In the last post, we discussed the introduction of benefit companies in British Columbia. As a continuation of the discussion of this new legislative framework, this article will dive a little deeper into the legal requirements of setting up a benefit company.
As was mentioned in an earlier post, benefit companies give social entrepreneurs the opportunity to structure their companies to consider the financial, social and environmental considerations of their decisions. This legislative initiative is a step in the direction of creating more multifaceted and socially responsible corporate entities.
So, how does a corporation become a benefit company? In addition to the inclusion of a benefit statement in the corporation’s notice of articles (see here – link), a benefit company must include in its articles a provision that specifies the public benefits to be promoted by the benefit company. The articles of a benefit company must also include a provision that specifies the public benefits to be promoted by the company and which sets out the commitment to conduct the benefit company’s business in a responsible and the commitment to promote the public benefits associate with conducting the business in such manner.
Once the corporation is recognized as a benefit company, it has an obligation to produce an annual assessment of its performance relative to its sustainability goals. This is done through, first, selecting a third-party standard for assessment purposes and, second, generating a benefit report. The benefit company will assess its performance in achieving its commitments as set out in its benefit provisions against the third-party standard. The annual benefit report will contain a description of the way in which the benefit company demonstrated the commitment to conducting its business in a responsible and sustainable manner and to promoting the public benefits specified in the articles. Further, a record of the results of whether those commitments were in fact met must also be included as well as an acknowledgement of where the company’s efforts were hindered. Lastly, the third-party standard selected must be justified in the benefit report, including an explanation of the rationale for selecting that particular standard or the reason and process of changing the standard.
If a company chooses to cease to be a benefit company, it may only do so through shareholder approval by special resolution. Once authorized, the benefit statement must be removed from the articles of the company.
The addition of this new legislative framework in British Columbia paves the way for a new corporate culture based on socially sustainable initiatives. If you’re looking to create a greater social impact with your business, connect with Kickstart Law today and together we can work to figure out if a benefit company is the right option for you.