On July 1, 2011, Vermont became the second state in the country to pass legislation authorizing the formation and operation of “benefit corporations,” also known as B Corps.
B Corps are a new class of corporation that are required by statute to create an overall “material positive impact on society and the environment” and to meet higher standards of accountability and transparency. These corporations combine the altruistic sensibilities of nonprofit corporations with the business acumen of for-profit corporations. Benefit corporations pay taxes and have shareholders like traditional corporations but enjoy statutory authorization to consider interests beyond the traditional maximization of shareholder value. The benefit corporation law redefines fiduciary duty by requiring that interests beyond just those of shareholders are considered when making corporate decisions. Those other interests may include the interests of the corporation’s employees and suppliers, as well as the local and state economy and the natural environment.
A benefit corporation differs from the current corporate model in three primary ways:
- The corporate purpose includes the creation of public benefit;
- Corporate directors’ fiduciary duties include consideration of non-financial interests; and
- Corporate transparency is facilitated by a required public annual Benefit Report.
Any corporation incorporating in Vermont may designate itself as a “benefit” corporation, and existing corporations may opt-in as benefit corporations, subject to approval by at least 2/3 of the outstanding shares. The new law is voluntary and no corporation is required to adopt the benefit corporation model.
If you have questions about whether a B Corp may be the right entity for your business, get in touch with us and we can talk about the specific advantages and disadvantages that may be unique to your particular situation.