Effective July 1, 2011, Virginia law permits stock corporations to elect to be treated as “benefit corporations.” A benefit corporation has as one of its purposes the purpose of creating a “general public benefit.” A “general public benefit” means a material positive impact on society and the environment taken as a whole, as measured by a third-party standard, from the business and operations of a benefit corporation.
A benefit corporation may also set out in its articles of incorporation or bylaws specific public benefits that it intends to create such as providing low-income or underserved individuals or communities with beneficial products or services; promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; preserving or improving the environment; improving human health; promoting the arts, sciences, or advancement of knowledge; increasing the flow of capital to entities with a public benefit purpose; and conferring any other particular benefit on society or the environment.
A benefit corporation differs from traditional stock corporations in that the board of directors of the benefit corporation has to consider the effect of any corporate action not only on the shareholders of the benefit corporation, but also on the employees and workforce of the benefit corporation, its subsidiaries, and suppliers; the interests of customers as beneficiaries of the general or specific public benefit purposes of the benefit corporation; community and societal considerations, including those of each community in which offices or facilities of the benefit corporation, its subsidiaries, or suppliers are located; the local and global environment; the short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests and the general and specific public benefit purposes of the benefit corporation may be best served by the continued independence of the benefit corporation; and the ability of the benefit corporation to accomplish its general and any specific public benefit purpose.
A benefit corporation must prepare an annual benefit report that includes a narrative description of the ways in which the benefit corporation pursued the general and specific public benefits during the year and the extent to which the general and specific public benefits were created; any circumstances that have hindered the creation by the benefit corporation of the general or any specific public benefit; and an assessment of the social and environmental performance of the benefit corporation. This assessment must be prepared in accordance with the applicable third-party standards. The benefit corporation must provide a copy of its annual benefit report to its shareholders and must either post the report on its website or provide a copy to any person requesting one.
Greg Johnson, the author of this post, is the head of the MartinWren, P.C. Business, Corporate and Tax Law group, where he provides corporate and tax advise to a broad range of Virginia entities and individuals. For more information about Benefit Corporations, please contact Greg at (434) 817-3100 or send him an email at johnson@martinwrenlaw.com.