Public Benefit Corporations | Brian JM Quinn | November 15, 2013

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Public Benefit Corporations

Original Creator: Brian JM Quinn Current Version: Brian JM Quinn Show/Hide

The development of corporate social responsibility and social entrepreneurship has given rise to demand for a different kind of corporate form, the “public benefit corporation”. The public benefit corporation is a for-profit corporation established with a specific public purpose. The certificate of incorporation of a public benefit corporation requires that incorporators specify some public benefit against which the pecuniary interests of the corporation's business must be balanced. 

Although the form is relatively new, there is very little in the public benefit form that could not also be accomplished using a regular corporation. For many years, non-profit corporations were nothing more than corporations in which the certificate of incorporation prohibited the board from making a profit for stockholders. In fact, the Green Bay Packers' certificate of incorporation prohibits stockholders from ever receiving a dividend and requires the board of the Packers to donate any profits the team might have to a community foundation.

Public benefit corporations as a specifc form are a relatively new addition to corporate laws of states in response to a growing desire by promoters to have a corporate form that outwardly signals a credible commitment by managers to a more publicly-minded business. 

In recent years, there has been a proliferation of public benefit corporations. For example, Ello, a Delaware public benefit corporation (social networking site), specifies as its public benefit that it will not share the private information of its customers with third parties. Plum Organics, another Delaware public benefit corporation (a baby food manufacturer), specifies that its public benefit includes “the delivery of nourishing, organic food to the nation's little ones.” Certificates of incorporation for these and other public benefit corporations are available on the course website. 

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  1. 1 Show/Hide More DGCL Sec. 361-368 - Public Benefit Corporations
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
    The following amendments to the Delaware corporation code became effective on August 1, 2013 and provide for the establishment of public benefit corporations under the Delaware General Corporation Law. Section 362 requires public benefit corporations to identify a public benefit in its certificate of incorporation.  Section 365 requires boards of directors to manage the business in a manner that balances profit with the best interests of those affected by the corporation's conduct as well as the specific public benefit identified in the certificate of incorporation.
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March 15, 2017

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