- Reduces start-up costs by providing attorneys with a uniform and standardized means for structuring a social enterprise, that is easy to understand, and duplicate from company to company.
- Changes the fiduciary duty of the corporation’s directors, requiring them to consider the creation of a positive social or environmental impact, in addition to profits when making decisions on behalf of the company.
- Offers the option of “legacy preservation” to social entrepreneurs who want to ensure that their company, or its assets, will be used to create a positive social impact after they leave the organization or if ownership is diluted. If a company adopts a legacy preservation provision, the business would remain a benefit corporation in perpetuity, regardless of changes in ownership
Advantages for Investors
- The market opportunity for investing in social enterprises has been predicted to range between $400 billion to $1 trillion according to a study by J.P. Morgan. Despite its size, mission-driven “impact” investors still have difficulty sourcing potential portfolio companies.
- Benefit corporations allow mission driven “impact” investors the ability to identify social enterprises with greater ease, and provides them with a familiar framework that they can use when screening companies, and assessing fit with the investor’s motives for investing.
- The benefit corporation structure also provides investors in a benefit corporation the ability to compel that company to create a specific or general public benefit if its officers or directors fail to do so, through a “benefit enforcement proceeding.”
- Reaching Consumers: The benefit corporation provides social entrepreneurs with an opportunity to cut through the noise of the purely for-profit marketplace, and makes it easy for consumers to identify and patronize social enterprises. Also, because the new entity ensures a high level of standardization from company to company, consumers who understand what it means to be a benefit corporation can comfortably make assumptions about the operations of benefit corporations across different sectors.
- Greenwashing Prevention: Benefit corporations must file annual reports to shareholders and consumers that demonstrate their positive social or environmental impact. This fosters more transparent business operations, and helps to protect the nascent social enterprise sector from companies that claim to be social enterprises to increase their profits, or generate some other self-serving benefit.
New Resources for Non-Profits
- Many social enterprises form bonds or agreements with nonprofit organizations to provide funding or other resources to non-profit organizations. As many non-profit organizations struggle to find funding, benefit corporations can provide a powerful new source of revenue, and help to diversify their funding sources.
- As difficult as it is for social entrepreneurs to communicate their social mission to consumers, it can be just as difficult for them to find and communicate with other social entrepreneurs. This legislation allows social entrepreneurs to identify each other with greater ease, share best practices, and build a stronger, more cohesive social enterprise sector within the state.