In 2011, New York was the seventh state to pass Benefit Corporation legislation. Most state Benefit Corporation laws are similar and share common principles, but there are differences. This primer focuses on the New York statute. A New York entrepreneur can form a new business as a Benefit Corporation by declaring in its Certificate of Incorporation that it is a Benefit Corporation and satisfying the other requirements of Article 17 of the New York Business Corporation Law. NYBCL 1703. A corporation may convert to a Benefit Corporation from a different type of corporate format, such as a C Corporation, with the correct shareholder vote. NYBCL 1704(a).
Note that some people refer to Benefit Corporations as "B Corps," but the terms are not actually interchangeable. A specific company called "B Lab" provides assessment services for Benefit Corporation qualification; but not every Benefit Corporation is certified by B Lab.
General Public Benefit
A Benefit Corporation must have the purpose of creating General Public Benefit, which is defined as "a material positive impact on society and the environment, taken as a whole, assessed against a third-party standard, from the business and operations of a benefit corporation." NYBCL 1702(b).
Specific Public Benefits
A Benefit Corporation may also identify one or more Specific Public Benefits in its Certificate of Incorporation, including:
(1) providing low-income or underserved individuals or communities with beneficial products or services; (2) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; (3) preserving the environment; (4) improving human health; (5) promoting the arts, sciences or advancement of knowledge; (6) increasing the flow of capital to entities with a public benefit; (7) the accomplishment of any other particular benefit for society or the environment. — NYBCL 1702(e)(1-7)
Corporate Decision Making
The New York Benefit Corporation statute requires corporate executives and directors to consider the interests of stakeholders beyond the company's shareholders when making corporate decisions. It states that corporate officers and directors:
(1) shall consider the effects of any action upon: (A) the ability for the benefit corporation to accomplish its general and any specific public benefit purpose; (B) the shareholders of the benefit corporation; (C) the employees and workforce of the benefit corporation and its subsidiaries and suppliers; (D) the interests of customers as beneficiaries of the general or specific public benefit purposes of the benefit corporation; (E) community and societal considerations, including those of any community in which offices or facilities of the benefit corporation or its subsidiaries or suppliers are located; (F) the local and global environment; (G) the short-term and long-term interests of the benefit corporation, including the benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests may be best served by the continued independence of the benefit corporation. — NYBCL 1707(1)(A-G)
In addition, the statute allows Benefit Corporation officers and directors to consider the intent of a prospective corporate buyer with respect to the general and specific public benefits of the Benefit Corporation, and offers other statutory protections for corporate decision making aligned with the stated social purposes of the Benefit Corporation. NYBCL 1707(2-3) & NYBCL (b).
New York Benefit Corporation Status
In order to maintain Benefit Corporation status in New York, a business organization must be qualified, as measured against an independent, third party standard, such as the B Lab assessment. In addition, a Benefit Corporation must distribute to shareholders, publish on its internet site, and file a detailed annual benefit report presenting the progress made towards its stated general and specific public benefits, if any, and certain other information. NYBCL 1708.
To learn more about Benefit Corporation law and legal services for Benefit Corporations, read the following: Corporate Impact Law & Benefit Corporation Law.
To discuss how Host Law Firm can support your socially responsible business, contact the Firm.