Pennsylvania Benefit Corporations
What Are 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. In addition to the intended purpose of providing profit to shareholders, benefit corporations include provisions within their articles of incorporation that require the corporation to have a purpose that positively benefits society.
Perks of Becoming a PA Benefit Corporation
Social investing and social responsibility are major trends 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.
- Attract socially conscious consumers.
- Associate the identity of your business with a particular cause.
Pennsylvania Benefit Corporation Requirements
Social Conscience Requirements
The Pennsylvania statute assures benefit corporations will maintain a social conscience in several ways:
- 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.
- The officers and directors of the benefit corporation have a newly-created fiduciary duty to consider nonfinancial interests.
- 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.
Public Benefit Requirements
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
- Conferring any other particular benefit on society or the environment
How to Become a Benefit Corporation in Pennsylvania
For new PA businesses, the process of forming a benefit corporation does not differ much from the process of forming a traditional corporation. A new business may elect to be a benefit corporation at the time of its initial filing of articles of incorporation.
Existing Pennsylvania corporations seeking to become benefit corporations can do so following either of these circumstances:
- Amendment of the corporation’s existing articles of incorporation. This amendment must be approved by at a two-thirds majority of the corporation’s shareholders.
- Completion of a fundamental transaction such as merger, division, consolidation or share exchange.
It is important to understand that the election to be a benefit corporation does not change the federal or state tax status of a corporation, so if a business is a C-corporation or an S-corporation, it will maintain that status.
Choose MPL Law Firm for Your PA Benefit Corporation Needs
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.