What does a Delaware public benefit corporation have to do?
DelawarePublic benefitCompliance
Its certificate of incorporation must identify one or more specific public benefits the corporation will promote, and state in its heading that it is a public benefit corporation. Its directors must balance the stockholders' financial interests, the best interests of those materially affected by the company's conduct, and the public benefit named in the certificate. And at least once every two years it must give stockholders a statement on how it is doing against that benefit. Everything else is the same as for any other Delaware corporation.
The specific public benefit
The statute defines a public benefit as a positive effect, or a reduction of negative effects, on one or more categories of persons, entities, communities or interests other than stockholders as stockholders. It has to be specific: a category and an effect, not a slogan.
The balancing duty
The statute gives directors cover for the balancing: a decision on it satisfies the director's duties to stockholders if it is informed, disinterested, and not one that no person of ordinary, sound judgment would approve. A board can weigh the mission without a stockholder suing over foregone profit, and stockholders cannot insist the mission be ignored.
The statement to stockholders
No less than every two years, the corporation gives stockholders a statement of the objectives it set, the standards it uses to measure them, factual information on progress, and its own assessment of success. It goes to stockholders, not the public, unless the certificate or bylaws require an annual statement, public disclosure or third-party certification.
The name, and what investors think
The name may include public benefit corporation, P.B.C. or PBC. The statute no longer requires it, but a company whose name does not say so must tell anyone it issues shares to that it is one. Investors are more relaxed about the form than they were a decade ago. What a lead investor reads closely is whether the benefit is drafted so that it cannot be used to justify decisions against the round's economics, a certificate drafting question to settle before the round.
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Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.