Last April, the Minnesota legislature passed the Minnesota Public Benefit Corporation Act, which became effective with the start of the new year. Minnesota now joins about two dozen other states that offer a specific statutory option for the organization of for-profit but socially minded businesses. For some explanation, we reached out to Daryl Koehn, a professor of Ethics and Business Law.
Public benefit corporations (PBCs) are a relatively new legal corporate form, says Koehn.
They are for-profit firms. However, unlike traditional for-profit corporations, PBCs commit to a legally binding social purpose. Directors and executives of PBCs typically must consider not only the interests of shareholders but also of other relevant stakeholders. In addition, PBCs must publicly report (generally every year) on the progress they have made to date in realizing this social purpose. Although there are numerous reasons why states have passed laws enabling the formation of PBCs, one major reason has been to support the growth of social enterprises.
Jonathan Nygren and Brandon Mason, lawyers in Faegre Baker Daniel's corporate practice wrote a good summary of the requirements and consequences of electing public benefit corporation status on their firm's blog. Here are some interesting things to look for as PBCs begin to appear in our corporate landscape:
A public benefit corporation's articles must spell out its duty to pursue a general or specific public benefit. Public benefit corporations in Minnesota are divided into two types, depending on the scope of the public benefit to be pursued by the entity:
- General benefit corporations are required to pursue a net material positive impact from its business and operations on society, the environment and the well-being of present and future generations. In addition to this broad obligation, general benefit corporations may also state a specific public benefit or benefits.
- Specific benefit corporations are required to elect only to pursue one or more positive impacts, or reduction of a negative impact, on specified categories of natural persons, entities, communities or interests other than shareholders (in their capacity as shareholders). This narrower obligation allows the specific benefit corporation to focus its mission on one or more explicit benefits without the general societal concerns required of general benefit corporations.
Each public benefit corporation will have "General Benefit Corporation" or "Specific Benefit Corporation" (or the abbreviations GBC or SBC) in its legal name. This "branding" aspect of the entity form may be important for benefit corporations.
Big Questions, a television program that explores new ideas and projects that are changing the way the world works, has an episode the profiles an Oakland-based Benefit Corporation who gives their profits back to charities chosen by their customers.