Should My Company Be a Benefit Corporation?

April 13, 2016

Etsy, Kickstarter, Toms, and Method. What do these prominent companies have in common? They are all “benefit corporations” (or “B-corps”) focused on a “triple bottom line” that includes people, planet and profits.

What is a B-Corp?

Benefit corporations have many of the same characteristics of a traditional business corporation, but are subject to new requirements with respect to purpose, accountability, and transparency.

These requirements include:

  • Having a corporate purpose to create a material, positive impact on society and the environment;
  • Expanding the fiduciary duties of directors to require consideration of nonfinancial interests; and
  • Reporting on their overall social and environmental performance as assessed against a comprehensive, credible, independent, and transparent third-party standard.

Why Should My Company Be a B-Corp?[1]

  • Reduced Director Liability: Benefit corporation status provides legal protection to balance financial and non-financial interests when making decisions – even when going through mergers and acquisitions.
  • Expanded Stockholder Rights: Stockholders who want assurance that they will be able to hold a company accountable to its mission in the future invest in B-corps. These impact investors will be more likely to invest in your benefit corporation.
  • Better Talent: Millennials are increasingly interested in working for companies whose purpose and mission are aligned with their view of the world.
  • Increased Access to Private Investment Capital: Benefit corporation status can make your company more attractive to investors as a company with increased legal protection, accountability and transparency around its mission. Benefit corporations can also speed up investor due diligence since B-corps produce an annual benefit report, which describes their qualitative activities aimed at producing general public benefit.

How Does My Company Become a Benefit Corporation?

  • Existing Business: Amend your articles of incorporation to include a statement that it is a benefit corporation and obtain two-thirds of the company’s shareholders vote to approve the amendment.
  • New Business: Include a statement that the company is a benefit corporation in your articles of incorporation.
  • Determine Your Purpose: Your articles of incorporation must include a purpose to (i) create general public benefit in addition to any other lawful purpose, and (ii) any specific benefit, if applicable. In Pennsylvania, a general public benefit means a material, positive impact on society and the environment, taken as a whole, as assessed against a third-party standard.
  • Call Us!: Our team of talented business lawyers can assist you in the process of becoming a benefit corporation and get you started faster on the path to helping mankind and the environment.

[1] Cite http://benefitcorp.net/businesses/why-become-benefit-corp