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In the United States, a benefit corporation is a type of for-profit corporate entity, authorized by 33 U.S. states and the District of Columbia[1] that includes positive impact on society, workers, the community and the environment in addition to profit as its legally defined goals. Benefit corporations differ from traditional C corporations in purpose, accountability, and transparency, but not in taxation. In 2015, Italy became the first country in the world to legally recognize benefit corporations across its entire territory. Australia is in the process of drafting their own similar version as of February 2016. The purpose of a benefit corporation is to create general public benefit, which is defined as a material positive impact on society and the environment, i.e. maximum positive externalities and minimum negative. A benefit corporation’s directors and officers operate the business with the same authority as in a traditional corporation but are required to consider the impact of their decisions not only on shareholders but also on society and the environment. In a traditional corporation, shareholders judge the company's financial performance; with a benefit corporation, shareholders judge performance based on the company's social, environmental, and financial performance. Transparency provisions require benefit corporations to publish annual benefit reports of their social and environmental performance using a comprehensive, credible, independent, and transparent third-party standard. In some states, benefit corporations must also file the reports with the Secretary of State, although the Secretary of State does not control the content of the annual benefit report. In some U.S. states, shareholders have a private right of action, called a benefit enforcement proceeding, to enforce the company’s mission when the business has failed to pursue or create general public benefit, although, to date,[when?] no such proceeding has been instituted by benefit corporation shareholders in any U.S. court.[citation needed][not verified in body] There are around 12 third-party standards that satisfy the reporting requirements of most benefit corporation statutes. A benefit corporation need not be certified or audited by the third-party standard. Instead, it may use third-party standards solely as a rubric to measure its own performance.

Contents

1 History 2 Differences from traditional corporations 3 Provisions 4 Benefits 5 See also 6 References 7 External links

History[edit] In April 2010, Maryland became the first U.S. state to pass benefit corporation legislation. As of March 2018, 35 states and Washington, D.C. have passed legislation allowing for the creation of benefit corporations:[2] Connecticut's benefit corporation law is the first to allow "preservation clauses," which allow the corporation's founders to prevent it from reverting to a 'For Profit' entity at the will of their shareholders.[3]Illinois established a new type of entity called the “benefit LLC,” making the state the first to allow limited liability companiesthe same opportunities afforded to Illinois corporations under the state’s Benefit Corporation
Corporation
Law.[4][5]In December 2015, the Italian Parliament passed legislation recognizing a new kind of organization, named Società Benefit, which was directly modeled after Benefit Corporations in the United States. This made Italy the first country in the world to make this legal status available across its entire territory.[6][7][8]Instead of recognizing Benefit Corporations, Washington created social purpose corporationsin 2012 with a similar focus and intent.[9][10] Differences from traditional corporations[edit] Historically, United States
United States
corporate law has not been structured or tailored to address the situation of for-profit companies that wish to pursue a social or environmental mission.[11] While corporations generally have the ability to pursue a broad range of activities, corporate decision-making is usually justified in terms of creating long-term shareholder value. A commitment to pursuing a goal other than profit as an end for itself may be viewed in many states as inconsistent with the traditional perspective that a corporation’s purpose is to maximize profits for the benefit of its shareholders. The idea that a corporation has as its purpose to maximize financial gain for its shareholders was first articulated in Dodge v. Ford Motor Company
Company
in 1919. Over time, through both law and custom, the concept of “shareholder primacy” has come to be widely accepted. This point was recently reaffirmed by the case eBay Domestic Holdings, Inc. v. Craig Newmark, et al., 3705-CC, 61 (Del. Ch. 2010). , in which the Delaware Chancery Court stated that a non-financial mission that “seeks not to maximize the economic value of a for-profit Delaware corporation for the benefit of its stockholders” is inconsistent with directors’ fiduciary duties. In the ordinary course of business, decisions made by a corporation’s directors are generally protected by the business judgment rule, under which courts are reluctant to second-guess operating decisions made by directors. In a takeover or change of control situation, however, courts give less deference to directors’ decisions and require that directors obtain the highest price in order to maximize shareholder value in the transaction. Thus a corporation may be unable to maintain its focus on social and environmental factors in a change of control situation because of the pressure to maximize shareholder value. Of course, if a company does change ownership and the result is no longer in adherence to its initially described benefit goals, the sale could be challenged in court. Mission-driven businesses, impact investors, and social entrepreneurs are constrained by this legal framework, which is not equipped to accommodate for-profit entities whose mission is central to their existence. Even in states that have passed “constituency” statutes, which permit directors and officers of ordinary corporations to consider non-financial interests when making decisions, legal uncertainties make it difficult for mission-driven businesses to know when they are allowed to consider additional interests. Without clear case law, directors may still fear civil claims if they stray from their fiduciary duties to the owners of the business to maximize profit. By contrast, benefit corporations expand the fiduciary duty of directors to require them to consider non-financial stakeholders as well as the financial interests of shareholders.[12] This gives directors and officers of mission-driven businesses the legal protection to pursue an additional mission and consider additional stakeholders besides profit.[13][14] The enacting state's benefit corporation statutes are placed within existing state corporation codes so that the codes apply to benefit corporations in every respect except those explicit provisions unique to the benefit corporation form. In the rest of the world, the corporate law position is sometimes very different. In the UK, for example, the Community Interest Company ensures profit and purpose can both be prioritised.[citation needed] Provisions[edit] Typical major provisions of a benefit corporation are: Purpose

Shall create general public benefit. Shall have right to name specific public benefit purposes (e.g. 50% profits to charity). The creation of public benefit is in the best interests of the benefit corporation.

Accountability

Directors' duties are to make decisions in the best interests of the corporation Directors and officers shall consider effect of decisions on shareholders and employees, suppliers, customers, community, environment (together the "stakeholders")

Transparency

Shall publish annual Benefit Report in accordance with recognized third party standards for defining, reporting, and assessing social and environmental performance Benefit Report delivered to: 1) all shareholders; and 2) public website with exclusion of proprietary data

Right of Action

Only shareholders and directors have right of action Right of Action can be for 1) violation of or failure to pursue general or specific public benefit; 2) violation of duty or standard of conduct

Change of Control/Purpose/Structure

Shall require a minimum status vote which is a 2/3 vote in most states, but slightly higher in a few states

Benefit corporations are treated like all other corporations for tax purposes.[15] Benefits[edit] Benefit corporation
Benefit corporation
laws address concerns held by entrepreneurs who wish to raise growth capital but fear losing control of the social or environmental mission of their business. In addition, the laws provide companies the ability to consider factors other than the highest purchase offer at the time of sale, in spite of the ruling on Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. Chartering as a benefit corporation also allows companies to distinguish themselves as businesses with a social conscience, and as one that aspires to a standard they consider higher than profit-maximization for shareholders.[16] See also[edit]

State Date Passed Date in Effect Legislation

Arizona April 30, 2013 December 31, 2014 SB 1238

Arkansas April 19, 2013 July 18, 2013 HB 1510

California October 9, 2011 January 1, 2012 AB 361

Colorado May 15, 2013 April 1, 2014 HB 13-1138

Connecticut April 24, 2014 October 1, 2014 SB 23, HB 5597 Section 140

Delaware July 17, 2013 August 1, 2013 SB 47

Florida June 20, 2014 July 1, 2014 SB 654, HB 685

Hawaii July 8, 2011 July 8, 2011 SB 298

Idaho April 2, 2015 July 1, 2015 SB 1076

Illinois August 2, 2012 January 1, 2013 SB 2897

Indiana April 30, 2015 July 1, 2015 HB 1015

Kansas March 30, 2017 July 1, 2017 HB 2153

Kentucky March 7, 2017 July 1, 2017 HB 35

Louisiana May 31, 2012 August 1, 2012 HB 1178

Maryland April 13, 2010 October 1, 2010 SB 690/HB 1009

Massachusetts August 7, 2012 December 1, 2012 2012 Acts, Chapter 238

Minnesota April 29, 2014 January 1, 2015 SF 2053, HF 2582

Montana April 27, 2015 October 1, 2015 HB 2458

Nebraska April 2, 2014 July 18, 2014 LB 751

Nevada May 24, 2013 January 1, 2014 AB 89

New Hampshire July 11, 2014 January 1, 2015 SB 215

New Jersey January 10, 2011 March 1, 2011 S 2170

New York December 12, 2011 February 10, 2012 A4692-a and S79-a

Oregon June 18, 2013 January 1, 2014 HB 2296

Pennsylvania October 12, 2012 January 1, 2013 HB 1616

Rhode Island July 17, 2013 January 1, 2014 HB 5720

South Carolina June 6, 2012 June 14, 2012 HB 4766

Tennessee May 20, 2015 January 1, 2016 HB 0767/SB 0972

Texas June 14, 2017 September 1, 2017 HB 3488

Utah April 1, 2014 May 13, 2014 SB 133

Vermont May 19, 2010 July 1, 2011 S 263

Virginia March 26, 2011 July 1, 2011 HB 2358

Washington, D.C. February 8, 2013 May 1, 2013 B 19-058

West Virginia March 31, 2014 July 1, 2014 SB 202

Wisconsin November 27, 2017 February 26, 2018 SB298 Act 77

Wikiversity has learning resources about Benefit corporation

B Corporation
Corporation
(certification) Low-profit limited liability company Community interest company Impact investing Public-benefit corporation Socially responsible investing Stakeholder theory Social Purpose Corporation Workplace spirituality

References[edit]

^ "Social Enterprise Law Tracker". Social Enterprise Law Tracker. 2014-11-12. Retrieved 2017-07-17.  ^ "State by State Status of Legislation". B Lab. Retrieved 4 July 2017.  ^ Stuart, Christine (October 1, 2014). "20 Connecticut Social Entrepreneurs
Entrepreneurs
Convert Their Companies to Benefit Corporations". CT News Junkie. Retrieved 2017-07-17.  ^ S.B. 2358, 98th Gen. Assem. (Ill. 2013). ^ Six Month Report (PDF) (Report). Governor’s Task Force on Social Innovation, Entrepreneurship, and Enterprise. April 2013.  ^ Italian financial Act for 2016- L. nr. 208/2015 ^ Daniel (22 December 2015). "Italian Parliament approves Benefit Corporation
Corporation
legal status". Amsterdam, Netherlands: B Lab. Retrieved 19 July 2017.  ^ "Disposizioni per la formazione del bilancio annuale e pluriennale dello Stato". Gazzetta Ufficiale (in Italian). Republic of Italy. 30 December 2015. Retrieved 19 July 2017.  ^ HB 2239 ^ "Social Purpose Corporation". Washington Secretary of State. Retrieved 10 August 2016. As of June 7, 2012, a new type of profit corporation will exist in Washington. ..[T]his law...would allow a corporation’s shareholders and directors to put a social purpose (such as saving the environment or saving the whales) above the purpose of making a profit.  ^ "Balancing purpose and profit: Legal mechanisms to lock in social mission for "profit with purpose" businesses across the G8". Trust Law. Retrieved 3 September 2015.  ^ Marc J. Lane (March 11, 2014). "Emerging Legal Forms Allow Social Entrepreneurs
Entrepreneurs
to Blend Mission And Profits". Triple Pundit.  ^ Marc J. Lane. "Representing Corporate Officers and Directors". Aspen Publishers: Wolters Kluwer Law & Business. Retrieved 8 August 2012.  ^ Marc J. Lane. "Social Enterprises: A New Business Form Driving Social Change". The Young Lawyer. Retrieved 18 November 2014.  ^ "Maryland First State in Union to Pass Benefit Corporation Legislation". CSRWire USA. 14 April 2010.  ^ New-Economy Movement Archived August 7, 2011, at the Wayback Machine. article by Gar Alperovitz, also appeared in the June 13, 2011 edition of The Nation

External links[edit]

Social Enterprise Law Tracker - Interactive map visualizing the progression of benefit corporation legislation across the United States BenefitCorp.net - Information about creating and running benefit corporations Vermont benefit corporation statute - an example of legislation California Benefit Corporation
Corporation
Statute - scroll down to Part 13, law begins at §14600. Benefit Corporation
Corporation
Gateway - DePaul University-sponsored resource that aggregates and organizes benefit corporation research and guides.

v t e

Social and environmental accountability

Ethics and principles

Aarhus Convention Corporate accountability / behaviour / social responsibility Ethical banking Ethical code Extended producer responsibility Organizational ethics Organizational justice Principles for Responsible Investment Social responsibility Stakeholder theory Sullivan principles Transparency (behavioral social) UN Global Compact

Social accounting

Double bottom line Ethical Positioning Index Higg Index Impact assessment (environmental equality social) ISO 26000 ISO 45001 Genuine progress indicator Performance indicator SA8000 Social return on investment Whole-life cost

Environmental accounting

Carbon accounting Eco-Management and Audit
Audit
Scheme Emission inventory Environmental full-cost accounting / impact assessment / management system / profit-and-loss account ISO 14000 ISO 14031:1999 Life-cycle assessment Pollutant release and transfer register Sustainability accounting / measurement / metrics and indices / standards and certification / supply chain Toxics Release Inventory Triple bottom line

Reporting

Global Reporting Initiative GxP
GxP
guidelines Sustainability reporting

Auditing

Community-based monitoring Environmental (certification) Fair trade (certification) ISO 19011

Related

Bangladesh Accord Benefit corporation Child labour Community interest company Conflict of interest Disasters Disinvestment Eco-labeling Environmental pricing reform Environmental, social and corporate governance Ethical consumerism Euthenics Health impact assessment Market governance mechanism Product certification Public participation Social enterprise Socially responsible investing Stakeholder (engagement) Supply chain management

Environment portal Category Commons O

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