Legislation has been introduced that would allow the formation of a new type of corporation that takes into account the interests of non-shareholders.
Public benefit corporations are intended to operate in a responsible and sustainable manner. They are to be managed for the benefit not only of stockholders, but also for other people, the community and public interests according to a release from the state.
“Delaware is rightfully recognized worldwide for its leading role in corporate law,” said Gov. Jack Markell. “With the addition of Public Benefit corporations, Delaware will continue to be a leader and support a new movement of social entrepreneurs and investors who are stepping forward to meet high standards of corporate purpose, accountability and transparency.”
Delaware is the legal home of more than one million legal entities including many of the nation’s largest businesses.
The bill requires directors of a Delaware public benefit corporation to balance the interests of stockholders with the best interests of those materially affected by the corporation’s conduct and the specific public benefits identified by the corporation.
The legislation, Senate Bill 47 was introduced Thursday in the Delaware General Assembly with bi-partisan support.
“I am proud to sponsor legislation which gives corporations a way to rebuild public trust in business by ensuring that the benefits of their work extend beyond their stockholders and managers,” said State Sen. David Sokola, D-Newark, who is sponsoring the bill.”
B Lab, a non-profit organization whose mission is to use the power of business to solve social and environmental problems, is the nation’s leading advocate for benefit corporation legislation.
B Lab also certifies hundreds of companies that meet rigorous standards of social and environmental performance, accountability and transparency including more than 70 firms that are already incorporated in Delaware.
Says Jay Coen Gilbert, co-founder of B Lab, “Delaware’s introduction of benefit corporation legislation is a tipping point in the acceleration of a global movement to redefine success in business. We are deeply appreciative of the commitment that Delaware had made to this important issue and thank Governor Markell, the bill’s sponsors, the Delaware State Bar Association, the Delaware Court of Chancery, and the Secretary of State for their leadership in supporting legislation that will work in Delaware.”
A public benefit corporation (PBC) will be formed in the same manner as any other corporation formed under the Delaware General Corporation Law. However, in order to be a PBC, the corporation’s certificate of incorporation must identify one or more specific public benefits and must have a name that clearly identifies its status as a PBC.
Public benefits for which corporations may be formed under the proposed law include, but are not limited to, those of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technical nature.
Once every two years, a public benefit corporation must send its stockholders a statement with respect to its promotion of the public benefits identified in its charter, as well as its promotion of the best interests of those materially affected by the corporation’s conduct.
John Grossbauer, vice chair of the Council of the Corporation Law Section of the Delaware State Bar Association, stated “I’m pleased to represent the Delaware State Bar Association in endorsing this legislation which will provide corporations, entrepreneurs and investors who wish to pursue these goals the ability to rely on a long tradition of Delaware corporate law that provides both the stability and predictability that businesses have come to rely upon.”
If enacted, corporations would become eligible to form, convert or merge into a public benefit corporation beginning August 1, 2013.
