A B Corp is not a statutory business form. In fact, any business form (corporation, LLC, sole proprietorship, partnership) can be a B Corp – this is slightly confusing because the name implies a B Corp has to be a corporation. A B Corp is a business that has gone through a rigorous process to be certified by a nonprofit organization called B Lab.
In order to achieve certification, a company must:
- Demonstrate high social and environmental performance by achieving a minimum B Impact Assessment score
- Make a legal commitment to be accountable to all stakeholders, not just shareholders
- Exhibit transparency by allowing information about their performance measured against B Lab’s standards to be publicly available.
Click here for details on how to be certified as a B Corp.
Over a decade ago, B Lab launched an initiative to create a new corporate form called the Benefit Corporation to provide some comfort to businesses that want to be accountable to all stakeholders, not just shareholders. They lobbied state legislatures to adopt this new form and some version of it has now been adopted in about three-quarters of the states.
New corporations can form under one of these statutes and existing corporations can convert into them.
Companies formed under these statutes have the same options in terms of the types of securities they can offer and are taxed in the same way as regular corporations. The primary difference between these corporate forms and plain vanilla corporations is that the board of directors has more protection if it makes a decision in the name of public or environmental benefit that shareholders do not consider to be in their best financial interest. These companies are generally required to be evaluated pursuant to a third-party standard to demonstrate that they have a public benefit or social purpose. For more information on Benefit Corps, visit http://benefitcorp.net/
Can a B Corp be a Benefit Corporation and Vice Versa?
Yes! A benefit corporation can seek certification as a B Corp, and a company that is a certified B Corp can convert from its current form to a benefit corporation. Conversion usually requires a two-thirds vote of all current shareholders. In some states, investors that vote against conversion have dissenter’s rights which means a dissenting shareholder may require the corporation to purchase at fair market value the shares owned by the shareholder.
For companies that are formed as corporation that seek B Corp certification, B Lab requires that they convert into statutory benefit corporations.
The Kassan Group is both a certified B Corp and a California benefit corporation. Please feel free to contact us if you’d like help becoming a B Corp and/or benefit corporation.