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Benefit Corporations- Are they forever?

8 Jul

Recently, I have been part of several discussions of Benefit Corporations revolving around what benefit corporation status protects and how exactly it does it.  One of the common misconceptions is that becoming a Benefit Corporation cannot be reversed and, therefore, the corporation must always work for the general public benefit and, if applicable, any specific public benefits adopted.

In reality the Illinois Benefit Corporation Act, 805 ILCS 40, only makes the decision to cease being a benefit corporation or remove a specific general purpose more difficult by requiring a “minimum status vote”  for a corporation.  The statute requires such a decision to be made by a 2/3 supermajority vote of the shareholders.  In addition, the statute overrides any provisions in the by-laws that preempts certain classes of stockholders from voting.  As a result, all stockholders are entitle to vote on whether the benefit corporation will covert to a corporation or whether the corporation will cease to pursue a specific public benefit.

Needless to say, both of these requirements make it difficult, but not impossible to achieve.  Perhaps more importantly, these requirements will give pause to anyone who is considering buying into a Benefit Corporation with the ultimate goal of stripping out the environmental and social stewardship provisions of the corporation.

If you have questions about Benefit Corporations, contact us at 773-609-5320, info@thornenvironmentallaw.com, or through our web contact form.

Disclaimer: This article cannot, and does not, create any attorney/client or consultant/client relationship.

 

Benefit Corporations- What is “general public benefit” and “specific public benefit”?

3 Jul

Recently, I have been part of several discussions of Benefit Corporations revolving around what benefit corporation status protects and how exactly it does it.  In particular, one of the conversations used George Zimmer’s recent ouster as the basis of the discussion.  In order to provide some clarity, I will be posting a series of blog entries discussing the various requirements and provisions of the Illinois Benefit Corporation Act.  While many of these provisions are identical to Benefit Corporation Acts in other states, if you are researching Benefit Corporation Acts in other states please consult the statutes in your state (or intended state of incorporation) as there may be differences or, as is the case in most states, there is not actually a Benefit Corporation Act on the books yet.

The heart and soul of the Illinois Benefit Corporation Act (and other such statutes) are that Benefit Corporations must promote the ”general public benefit” and may promote one or more “specific public benefits.”  A ”general public benefit” is defined under the Illinois Benefit Corporation Act 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.”   The Illinois Benefit Corporation Act enumerates seven specific public benefits, including what amounts to a miscellaneous catch-all category: (more…)

Illinois Benefit Corporation Law passed but not yet effective

5 Sep

Governor Quinn signed the Benefit Corporation bill on August 2, 2012 (Public Act 97-0885).  The new law does not go into effect, however, until January 1, 2013.

Benefit Corporations, also known as B Corps, are a new type of corporation in Illinois which actively adopt a general public benefit or one or more specific public benefits as a corporate goal (or a combination of a general and specific goals).  Legally speaking, this allows B Corps to pursue purposes other than maximizing profits without fear of a shareholder derivative lawsuit and, u nlike L3C s, a B Corp still make significant profits.  From a public relations standpoint, it allows a business to attract like-minded consumers.

The statute places ongoing reporting responsibilities on Benefit Corporations which are undertaken by a Benefit Director and a Benefit Officer.  The statue also creates a “benefit enforcement proceeding” as a means of making sure the general or specific goals of the B Corp are met.

If you have questions about B Corps, wish to create a B Corp, or wish to conert your existing business to a B Corp, contact us at 773-609-5320, info@thornenvironmentallaw.com, or through our web contact form.

Disclaimer: This article cannot, and does not, create any attorney/client or consultant/client relationship.

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