June 2010 - socentlaw


All of us social entrepreneurs were really excited to hear about the Benefit Corporation legislation passing in Maryland. But, after the dust has settled, many are wondering, “What exactly does this law do?” So we’ve looked at the statute and created an overview of the legislation.
Check it out. Pass it on. We’d love to hear what you think and what questions remain unanswered. Leave your questions in the comments section and we’ll answer every one of them.
Maryland Subtitle 6 C: Benefit Corporations – Takes Affect 10/01/2010
1.   Creation
  • A corporation may elect to be a Benefit Corporation by amending or including in their Charter of the Corporation a statement that the corporation is a Benefit Corporation.
  • An amendment of a corporation to become a Benefit Corporation shall be done by 2/3 shareholder vote.
  • Clear reference to the fact that the corporation shall be a Benefit Corporation shall appear prominently on all charter documents and stock certificates.
2.   Benefit
  • A Benefit Corporation MUST have a “General Public Benefit”
    • General Public Benefit is a material, positive impact on society and the environment, as measured by a Third-Party Standard, through activities that promote a combination of Specific Public Benefits.
      • Third-Party Standard is a standard for defining, reporting, and assessing best practices in corporate social and environmental performance that:
        • Is developed by a person or entity that is independent of the Benefit Corporation;
        • Makes the following information publically available:
          • the factors considered when measuring the performance of a business
          • relative weighting of factors; and
          • the process by which any changes to the standard are made.
  • A Benefit Corporation MAY  have a “Specific Public Benefit”
    • Specific Public Benefit Includes:
      • Providing individuals or communities with beneficial products or services;
      • Promoting economic opportunities for individuals or communities beyond the creation of jobs in the normal course of business;
      • Preserving the environment;
      • Improving human health;
      • Promoting the arts, sciences, or advancement of knowledge;
      • Increasing the flow of capital to entities with a public benefit purpose; or
      • The accomplishment of any other particular benefit for society or the environment.
3.   Duty of Directors
  • In determining what the Director reasonably believes to be in the best interest of the Benefit Corporation, SHALL consider the effects of any action on:
    • The stockholder;
    • The employees and workforce of the Benefit Corporation and its subsidiaries/suppliers;
    • The interest of customers as beneficiaries of the General or Specific Public Benefit purposes;
    • Community and societal considerations, including those of any community in which offices or facilities of the Benefit Corporation (or the subsidiaries/suppliers) are located;
    • The local and global environment.
  • MAY consider any other pertinent factors or the interests of any other group that the Director determines are appropriate to consider in light of the Public Benefit described in the charter of the Benefit Corporation.
  • A Director does not have any duty to a person that is a beneficiary of the Public Benefit Purposes described in the Charter.
  • A Director shall have the immunity from liability so long as he/she follows the standard duties placed on a Director under the Maryland code..
4.   Annual Benefit Report to Stockholders:
  • A Benefit Corporation shall deliver to each stockholder an annual Benefit Report including:
    • A description of:
      • The ways in which the Benefit Corporation generally pursued the general public benefit described in the Charter during the year and the extent to which the General Public Benefit was created; and
      • Any circumstances that have hindered the creation by the Benefit Corporation of the Public Benefit;
      • An assessment of the environmental and societal performance of the Benefit Corporation prepared in accordance with a Third-Party standard applied consistently with the prior year’s Benefit Report or accompanied with an explanation for the reasons for any inconsistent application.
  • The Benefit Report must be distributed within 120 days of the end of the Benefit Corporation’s fiscal year.
  • The most recent Benefit Report must be posted on the public portion of the Benefit Corporation’s website or available without charge.
5.   Termination:
  • A corporation may terminate status as a Benefit Corporation by amending the Charter of the corporation by deleting the statement that the corporation is a Benefit Corporation.
  • An amendment terminating the status as a Benefit Corporation shall be approved by the 2/3 of the stockholders.