Corporation Legal Roadmap


Legal Disclaimer: The following information does not constitute legal advice and is provided solely as a reference. Business entities interested in institutionalizing their values by incorporating consideration of the interests of employees, consumers, the community, and the environment into their corporate governing documents should discuss with their legal advisors the potential risks and liabilities associated with adoption of the language set forth below for the company's specific corporate structure and state/province of incorporation. Decisions by the board of directors, managing members or general partners of B Corporations will be evaluated pursuant to standards of reasonableness, good faith and fair dealing within the relevant jurisdictions of organization.


If you're incorporated in AR, AZ, CA, CO, DE, MT, NE, NH, SC, UT, VA, or WV:

Congratulations! Your state recently passed benefit corporation legislation. Electing this status is the best way to ensure that the values of your company are maintained over time. Adopting benefit corporation status is a straightforward process that you can learn about here; companies must elect benefit corporation status within four years of the first effective date of the legislation or two years of initial certification, whichever is later.  For further clarification, please contact us at thelab@bcorporation.net or call us at 610-293-0299.


If you're incorporated in CT, DC, FL, HI, ID, IL, IN, LA, MA, MD, MN, NJ, NY, NV, OR, PA, RI, or VT:

Congratulations! Your state recently passed benefit corporation legislation. Electing this status is the best way to ensure that the values of your company are maintained over time. Adopting benefit corporation status is a straightforward process that you can learn about here; you have until the end of your first 2-year certification period to complete this process.

Note for Minnesota companies: the state of Minnesota offers both the Specific Benefit Corporation and General Benefit Corporation legal structures. Only the General Benefit Corporation structure fulfills the requirement for B Corp certification.

Alternatively, you can amend your articles to include the below language which also meets the legal requirement for B Corp certification. Corporations have until one year after certification to amend their articles.

To do so, you will need to 1) obtain approval of the amended articles by both your board of directors and shareholders (requiring either a majority or supermajority vote, depending on your state); and 2) file your amended articles with the secretary of state, coupled with a modest fee (usually less than $300). For further clarification, please contact us at thelab@bcorporation.net or call us at 610-293-0299.

Language to Amend Articles:

PURPOSE CLAUSE:

The purpose of the Company shall include creating a material positive impact on society and the environment, taken as a whole,

DIRECTORS CLAUSE:

a) In discharging the duties of their respective positions and in considering the best interests of the Company, the board of directors, committees of the board, and individual directors shall consider the effects of any action or inaction upon:

i) the members of the Company;
ii) the employees and work force of the Company, its subsidiaries, and its suppliers;
iii) the interests of its customers;
iv) community and societal factors, including those of each community in which offices or facilities of the Company, its subsidiaries, or its suppliers are located;
v) the local and global environment;
vi) the short-term and long-term interests of the Company, including benefits that may accrue to the Company from its long-term plans and the possibility that these interests may be best served by the continued independence of the Company; and
vii) the ability of the Company to create a material positive impact on society and the environment, taken as a whole.

b) In discharging his or her duties, and in determining what is in the best interests of the Company, a Director shall not be required to regard any interest, or the interests of any particular group affected by such action, including the shareholders, as a dominant or controlling interest or factor.

c) A director does not have a duty to any person other than a shareholder in its capacity as a shareholder with respect to the purpose of the Company or the obligations set forth in this Article, and nothing in this Article express or implied, is intended to create or shall create or grant any right in or for any person other than a shareholder or any cause of action by or for any person other than a shareholder [or the corporation].

d) Notwithstanding the foregoing, any director is entitled to rely on the provisions regarding "best interests" as set forth above in enforcing his or her rights hereunder, and under state law and such reliance shall not, absent another breach, be construed as a breach of a director's duty of care, even in the context of a change in control transaction where, as a result of weighing the interests set forth in subsection (a)(i)-(vii) above, a director determines to accept an offer, between two competing offers, with a lower price per share.


If you're incorporated in GA, IA, KY, ME, MS, MO, ND, NM, OH, SD, TN, WI, or WY:

Institutionalizing consideration of stakeholder interests requires amending your Articles of Incorporation using the language below.

The major steps include: 1) getting your amended articles approved by both your board of directors and shareholders (requiring either a majority or supermajority vote, depending on your state); and 2) filing your amended articles with the secretary of state, coupled with a modest fee (usually less than $300). Corporations have until one year after certification to complete this process.

Language to Amend Articles:

PURPOSE CLAUSE:

The purpose of the Company shall include creating a material positive impact on society and the environment, taken as a whole,

DIRECTORS CLAUSE:

a) In discharging the duties of their respective positions and in considering the best interests of the Company, the board of directors, committees of the board, and individual directors shall consider the effects of any action or inaction upon:

i) the members of the Company;
ii) the employees and work force of the Company, its subsidiaries, and its suppliers;
iii) the interests of its customers;
iv) community and societal factors, including those of each community in which offices or facilities of the Company, its subsidiaries, or its suppliers are located;
v) the local and global environment;
vi) the short-term and long-term interests of the Company, including benefits that may accrue to the Company from its long-term plans and the possibility that these interests may be best served by the continued independence of the Company; and
vii) the ability of the Company to create a material positive impact on society and the environment, taken as a whole.

b) In discharging his or her duties, and in determining what is in the best interests of the Company, a Director shall not be required to regard any interest, or the interests of any particular group affected by such action, including the shareholders, as a dominant or controlling interest or factor.

c) A director does not have a duty to any person other than a shareholder in its capacity as a shareholder with respect to the purpose of the Company or the obligations set forth in this Article, and nothing in this Article express or implied, is intended to create or shall create or grant any right in or for any person other than a shareholder or any cause of action by or for any person other than a shareholder [or the corporation].

d) Notwithstanding the foregoing, any director is entitled to rely on the provisions regarding "best interests" as set forth above in enforcing his or her rights hereunder, and under state law and such reliance shall not, absent another breach, be construed as a breach of a director's duty of care, even in the context of a change in control transaction where, as a result of weighing the interests set forth in subsection (a)(i)-(vii) above, a director determines to accept an offer, between two competing offers, with a lower price per share.


If you're incorporated in AL, AK, KS, MI, NC, OK, or TX:

Since your state does NOT currently have a corporate statute that explicitly allows directors to consider the interests of stakeholders (often called a 'constituency statute'), the best we can do together is to build the language of the B Corp legal framework into your Term Sheet for B Corp certification.

The Term Sheet commits your company to consider stakeholders to the extent possible within the current corporate laws of your state; to support benefit corporation legislation when we move forward in your state; and, once legislation becomes law, to adopt benefit corporation status within four years of the first effective date of the legislation or two years of initial certification, whichever is later.  For further clarification, please contact us at thelab@bcorporation.net or call us at 610-293-0299.


If you're incorporated in Washington state:

Corporations in Washington can meet the legal requirement for B Corp certification by amending their articles to become a social purpose corporation (SPC) and then including further language designed to create stakeholder consideration.

For more details on the pathway to fulfilling the legal requirement for traditional WA corporations, existing WA SPCs, and newly-incorporated WA corporations, click here. For an example of articles of incorporation for a Washington SPC that fulfills the B Corp legal requirement, click here. Both documents were drafted in consultation with the Washington State law firm Apex Law Group LLP.

For further clarification, please contact us at thelab@bcorporation.net or call us at 610-293-0299.


If you're incorporated in Canada:

If you're a Corporation in Canada, an amendment to the articles of a corporation is considered a "fundamental change" and thus requires a "special resolution" by the shareholders.

Both the Ontario Business Corporation Act and Canadian Business Corporation Act define a "special resolution" as requiring not less than two-thirds of the votes cast by the shareholders who voted in respect of that resolution (each also permit a special resolution to be in writing provided that it is signed by all the shareholders entitled to vote on that resolution). Corporations have until one year after certification to complete this process.

To incorporate stakeholder interests into your corporate DNA, please amend your Articles to include the following language:

The directors shall, acting fairly and responsibly, consider the short-term and the long-term interests of the corporation, including, but not limited to, the corporation's shareholders, employees, suppliers, creditors and consumers, as well as the government and the environment (the "Stakeholders"), and the community and society in which the corporation operates, to inform their decisions.

In discharging his or her duties, and in determining what is in the best interests of the corporation, each director may consider all of the Stakeholders (defined above) and shall not be required to regard the interests of any particular Stakeholder as determinative.

Nothing in this Article express or implied, is intended to create or shall create or grant any right in or for any person other than a shareholder or any cause of action by or for any person other than a shareholder.

Notwithstanding the foregoing, any Director is entitled to rely upon the definition of "best interests" as set forth above in enforcing his or her rights hereunder, and under province law and such reliance shall not, absent another breach, be construed as a breach of a Director's fiduciary duty of care, even in the context of a Change in Control Transaction where, as a result of weighing other Stakeholders' interests, a Director determines to accept an offer, between two competing offers, with a lower price per share.

 


If you're incorporated in any other country outside of the United States or Canada:

There are already more than 100 Certified B Corporations outside the United States and Canada. Check out this page for more details, or contact us at thelab@bcorporation.net or 212-608-4150 and we will work together to figure out next steps.