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The legal requirement for Certified B Corporations

Certified B Corporations are legally required to consider the impact of their decisions on all of their stakeholders - a model known as stakeholder governance. The B Corp legal framework allows companies to protect their mission and ensures that the company will continue to practice stakeholder governance even after capital raises and leadership changes. The legal framework also provides more flexibility when evaluating potential sale and liquidity options.

The legal requirement ensures that B Corps remain legally accountable to all of their stakeholders - workers, communities, customers, suppliers, and the environment - not just shareholders.

Why this matters

Because of legal precedents and cultural expectations, businesses are often expected and required to make decisions exclusively through the lens of profit maximization for the benefit of the owners and shareholders - a concept known as shareholder primacy. B Lab considers shareholder primacy to be an obstacle to creating long-term value for all stakeholders, including the owners and shareholders themselves. We believe overturning shareholder primacy is integral to making our economy work for everyone.

But how do we overturn shareholder primacy? Integrating stakeholder governance into a company's DNA ensures that it stays legally accountable to a broad purpose and a commitment to consider the interests of all stakeholders. Stakeholder governance demonstrates that a company is not only committed and accountable to creating lasting value for all stakeholders, but is credibly using their business as a force for good.

How the legal requirement works

Use our tool below to understand your company's pathway to meeting the legal requirement.

The specific legal requirements for a company differ based on the company's entity type: corporation, articles, partnership, worker-owned co-operative, etc. Use the Legal Requirement Tool above and consult your local B Lab or Sistema B team to learn more about meeting the B Corp legal requirement in your market. The legal requirement often involves an update to the company's Articles of Incorporation, reincorporating as a benefit corporation, or making other structural changes.

In many jurisdictions, corporate law (sometimes called "company law") permits, but does not require, stakeholder governance. In other places, however, the law does not permit a company to adopt stakeholder governance as a voluntary matter. In places that do not clearly permit stakeholder governance, a change in law will need to be pursued. Until the law has been amended, B Corps will be asked to sign a term sheet in which they agree to either amend their formation documents or adopt a new legal form if one is enacted through local lawmaking.

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