A Benefit Corporation, also known as a B Corporation, B Corp or Public-Benefit Corporation, is a type of for-profit corporate entity that includes a mission among its corporate goals, including: creating a positive impact on society, workers, the community and the environment. Such positive impact goals are in addition to the traditional corporate goal of increasing shareholder value. Typically, as an entity, the structure of a B Corporation does not differ from that of a typical “C” Corporation, which, along with Limited Liability Companies (LLCs) are two of the most broadly used entities for emerging growth companies. A business that is a C Corporation may, in certain jurisdictions, become a B Corporation merely by stating in its certificate of incorporation or bylaws that is it is a benefit corporation. Several jurisdictions, including Delaware, do however require the use of the term “public benefit corporation” or “PBC” in the legal name of the B Corporation.
The benefits of becoming a B Corporation can vary. A University of Maryland study found that a business would want to become a B Corporation to gain recognition from their customers and the community about the company’s social impact (Kincaid, Amy; et al. (January 1, 2013). “Maryland Benefit Corporation Act: The State of Social Enterprise in Maryland”). An entrepreneur or business might also value the fact that a B Corporation’s directors and officers must consider in their decision making social impacts on employees, customers and the environment, and not exclusively the value created for shareholders.
However, some argue that the benefits of becoming a B Corporation are limited to mere value signaling for marketing purposes. This is because many states have adopted “constituency statutes” that expressly require the consideration of all corporate stakeholders in decision making and therefore some argue that the B Corporation status, on its own, does not significantly impact the behavior of the company.
The requirements for becoming a B Corporation differ from state to state. Some states only require that a company update their bylaws to include social impact as a goal. Other states require certification from a third-party assessment firm, such as B Lab. Entities such as B Lab provide certification services, which include impact assessments. Once certified, a company can use logos and emblems signaling certification as a B Corporation.
In Delaware, where many companies incorporate because of the state’s robust business laws and judicial climate, a company must file a Certificate of Incorporation for a Public Benefit Corporation (https://corpfiles.delaware.gov/PBC_Inc.pdf) with the Secretary of State, in accordance with Sections 102 and 362 of the General Corporation Law of the State of Delaware. Applicable fees must be paid along with the completed Certificate of Incorporation. The entity’s name must include the words “public benefit corporation,” or the abbreviation “P.B.C.,” or the designation “PBC,” which will satisfy the requirements under Delaware Public Benefit Corporation law.
As a B Corporation in Delaware, a company is required to file an Annual Report by March 1 of each year following the calendar year in which the Certificate of Incorporation became effective. Additionally, a B Corporation in Delaware will be required to include in every notice of a stockholders’ meeting a statement to the effect that the company is a public benefit corporation formed pursuant to subchapter XV of the General Corporation Law of the State of Delaware. Likewise, a B Corporation must provide its stockholders with a statement at least every other year, confirming the corporation’s promotion of the public benefit or public benefits identified in the Certificate of Incorporation and of the best interests of those materially affected by the corporation’s conduct. The statement must include:
- The objectives the board of directors has established to promote such public benefit or public benefits and interests
- The standards the board of directors has adopted to measure the corporation’s progress in promoting such public benefit or public benefits and interests
- Objective factual information based on those standards regarding the corporation’s success in meeting the objectives for promoting such public benefit or public benefits and interests
- An assessment of the corporation’s success in meeting the objectives and promoting such public benefit or public benefits and interests