Pennsylvania Benefit Corporations
On October 24, 2012, Pennsylvania became the twelfth state to amend its business corporation law to provide for a new type of corporation known as the “benefit corporation”. Benefit corporations are intended to be for-profit corporations with a social conscience. Why should you business become a benefit corporation? Social investing and social responsibility is becoming a major trend in the financial and business world. Many investors and consumers want to invest in or buy from companies that have a moral compass. The benefit corporation law is intended to create standards for social responsibility that investors and consumers can use to make decisions about the moral and social propriety of the companies they invest in. An election to be a benefit corporation may allow you to raise capital from socially responsible investors and attract socially conscious consumers.
The new Pennsylvania statute assures benefit corporations will maintain a social conscience in several ways: (1) a benefit corporation must have a corporate purpose to create a material, positive impact on society and the environment in addition to the obligation to make a profit; (2) the officers and directors of the benefit corporation have a newly-created fiduciary duty to consider nonfinancial interests; and (3) a benefit corporation must file an annual statement available to the public used to assess its overall social and environmental performance against independent third-party standards.
A benefit corporation may elect to have a general public benefit or a specific public benefit. Specific public benefits must be set forth in the articles of incorporation. The specific public benefits listed in the statute include:
- Providing low-income or underserved individuals or communities with beneficial products or services;
- Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
- Preserving the environment;
- Improving human health;
- Promoting the arts, sciences or advancement of knowledge;
- Promoting economic development through support of initiatives that increase access to capital for emerging and growing technology enterprises, facilitate the transfer and commercial adoption of new technologies, provide technical and business support to emerging and growing technology enterprises or form support partnerships that support those objectives;
- Increasing the flow of capital to entities with a public benefit purpose; and
- Conferring any other particular benefit on society or the environment.
A business may become a benefit corporation in several ways. A business may elect to be a benefit corporation at the time of its initial filing of articles of incorporation; or an existing corporation may elect to be a benefit corporation by amending its articles of incorporation with the approval of at least a two-thirds majority of its shareholders; or an existing corporation may become a benefit corporation by a fundamental transaction such as merger, division, consolidation or share exchange. Importantly, the election to be a benefit corporation does not change the federal or state tax status of a corporation, so if your business is a c-corporation or an s-corporation you will maintain that status.
If you want your business model to include consideration of general or specific public benefits, a benefit corporation may be a good choice for your corporate structure. To explore the aspects of a public benefit corporation, please contact Andrew Miller, at MPL Law Firm, email@example.com for more information.