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, 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, IL, 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.

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:

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

He or she shall give due consideration to the following factors, including, but not limited to, the long-term prospects and interests of the Company and its shareholders, and the social, economic, legal, or other effects of any action on the current and retired employees, the suppliers and customers of the Company or its subsidiaries, and the communities and society in which the Company or its subsidiaries operate, (collectively, with the shareholders, the "Stakeholders" ), together with the short-term, as well as long-term, interests of its shareholders and the effect of the Company's operations (and its subsidiaries' operations) on the environment and the economy of the state, the region and the nation.

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 state 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 GA, IA, ID, IN, 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:

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

He or she shall give due consideration to the following factors, including, but not limited to, the long-term prospects and interests of the Company and its shareholders, and the social, economic, legal, or other effects of any action on the current and retired employees, the suppliers and customers of the Company or its subsidiaries, and the communities and society in which the Company or its subsidiaries operate, (collectively, with the shareholders, the "Stakeholders" ), together with the short-term, as well as long-term, interests of its shareholders and the effect of the Company's operations (and its subsidiaries' operations) on the environment and the economy of the state, the region and the nation.

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 state 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 AL, AK, KS, MI, MT, NC, OK, TX, or WA:

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 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.