HSE LEGALcurrents

On December 12, 2011, Gov. Andrew Cuomo signed legislation permitting a new type of New York corporation known as a benefi­t corporation (or “B Corp”), making New York the ­fifth state to permit business corporations to elect in their certifi­cates of incorporation to pursue public purposes.

Benefi­t corporations have been big news lately. However, existing not-for-pro­fits have nothing to fear from the new entities: the B Corp legislation does nothing to change the law regarding not-for-pro­fits and does not affect their exempt status.

The new law presents an exciting opportunity for for-pro­fit enterprises to pursue the public good alongside their business activities.

All bene­fit corporations must pledge to have a material positive impact on society and the environment taken as a whole, assessed against a third-party standard. In addition, a benefi­t corporation can, in its certifi­cate of incorporation, identify one or more specifi­c public benefi­ts that it is the purpose of the benefi­t corporation to create. The statute sets forth a number of examples, including providing low-income or underserved individuals with bene­ficial products or services, promoting economic opportunity, preserving the environment, improving human health, and promoting the arts or sciences. Directors are required to consider the public benefi­t obligations of a B Corp in carrying out their duties.

Existing business corporations can elect to become benefi­t corporations by vote of three quarters of their stockholders. New corporations can elect to be benefi­t corporations in their certi­ficate of incorporation.

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