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