Editor’s Note: This is the first post in a two-part series that highlights notable differences in benefit corporation law in two influential states, Delaware and California. This post originally appeared on Law360.
By Jonathan Storper
Benefit corporation law has been enacted in 19 states, including Delaware, California, New York, New Jersey, Vermont, Maryland, Virginia, Louisiana, South Carolina, Arizona, Arkansas, Colorado, Massachusetts, Nevada, Oregon, Hawaii, Illinois, Rhode Island, Vermont and the District of Columbia. Ten other states have introduced the legislation.
For the first time, this new corporate form provides a legal basis for companies to have a positive social and environmental purpose in addition to creating shareholder value. Without it, the company’s responsibility is to maximize value to shareholders.
Entrepreneurs find the form attractive because it provides a simple and consistent platform to protect a corporate mission and balance it with shareholder value instead of creating complex and expensive corporate class structures, which are of limited value to protect the mission in certain circumstances.
To be successful, however, founders and investors must be aligned on core values, revenue objectives and exit strategies, perhaps to a greater degree than with general-purpose corporations. This is the first new corporate form with a national scope to be introduced into American law since the limited liability company in 1977. Delaware is of particular significance because it is the recognized leader in corporate law, and over half of all public companies are domiciled there.
California is the largest state and has provided the country with the benefit corporation model legislation. Delaware differs from the model legislation in notable ways. This article compares the two states.* Click to continue reading »
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