Maryland Passes 'Benefit Corp.' Law
for Social Entrepreneurs
Posted
by: John Tozzi on April 13, 2010
Maryland
today became the first state to legally create a new corporate form known as a “benefit
corporation” that will let social entrepreneurs codify their missions
in their corporate charters.
(DO-
difference b/w L3C and B-Corp ?)
The
law is modeled on proposals by B-Lab, a Berwyn, Pa.-nonprofit that
certifies socially responsible companies. The law lets entrepreneurs commit
their for-profit ventures to a specific public good, and requires them to
report on contributions to that goal and submit to auditing of their impact.
Having official “benefit corporation” status allows entrepreneurs to consider
stakeholders like employees, communities, or the environment in business
decisions. Under existing corporate law, company directors can face lawsuits if
considering outside stakeholders is seen to damage the financial interest of
shareholders.
We wrote
nearly a year ago on the difficulty social entrepreneurs have fitting
their hybrid missions of making money and doing good into existing corporate
forms. The tangled arrangements they get into (nonprofits controlling
for-profits, etc.) can be costly to set up and limit their ability to raise
money from outside investors. Adopting the “benefit corporation” form signals
that our economic institutions — in this case the laws that govern corporations
— are catching up with the growing interest in the social enterprise sector.
(This was one of two
big ideas on my radar this year.) “If you care about accelerating the
development of this emerging marketplace, the first step is providing the legal
infrastructure,” Jay Coen Gilbert, one of the co-founders of B-Lab, told me
last week.
He
says the new legal designation could unlock new capital for social
ventures from investors who want to park their money in mission-driven
companies. “I think it’s becoming increasingly not only acceptable but sought
after by mainstream investors,” Gilbert says.
Maryland
Gov. Martin O’Malley, a Democrat, signed the bill today, along with other bills
at the end of Maryland’s legislative session. The bill, sponsored by Democratic
state Sen. Jamie Raskin, passed Maryland’s Senate unanimously and passed the
House by a vote of 135-5.
A
similar proposal is pending in Vermont. California lawmakers are considering
related legislation to allow “flexible purpose corporations” that would let
companies protect their social missions, without the affirmative requirements
that the “benefit corporation” law puts in place.
The
Capital Law Firm, PLLC
The
Maryland Benefit Corporation Act
