Benefit Corporations v. Certified B Corps
A benefit corporation is a corporation established under a state’s benefit corporation law (13-C M.R.S.A. § 1801 et seq. in Maine) which provides a legal framework and governance structure for benefit corporations. Beyond maximizing the value of shares, benefit corporations must have a purpose of creating a general public benefit, which is a “material positive impact on society and the environment, taken as a whole, assessed against a 3rd-party standard, from the business operations of a benefit corporation.” 13-C M.R.S.A. § 1802(5).
In contrast, a B Corp is a business that is certified by the nonprofit B Lab which requires that each certified entity meet specific public benefit criteria. The B Corp certification is not a legal designation, but is similar to other mission-based certifications such as Fair Trade or Certified Organic. The B Corp certification by B Lab is voluntary and not required for registration as a benefit corporation under state law.
| Maine Benefit Corporations | Certified B Corps | |
|---|---|---|
| Basics | Legal framework and governance structure under Maine law | Mission based certification, not required for registration as a benefit corporation under Maine law |
| Accountability | Consider impact on various stakeholders | Same |
| Transparency | Must publish public report | Same |
| Performance Standards | Self-reported | Minimum score on BIA and required recertification |
| Availability | Available to Maine corporations | Available to any business (not just corporations) regardless of state or country of incorporation |
| Cost | State of Maine filing fees | B Lab certification fees |
Conversion Process under Maine Law
Prior to making an election as a benefit corporation under Maine law, a corporation should conduct due diligence and plan ahead for the election. The corporation should review the corporate governance documents to determine if any notices, consents, regulatory approval, or other actions are required for conversion to a benefit corporation. Once the due diligence and review has been completed and consents, if any, have been obtained, the corporation should amend the Articles of Incorporation and the bylaws to include specific provisions that apply to benefit corporations.
Why become a benefit corporation?
Designation as a benefit corporation grants a company some legal protection to pursue social or environmental good, rather than focusing solely on shareholder priorities. For-profit corporations have primarily existed to maximize profit for shareholders, however, benefit corporations must consider the impact of its decisions on all stakeholders, not just shareholders, which may provide legal protection for certain corporate actions.
The designation as a benefit corporation affords marketing opportunities and may enhance a company’s reputation. Benefit corporations often attract talent and retain employees due to the desire to work for a mission driven company. Many companies choose to become benefit corporations as they are already pursuing social and environmental good.
Electing to become a benefit corporation does not affect the corporation’s tax status nor afford any tax incentives. Additionally, benefit corporations in Maine must continue to adhere to the general provisions in the Maine Business Corporation Act. Shareholders of benefit corporations retain all of their rights and the directors have the same fiduciary duties of care and loyalty as in a traditional corporation.
B Corp Certification by B Lab
To become a certified B Corp, an entity must meet strict criteria set by B Lab. To obtain certification, the company must first complete the B Impact Assessment (BIA) which focuses on five “impact areas” – Governance, Workers, Community, Environment, and Customers. To become certified, a company must reach a total score of at least 80 points (out of 200) on the BIA. Most companies do not pass on the first attempt.
If a company meets the 80 point threshold on the BIA, the B Lab staff will communicate with the company to review the BIA and the company will be asked to submit additional information. The company must then meet B Lab’s “legal requirement,” must sign both the B Corp Declaration of Interdependence and the B Corp Agreement, and pay the annual certification fee. After a company has completed the certification with B Lab, the company’s profile will go live on www.bcorporation.net. This is mandatory as part of the transparency requirement.
Why pursue B Corp Certification?
Some certified B Corps noted that they pursued the B Lab certification to add additional value to the company, to join a community of other certified B Corps, to attract talent, to improve the company’s performance by setting goals and tracking performance through the initial certification and recertification process, or to be part of a movement that inspires peers in a “race to the top.” Additionally, certified B Corps may display the “Certified B Corp” logo provided by B Lab which has become very recognizable to consumers.
If you have any questions or would like more information about B Corp certification or making an election as a benefit corporation, please contact Eaton Peabody attorney, Hilary Forsley at hforsley@eatonpeabody.com.
Sources: Benefitcorp, BCorporation, and 13-C M.R.S.A. § 1801 et seq.