Most businesses in Australia are eligible to apply to become Certified B Corporations (this excludes charities and public bodies*).
Most businesses that are companies (pty ltd, ltd and publicly listed on the ASX), sole traders, partnerships, trusts, co-operatives and mutuals are eligible, depending on the specific requirements to certify. There is specific guidance on different legal forms below.
Businesses wishing to become a B Corp in Australia will need to have or adopt governing documents which include a commitment to a ‘triple bottom line’ approach to business. The required clauses to be inserted into governing documents are:
A purpose statement (‘purpose clause’):
The purpose of the Company is to deliver returns to shareholders whilst having an overall positive impact on society and the environment.
A clause stating that its directors must consider stakeholders in their decision-making (‘stakeholder clause’):
1) In discharging their duties under this constitution, the Corporations Act (2001) and the general law, the directors of the Company:
(a) will include in their consideration the following factors:
(i) the likely consequences of any decision or act of the company in the long term; and
(ii) the interests of the company’s employees; and
(iii) the need to foster the company’s business relationships with suppliers, customers and others; and
(iv) the impact of the company’s operations on the community and the environment; and
(v) the desirability of the company maintaining a reputation for high standards of business conduct; and
(vi) the interests of the members of the company; and
(vii) the ability of the company to create an overall positive impact on society and the environment; and
(b) Need not give priority to a particular factor referred to in paragraph (a) over any other factor (included in paragraph (a) or otherwise).
These are referred to as the “template clauses”. You may decide to develop more specific provisions adding additional purposes, or additional stakeholders — however to satisfy the legal requirement you must at least have the template clauses in your governing documents.
The most appropriate place for the 'purpose clause' and the 'stakeholder consideration clause' is different.
Some companies will already have an objects or purpose clause in their constitution. In this circumstance, it would be most appropriate for the existing clause to be amended. If they don't have such a clause, the purpose clause should be inserted at the beginning of the constitution as one of its foundational clauses.
Stakeholder consideration clause
The stakeholder consideration clause concerns how the directors should discharge their duties. Accordingly, it is most appropriate that the clause sit with those clauses in the constitution concerning the powers and duties of directors.
Most constitutions will already have a clause that notes something to the effect that the company is managed by the directors, who may exercise all powers of the company that do not require shareholder approval. Amending this clause would be the most appropriate location for the stakeholder consideration clause.
Governing documents for different business types (providing the business itself is eligible to be certified).
For companies, including public companies, the template clauses need to be included in your company’s constitution.
For sole traders — in lieu of a legal requirement to governing documents, the template clauses could be included in a written statement that is made to the public at large (such as a purpose statement or customer guarantee made available on a website or other prominent place in your business) at the company’s discretion. For partnerships — your partnership agreement should contain the template clauses, expressed to be binding commitments on all partners. If you have a board or other governing body, the template clauses must also be included in the charter of the board or governing body.
For businesses operating as a Trust where the trustee is the direct owner of the business or its assets — the template clauses must be included in the trust deed so that they apply to the trustee, informing the trustee’s obligations to the trust’s beneficiaries. Note, where the business operates through a company but is owned by a trust, the template clauses should appear in the company’s constitution and they need not appear in the trust deed.
For co-operatives — the template clauses should appear in the co-operative’s rules, which often state the co-operative’s objectives already. Care should be taken to align the template clauses with any existing object clauses.
For mutuals — A mutual entity (or mutual company) will have a constitution that sets out the specific rules governing its internal affairs. The template clauses should be inserted into the constitution. As for co-operatives, mutual companies often have specific objectives expressed in their constitution, so care should be taken to align the template clauses with any existing object clauses.
To learn more about this legal requirement and access resources to help you amend your governing documents, head to B Lab Australia's website here: https://www.bcorporation.com.au/legal-requirement. You can also find contact details there for the team at B Lab Australia. You should seek legal advice for your specific circumstances.
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