BENEFIT CORPORATIONS IN BRITISH COLUMBIA
As of June 30, 2020, British Columbia is the first province in Canada to legislate Benefit Corporations as an option for a BC business structure. What this means is that social entrepreneurs in British Columbia have the option to include in their articles of incorporation a commitment to require the directors of the company to consider not only the financial implications of their decisions, but also the social and environmental impact.
In traditional Canadian corporations, the directors of a corporation have a fiduciary duty to consider the bests interests of the company when making business decisions. Generally, the "best interests of the company" is often interpreted to mean the best financial interest of the company, subject to the discretion given to directors under the business judgment rule.
The directors' duties to the company typically align with maximizing profits, which in turn aligns with the best financial interest of the shareholders (although this is not always necessarily the case). If this duty is breached, it creates a situation where the directors are potentially liable to the company, and to its shareholders, for decisions that reduce profits if their decision is not within a reasonable range of options available to the company. In such a case, the shareholders have certain legal remedies against the company, and its directors, if they believe that the directors have breached their duty to the company.
A Benefit Corporation alleviates these concerns by including in its legal structure a mandate to consider not only financial benefits to the company but also a public interest such as a social and/or environmental mandate. A British Columbia benefit corporation must have the following “benefit statement” contained in their notice of articles:
This company is a benefit company and, as such, has purposes that include conducting its business in a responsible and sustainable manner and promoting one or more public benefits.
In its articles, the benefit company will also need to include a commitment to: (i) conduct its business in a responsible and sustainable manner; and (ii) promote public benefits that are specified in the articles.
A public benefit is defined as a “positive effect that includes an effect of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature.” The positive effect must also be for the benefit of either a class of persons (excluding the company’s shareholders), communities or organizations, or the environment.
Responsible and sustainable manner is defined as a manner of conducting business that takes into account the well-being of persons affected by the company’s operations and endeavours to use a fair and proportionate share of available environmental, social and economic resources and capacities.
This new form for a British Columbia benefit corporation mandates its directors to consider the social and/or environmental impact of their decisions, in addition to or even above the financial impact. Benefit corporations in British Columbia are well suited for those Canadian social entrepreneurs who want to use their business as a force for good, and for those companies seeking to become B Corporation certified.