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Public Benefit Corporations are formed to pursue a business purpose (often embodied in a generalized statement) but also one or more express public benefits the corporation intends to pursue alongside its for-profit business. In operating the Public Benefit Corporation and setting its direction, the Board of Directors may balance its fiduciary duty to act in the best interests of the corporation and shareholders with the interests of other constituencies affected by the corporation’s activities, such as, among other possibilities, its employees, current and retired, the environment, the towns and regions in which it operates, and society as a whole.
Although they are similar to standard corporations in many ways, including the drive to earn profits, Public Benefit Corporations also serve broader societal interests for the benefit of society, the environment, the natural world and/or the world at large. In this way, they reflect a very different conception of the corporate form than the “shareholder primacy” model, which is focused solely on shareholder economic benefit work.
A Delaware Public Benefit Corporation can be formed in the same manner as a Delaware Corporation, by filing a Certificate of Incorporation with the Delaware Division of Corporations. The Certificate of Incorporation for a Delaware Public Benefit Corporation must be clearly marked to delineate it as such.
The Certificate of Incorporation must also list the public benefit(s) the corporation will pursue. The State of Delaware has the ability to reject a Certificate of Incorporation if the public benefit statement is improper or impermissibly stated. Public benefits should be specific enough to identify the cause sufficiently, but should be general enough in scope to permit future growth in tackling the public issue.
For instance, a public benefit stating that a public benefit corporation will seek to “ensure that schoolchildren in grades 3 through 5 in X school district have sufficient access to organic fruits and vegetables in school lunches” may be too specific, particularly in geographic scope and age. The benefit could be restated as: “ensuring the schoolchildren in X counties, and eventually Y state as a whole, have sufficient access to nutritious school lunches.”
Likewise, a Delaware Public Benefit Corporation’s stock certificates must also be clearly marked with the words “Public Benefit Corporation.” or, in the case of uncertificated shares, the text provided to the shareholder in connection with such shares must bear the Public Benefit Corporation designation. However, in every other manner, the structure of a Delaware Public Benefit Corporation mirrors the structure of any type of Delaware Corporation.
Recorded on: January 27, 2021
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