Effective January 1, 2015 with the passing of SB 215 and enactment of RSA 293-C, New Hampshire will join the ranks of 24 other states (including Vermont, Massachusetts, Connecticut and Rhode Island) providing for the formation of Benefit Corporations, in addition to the traditional Business and Not for Profit Corporations. Additionally, existing corporations may elect to become Benefit Corporations, and the law will also permit professional corporations to form as or elect to become Benefit Professional Corporations. While being subject to most operational regulations and internal procedures of a traditional business corporation, a B Corp, as they are called, requires the identification of one or more public benefits in its Articles of Incorporation which may include: Providing low-income or underserved individuals or communities with beneficial products or services; Protecting or restoring the environment; Improving human health; Promoting the arts, sciences, or advancement of knowledge …along with a host of other identified public benefits. Differing from the scenario of a business corporation wherein actions are determined by the effect to the bottom line, directors and officers of a B Corp are specifically charged with considering the effect of any action on the shareholders, employees and suppliers, customers as beneficiaries of the public benefit purpose, community factors, and the environment to name a few. The articles may also include a requirement as to what priority the public benefit should be given by the directors in considering the best interests of the corporation. In addition, the B Corp can designate a benefit director (mandatory for publicly traded B Corps) and a benefit officer. Such positions would have the responsibility for reporting annually both to its shareholders and the public as well as a state filing as to ways the corporation pursued the public benefit, what was created, circumstances that hindered any action, performance assessment etc. While the directors will not be held personally liable for failure to pursue the public benefit, corporations can be subject to enforcement actions for injunctive relief only, which may be brought by shareholders or directors. Benefit Corporations, however, will not be liable for monetary damages under the new law for any failure to pursue or create general or specific public benefit.
While the enactment of the B Corp may be interpreted as one more layer of regulation and complexities in the operation and management of a company if it is elected, when viewed more globally it is the result of minority shareholders of publicly held corporations influencing the directors to look at more than just the bottom line when deciding on far reaching corporate actions which may adversely affect impoverished communities or the global environment. While the privately held companies in New Hampshire may seem a world away from the proxy battles and annual shareholder meetings on Wall Street, B Corps can be successfully used as a control in the buy-out of a company by its employees or can be used to pass on a philanthropic philosophy to the second generation of a family owned business. For those companies that now include as part of their marketing campaign that a percentage of their profits go to a certain charity, it affords a public way to demonstrate that in fact the company is being run in accordance with those principles. It doesn’t take much to imagine that, given the choice, customers may want to align themselves with B Corps knowing they share a common interest in public benefit.
This is a new and developing area of law in New Hampshire and elsewhere. For more information on B Corps and a discussion as to whether they may be effective in reaching your business and personal goals, please call Attorneys Denise Poulos or Doug Mansfield.