What is a benefit corporation and how does it differ from a regular corporation?
A benefit corporation is a type of for-profit company whose directors are legally required to consider the impact of decisions on employees, customers, the community, and the environment, not only on shareholders. Unlike a traditional corporation, where shareholder primacy governs fiduciary duty, a benefit corporation explicitly names public benefit as a goal alongside profit. It is treated like any other corporation for tax purposes.
Which state was the first to pass benefit corporation legislation?
Maryland was the first U.S. state to pass benefit corporation legislation. The law was enacted on the 13th of April 2010 as SB 690 and HB 1009 and took effect on the 1st of October 2010.
How many states have passed benefit corporation laws?
Approximately 36 states and Washington, D.C., have passed legislation allowing for the creation of benefit corporations. States include Maryland, Vermont, Delaware, California, and New York, among many others.
What is the difference between a benefit corporation and a B Corporation?
A benefit corporation is a legal corporate form authorized by state law. A B Corporation is a voluntary certification awarded by B Lab, requiring a minimum score of 80 out of 200 on the B Impact Assessment, an audit, and an annual fee. A company can hold one status without the other, though companies seeking B Lab re-certification are required to pledge to incorporate as a benefit corporation.
What vote is required to convert a company into a benefit corporation?
Converting to or from benefit corporation status requires a minimum status vote, which is a two-thirds supermajority in most states. Shareholders who vote against the change and qualify may invoke dissenter's rights, allowing them to require the company to repurchase their shares at fair value before the conversion takes effect.
How do benefit corporation laws protect directors from shareholder lawsuits?
Benefit corporation legislation expands directors' fiduciary duty to include non-financial stakeholders, giving them legal protection to pursue a social or environmental mission without fear of shareholder suits based on a drop in stock value. This directly addresses the constraint imposed by the shareholder-primacy doctrine first articulated in Dodge v. Ford Motor Co. in 1919.