OpenAI, the developer of ChatGPT, finalized a governance overhaul to convert into a public corporation (PBC) while keeping control under a nonprofit foundation.
OpenAI said on the 28th (local time) that it signed a new agreement with Microsoft (MS) and will proceed with a recapitalization and a conversion into a public corporation. With this overhaul, MS will hold about 27% (worth $135 billion) of the newly formed "OpenAI Group PBC" equity.
MS will support the OpenAI board's process to establish the public corporation and will retain intellectual property (IP) rights to OpenAI's models and products through 2032. This includes models that have met artificial general intelligence (AGI) thresholds. If OpenAI declares it has achieved AGI, an independent expert panel will verify the claim, and MS's IP rights will remain in place until verification is completed or until 2030, whichever comes first.
However, under the latest agreement, MS's IP rights will not apply to OpenAI's consumer hardware products, and OpenAI will be able to co-develop certain products with third parties. OpenAI also agreed to purchase about $250 billion worth of MS's cloud service Azure, but MS will no longer have a right of first negotiation as a computing supplier.
The revenue-sharing agreement between MS and OpenAI will remain in place until the AGI verification point. Bloomberg reported that MS retains the right to continue receiving about 20% of OpenAI's revenue and that OpenAI may make additional payments in the future.
OpenAI board chair Bret Taylor said, "OpenAI has completed a capital restructuring under the control of a nonprofit organization and secured a foundation for direct access to key resources to prepare for the AGI era."
The nonprofit entity controlling the for-profit company has been renamed the OpenAI Foundation and currently holds equity worth about $130 billion. The company said the foundation's equity share will expand further whenever OpenAI's corporate value reaches certain thresholds.
The OpenAI Foundation said, "While maintaining our founding purpose of ensuring that AGI benefits all humanity, we will use corporations revenue for philanthropy," adding, "We plan to deploy $25 billion in funding to public-interest areas such as disease treatment."
With this overhaul, MS retains its position as OpenAI's largest investor, and OpenAI will shift to a new structure that combines profit and public interest under the control of a nonprofit organization.