How Is a Delaware Public Benefit Corporation Structured?

In a Delaware Public Benefit Corporation, the Board of Directors is tasked with managing the corporation so that its fiduciary duty to the corporation and to maximize value to the shareholders is balanced against the interests of other constituencies affected by the corporation’s operations, including its employees, customers, suppliers, the environment, and society as a whole. The public benefit(s) stated can be related to the commercial business of the Public Benefit Corporation, but need not be related. For example, in a benefit related to the corporation’s business, a vitamin company can pledge to donate some of its products to undernourished mothers or third-world orphanages to improve public health.

The Board is responsible for the issuance of a biennial (every two years) Benefit Report. It must be distributed to shareholders, and may, but need not, be made more broadly available. The report must describe the company’s endeavors to achieve its public benefit purpose and provide concrete guidance on its progress and the standards and markers used to measure such progress. Unlike similar reports required for other states’ benefit companies, the biennial report compiled by a Delaware Public Benefit Corporation does not have to be completed in accordance with or using the measures of a third-party standard or certifying body, although the corporation may adopt such a standard or obtain the certification of a third-party certifying body as it deems appropriate. This report need not be made public by a Public Benefit Corporation, although it can be if the Public Benefit Corporation so chooses.

Delaware Public Benefit Corporations are, however, required to disclose the standards by which the Board of Directors has evaluated the corporation’s performance in regard to its identified public benefit(s).

Under 2020 amendments to the Delaware General Corporate Law, any other type of Delaware corporation can convert to a Public Benefit Corporation. All that is required is the consent to the conversion by holders of shares constituting a majority of outstanding voting shares entitled to vote. Previously, a shareholder who dissented from conversion to a Public Benefit Corporation could demand to be cashed out of the corporation through exercise of an appraisal right, entitling the dissenting shareholder to the “fair value” of his or her shares as determined by the Delaware Court of Chancery. The 2020 amendments did away with the appraisal rights in this case, however, again making it easier for a corporation to convert to a public benefit corporation.

A Delaware Public Benefit Corporation can exist in perpetuity, subject to operation of law that can terminate a company and any provisions for termination adopted by the Public Benefit Corporation, just as any other type of Delaware corporation.