A new state law in the state of Delaware allows companies to incorporate or reincorporate themselves as Public Benefit Corporations, rather than the traditional General Corporation. The Delaware Public Benefit Corporations, or PBC’s, enable business leaders to consider public interest and societal impact in addition to profit when making business decisions.
“We’ve all heard about corporations wanting to ‘do well’ while also ‘doing good.’ With this new law, Delaware corporations have the ability to build those dual purposes into their governing documents,” said Governor Jack Markell. Markell says there’s not only a market need for these businesses, but also a societal need. He noted the amount of investment funds for socially responsible investing has jumped by more than 20% over the past few years.
Businesses forming a PBC will be formed in the same manner as any other corporation formed under the Delaware General Corporation Law. The coporate ending can be one of the following:
Also, they must identify at least one public benefit supported, such as an educational, environmental, or cultural cause. PBC are then required to outline their efforts to that cause every two years in a statement to stockholders. Because of Delaware’s unique role in corporate America, the new law allowing creation of PBCs is a welcome addition to the state’s long-standing leadership in the development of corporate law worldwide. Delaware is home to more than 60% of the country’s publicly traded companies and 61% of the Fortune 500 companies.
“For Delaware to take this step sends a very strong signal to the business community throughout the country, and frankly, throughout the world that this kind of company is recognized by the premier jurisdiction for corporate law in America as something that is a good thing,” remarked Delaware’s Secretary of State Jeffery Bullock. Allowing PBCs in the state will have a ripple effect internationally.
With benefit corporations, investors and consumers have another tool to identify purpose-driven companies which meet higher standards of transparency and accountability. Investors increasingly look to use their investments both to make money and to make a difference. A growing number of consumers show a preference for making purchasing decisions based upon their sense of a company’s social and environmental responsibility.
Companies wanting to form, convert, or merge into a Public Benefit Corporation can do so via our easy-to-use order form (simply select "Public Benefit Corporation" under "Company Type") or over the phone at 800.345.2677.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.