As of January 1, 2015, Minnesotans will be able to form public benefit corporations — which allow more flexible uses of profits than just dividends to shareholders. Currently, 27 states, including Delaware, allow such entities. A “Benefit” corporation is a for-profit business that has an additional purpose to create a material positive impact on society and/or the environment. The business must report how it creates a social benefit.
In Minnesota, Public Benefit Corporations (PBCs) will come in two flavors, a General Benefit Corporation (GBC) and a Specific Benefit Corporation (SBC). A PBC could designate itself as a GBC if its purpose would be to pursue a net material positive impact from the business and operations of the GBC on society, the environment, and the well-being of present and future generations. A PBC could designate itself as an SBC if it would have a purpose to pursue one or more positive impacts on specified categories of natural persons, entities, communities or interests as stated in its Articles of Incorporation. The Minnesota Public Benefit Corporation Act allows a PBC to include either “General Public Corporation”, “GBC”, “Specific Public Corporation”, or “SBC” in its name.
A 302A corporation will be able to elect to become a PBC by setting forth in its Articles its election to be governed by the Minnesota Public Benefit Corporation Act and stating in its Articles that it will be a GBC, an SBC, or a GBC with a specific public benefit purpose. If either of the latter two, the PBC must also specifically describe the specific public benefit it chooses to pursue. Existing for-profit enterprises wishing to make the election would need to amend their Articles or merge the existing entity into a newly formed PBC that has Articles that include the required information. The election to become a PBC either by amendment or merger requires at least 2/3s of the existing equity holders to approve the amendment or transaction causing the election. Such a transactional election to become a PBC would trigger dissenters’ rights under 302A.
Under the Minnesota Public Benefit Corporation Act, a PBC is required to file an annual benefit report with the secretary of state and pay a $35 filing fee. The secretary of state will make these reports publicly available.