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Dec

2011

New York Becomes Fifth State to Pass Law Authorizing For-Profit Public Benefit Corporations

"Under the bill, a private, for-profit business would be permitted to incorporate as a “Benefit Corporation,” with the stated corporate purpose of serving a general or specific public benefit (as defined in the bill). The Benefit Corporation is essentially a hybrid form which permits a for-profit corporation to exist for primarily public or social benefit corporate purposes (previously reserved to non-profit entities), rather than exclusively for the purpose of maximizing shareholder profit. "

www.barnhartlawplc.com/...it-public-benefit-corporations

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socialenterprise socialbusiness newyork bill entrepreneurship benefits for-profit shareholdervalue

Under current corporate laws and judicial precedents in all fifty states, directors and officers of a for-profit corporation have a primary fiduciary duty to maximize profit for shareholders. After signature of the new Benefit Corporation law by Governor Cuomo, this will change for those New York businesses that organize as “Benefit Corporations” and meet the requirements of the law
“Benefit Corporations require companies to have a legal responsibility to stakeholders as well as shareholders so they can have a positive impact on their surrounding communities
2 more annotation(s)...
- the purpose to create general public benefit shall be a limitation on the other purposes of the benefit corporation, and shall control over any inconsistent purpose of the benefit corporation.”
- “Specific public benefit,” as defined in the bill, includes:
  
  (1) “providing low-income or underserved individuals or communities with beneficial products or services;
  (2) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
  (3) preserving the environment;
  (4) improving human health;
  (5) promoting the arts, sciences or advancement of knowledge;
  (6) increasing the flow of capital to entities with a public benefit purpose; and
  (7) the accomplishment of any other particular benefit for society or the environment.”

In New York, a Legislative Victory for Social Enterprise

"Another obstacle to the impact economy's expansion came crumbling down earlier this week when New York Governor Andrew Cuomo signed legislation creating a legal structure for social enterprises in his state.

The bill allows corporations to organize themselves as Benefit Corporations, for-profit entities that have a specific social mission. It had languished for several months on the governor’s desk until a spate of late-year legislation was completed, but passed New York’s divided legislature unanimously."

www.good.is/...-victory-for-social-enterprise

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economy socialbusiness socialenterprise newyork entrepreneurship enterprise profit bottomline environment

The law mandates that company directors consider not just bottom-line profit, but also their business’ social and environmental impact, as they make governance decisions. Without the new framework, businesses seeking to combine profit-making with good works face potential legal challenges, difficulty attracting capital and thorny issues around how to sell or scale their firms.
Now, the biggest challenge is to induce ever-larger and more varied companies to adopt the governance framework. Coen Gilbert hopes to see more startups and established companies taking advantage of the legal change, and perhaps even larger public companies.