide seamless operational support. Budgeting dues, banking, insurance and the name change are also key selling points.

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FAQ Sheet on New Global Corporate Structure

May 20, 2009

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