PENNSYLVANIA BECOMES THE TWELFTH STATE TO PASS BENEFIT CORPORATION LAW - socentlaw

PENNSYLVANIA BECOMES THE TWELFTH STATE TO PASS BENEFIT CORPORATION LAW

On October 24, 2012, Pennsylvania became the twelfth state to pass benefit corporation legislation.

I will update my Benefit Corporations: State Statute Comparison Chart when the law goes into effect (after 90 days).

Lancaster Online has additional details: here.

Below are four thoughts that came to mind after reading the Lancaster Online article:

(1) The statement that the traditional purpose of the corporation is “making a profit for its shareholders” is hotly contested.  See, e.g., Professor Lynn Stout’s recent book, The Shareholder Value Myth.  In May, I made a similar statement, but with a two very important caveats (primary purpose and Delaware corporate law), and, even with those caveats, a number of well-regarded academics disagreed (see the comments).

(2) To date, not many benefit corporations have been formed.  The fact that 19  benefit corporations (reported by other sources as only 12) were formed in California on the first day is nice, but not impressive.  The first benefit corporation statute (Maryland) went effective in 2010, and it appears that a total of fewer than 200 benefit corporations have been formed across the nine states with active statutes (IL, MA, and PA are not yet effective).  To put the total number of benefit corporations into perspective, over 900,000 business entities are formed in Delaware alone.  The benefit corporation form may take off, but it has not yet.

(3) I am extremely interested to see what Pennsylvania’s neighbor, Delaware (the leader in U.S. corporate law), will do to address the social enterprise movement. The total number of benefit corporations currently formed will not get Delaware’s attention, but the media attention and the passion of social entrepreneurs might.  Whatever Delaware’s response, I am sure it will be well thought out.

(4) While I still maintain a healthy skepticism, I am intrigued by these new forms, respect those who are on the ground trying to effectuate change, and am enjoying my research in the area.

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