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Delaware Public Benefit Corporation Resources
Practical Law Legal Update w-004-8101 (Approx. 3 pages)
Delaware Public Benefit Corporation Resources
by Practical Law Corporate & Securities
| Published on 01 Dec 2016 • Delaware, USA (National/Federal) |
A collection of new resources describing and explaining how to incorporate public benefit corporations in Delaware.
The Delaware General Corporation Law (DGCL) was amended on August 1, 2013, to create a new form of entity known as the public benefit corporation (PBC). A PBC is similar to a traditional Delaware corporation, except that the directors of a PBC have a statutory duty to consider interests other than those of the corporation's stockholders. Under the PBC statute, the board must balance:
- The pecuniary interests of stockholders.
- The best interests of those materially affected by its conduct (stakeholders such as employees, creditors, customers, and suppliers).
- The specific public benefits identified in the corporation's certificate of incorporation.
This is an enormous advantage for a company wishing to promote publicly beneficial objectives while remaining a for-profit entity. Before the amendment to the DGCL, directors were provided some leeway about social responsibility under the business judgment rule, but were ultimately required to act for the purpose of maximizing the value of the enterprise. Under the PBC statute, however, directors have an explicit mandate to balance the traditional requirement of providing a competitive return to stockholders with the goals of producing a net positive impact on society and advancing the interests specified in the corporate charter.
To help corporate practitioners advise clients on the benefits of PBCs and how to form them, Practical Law has published the following resources contributed by leading Delaware law firm Morris, Nichols, Arsht & Tunnell LLP:
- Practice Note, Public Benefit Corporations (DE), which provides an overview of public benefit corporations organized in Delaware. The Note highlights the special issues that apply to PBCs, including how "public benefit" is defined, the duties of directors, notice and reporting requirements, and the conversion process.
- Standard Clause, Certificate of Incorporation (DE): Public Benefit Corporation Provisions, a set of provisions for a certificate of incorporation creating a public benefit corporation in Delaware. This Standard Clause has integrated notes with important explanations and drafting tips.
- Delaware Public Benefit Corporation Conversion Checklist, a checklist summarizing the necessary steps for a traditional Delaware corporation to convert into a public benefit corporation.