Benefit Corporation Now Recognized in California: What Is It?

We’ve been reading with the interest legal analysis and commentary spurred by California Governor Jerry Brown’s recent bill signing spree. Included in the mix: a look at the new Benefit Corporation, a for-profit corporation that has the leeway to also take on objectives usually within the realm of non-profit organizations.

Here’s a closer look, from lawyers and law firms on JD Supra:

Tax Law — The Birth of a New Class of Corporation in California “Benefit Corporations” (Manatt):

“When Governor Jerry Brown signed Assembly Bill 361 into law on October 9, 2011, California became the sixth state to recognize a new category of corporation known as ‘benefit corporations’ or ‘B corporations.’ (Maryland enacted the first B corporations statute in 2010.)

Benefit corporations are for-profit corporations organized under California law. However, under the new law, for-profit corporations may adopt (in addition to one or more business purposes) purposes that have been historically pursued by nonprofit corporations. In other words, benefit corporations are business corporations that differ from traditional corporations in that they may set a goal to create public benefit while, at the same time, delivering economic returns to their investors. The new law provides legal protection to directors of this new class of corporations in pursuing what social entrepreneurs have termed a double bottom line-creating a beneficial social and environmental impact as well as financial returns to shareholders…” Read entire update»

New Form Of Corporate Entity Approved In California: Meet The Benefit Corporation (James Cai):

“Section 14600(e) of the Corporations Code states that a specific public benefits can include:

(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 ordinary 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 purpose
(7) The accomplishment of any other particular benefit for society…” Read entire update»

How Should Benefit Corporation Directors Make Decisions? (Allen Matkins):

“Subdivision (b) of new Corporations Code §14620 will require directors of benefit corporations to consider the impacts of any action or proposed action on all of a long list of interests and constituencies, including the shareholders, employees, and the interests of customers as beneficiaries of the general or specific public benefit purposes of the corporation. Subdivision (d) of the same statute provides that in discharging their duties, directors will not be required to give priority to any particular factor or the interests of any particular person or group identified in subdivision (b) unless the corporation has stated its intention to give priority to a specific public benefit purpose identified in the articles. How, then, is a director supposed to reach a decision?” Read entire update»


New Hybrid Business Entities Combine Businesses, Social Missions (Davis Wright Tremaine)

L3C and B-Corps (Sands Anderson)

Follow: Business Organization Updates