How to Become a Delaware Public Benefit Corporation

Transcription

1 Hw t Becme a Delaware Public Benefit Crpratin This utline describes the majr steps required fr an existing Delaware crpratin t becme a Delaware public benefit crpratin. 1. Summary. In rder t becme a public benefit crpratin (a PBC ), a traditinal Delaware crpratin must draft an amendment t its certificate f incrpratin (an Amendment ). The amendment must be apprved by the bard f directrs, and then by the stckhlders. Once apprved, the amendment must be filed with the Secretary s State f Delaware. Under certain circumstances, the crpratin must prvide its stckhlders wh d nt apprve the amendment with the right t cash ut their stck fr fair value ( appraisal rights ). Once the amendment is filed, the crpratin shuld include a legend n its stck certificates, stating that the crpratin is a PBC. 2. Cntents f Amendment. A sample frm f Amendment is attached as Appendix A. The fllwing prvisins are either required r shuld be cnsidered: 2.1. The heading f the certificate must state that the crpratin is a public benefit crpratin The name f the crpratin may be changed t add the wrds public benefit crpratin, the abbreviatin P.B.C., r the designatin PBC. If the name is nt changed, then if the PBC is nt publicly traded, the PBC must ntify anyne wh purchases stck that the crpratin is a PBC The certificate must identify ne r mre specific public benefits t be prmted by the crpratin Delaware gives public benefit crpratins the ptin f cmmitting t make its statement abut its effrts t create public benefit: 1) available t the public (as ppsed t its stckhlders nly); 2) annually (as ppsed t biennially); and 3) in accrdance with a third party standard (as ppsed t using its wn methdlgy). If a crpratin is already a Certified B Crpratin r is thinking f becming ne, B Lab recmmends that it make each f thse cmmitments in its certificate. See the sample language n Appendix A at the end f this dcument Delaware permits a public benefit crpratin t include in its certificate a prvisin that a disinterested failure by a directr t satisfy the requirements applicable t directrs f a public benefit crpratin will nt cnstitute an act r missin nt in gd faith r a breach f the duty f lyalty. The purpse f such a prvisin is t prtect directrs and shuld be cnsidered by any crpratin This utline is nt intended t prvide legal advice t any specific business. Businesses shuld btain legal and accunting advice befre taking any steps t becme a public benefit crpratin.

2 cnsidering an electin t be a public benefit crpratin. language n Appendix A at the end f this dcument. See the sample Nte: The Delaware statute will permit the prvisins described in 2.3 and 2.4 t be placed in the bylaws instead f the certificate. B Lab recmmends that Certified B Crpratins place the statements in the certificate f incrpratin t make them mre difficult t change. 3. Bard apprval. The bard f directrs must apprve the Amendment and recmmend that the amendment be submitted t the stckhlders fr apprval. The certificate f incrpratin and bylaws shuld be reviewed t determine the vte required. 4. Stckhlder apprval. The stckhlders must apprve the Amendment. The statute requires a 2/3 s affirmative vte f the utstanding shares f f the crpratin. The certificate f incrpratin and bylaws shuld be reviewed t determine the vte required whether any additinal vte is required. 5. Appraisal rights. If the crpratin is nt publicly traded,, stckhlders wh did nt vte fr the Amendment are entitled t an appraisal by the Delaware Curt f Chancery f the fair market value f the stckhlder s share f stck. The crpratin is required t prvide its stckhlders with ntice f their right t an appraisal. See Appendix B fr details regarding the prcess and requirements fr appraisal rights in Delaware. 6. File amendment. After the bard and stckhlders apprve the amendment, the Amendment must be prepared and filed with the Secretary f State. 7. Print and issue new stck certificates. The Delaware law requires that a stck certificate issued by a public benefit crpratin nte cnspicuusly that the crpratin is a public benefit crpratin. It is unclear whether that requirement applies t stck certificates issued befre a crpratin becmes a public benefit crpratin. T avid a later challenge by a persn that acquires shares represented by a stck certificate withut that ntatin, the crpratin shuld cnsider printing new stck certificates with the required ntatin and issuing the new stck certificates t its existing stckhlders. 8. Name change. If the PBC has adpted a new name, it shuld make the necessary changes t reflect the new name. The crpratin shuld update, fr example, bank accunts, business cards, intellectual prperty registratins, etc. There is n set timing fr cmpletin f these changes; hwever, a crpratin shuld aim t cmplete them within a cmmercially reasnable time fllwing the public benefit crpratin electin. 2

3 Appendix A Sample language fr certificates f incrpratin Purpse clause: 1. Purpse. The purpse f the Crpratin is t engage in any lawful act r activity fr which a crpratin may be rganized under the Delaware General Crpratin Law. 2. Benefit Crpratin. The Crpratin shall be a public benefit crpratin as cntemplated by subchapter XV f the Delaware General Crpratin Law (the DGCL ), r any successr prvisins, that it is intended t perate in a respnsible and sustainable manner and t prduce a public benefit r benefit, and is t be managed in a manner that balances the stckhlders pecuniary interests, the best interests f thse materially affected by the crpratin s cnduct and the public benefit r benefits identified in this certificate f incrpratin. Accrdingly, it is intended that the business and peratins f the Crpratin create a material psitive impact n sciety and the envirnment, taken as a whle. If the DGCL is amended t alter r further define the management and peratin f public benefit crpratins, then the crpratin shall be managed and perated in accrdance with the DGCL, as s amended. 3. Purpses. As its specific purpse, the crpratin shall prmte a psitive effect (r reduce negative effects [state affected persns, entities, cmmunities r interests and effects cnstituting the crpratin s specific public benefit(s), which may include (withut limitatin) effects f an artistic, charitable, cultural, ecnmic, educatinal, envirnmental, literary, medical, religius, scientific r technlgical nature];furthermre, in rder t advance the best interests f thse materially affected by the crpratin s cnduct, it is intended that the business and peratins f the Crpratin create a material psitive impact n sciety and the envirnment, taken as a whle. 4. Third Party Standard. The Crpratin shall deliver its public benefit statement annually, make it available t the public n its website, r if it des nt have a website, upn request, and prepare it in accrdance with a third party standard applied cnsistently with any applicatin f that standard in prir statements r accmpanied by an explanatin f the reasns fr any incnsistent applicatin. A third party standard means a credible standard fr defining, reprting, and assessing a crpratin s scial and envirnmental perfrmance that: a. Assesses the effect f the business and its peratins n all f the interests materially affected by the crpratin s cnduct; b. Is develped by an rganizatin that is nt under the cntrl f the crpratin r its affiliates; and c. Has infrmatin publicly available cncerning: i. The criteria and relative weighting the standard uses t assess the crpratin s verall scial and envirnmental perfrmance; 3

4 ii. The prcess by which the standard is develped and revised; and iii. The independence f the rganizatin that develped the standard, including: A. The material wners; B. The members f the rganizatin s gverning bdy and hw they are selected; and C. The rganizatin s material surces f financial supprt. In additin t the requirements under Sectin 366(b) f the DGCL, the statement shall including all f the fllwing: a. A narrative descriptin f the prcess and ratinale fr selecting the third-party standard used t prepare the statement; and b. A statement f any cnnectin between the entity that established the third-party standard, r its directrs, fficers, r material wners, and the Crpratin, r its directrs, fficers, and material wners, including any financial r gvernance relatinship that might materially affect the credibility f the bjective assessment f the third-party standard; c. The assessment shall include an assessment f the crpratin s creatin f a material psitive impact n sciety and the envirnment, taken as a whle, frm the business and peratins f the Crpratin. 5. Severability: T the extent that any prvisin f this ARTICLE is fund t be invalid r unenfrceable, such invalidity r unenfrceability shall nt affect the validity r enfrceability f any ther prvisin f this ARTICLE. Liability Limitatin: T the fullest extent permitted by law, a directr f the Crpratin shall nt be persnally liable t the Crpratin r its stckhlders fr mnetary damages fr breach f fiduciary duty as a directr. If the Delaware General Crpratin Law is amended t authrize crprate actin further eliminating r limiting the persnal liability f directrs, then the liability f a directr f the Crpratin shall be eliminated r limited t the fullest extent permitted by the Delaware General Crpratin Law, as s amended. Any disinterested failure t satisfy DGCL 365 shall nt, fr the purpses f Sectins 102(b)(7) r 145 f the DGCL, r fr the purpses f any use f the term gd faith in this certificate f incrpratin r the bylaws in regard t the indemnificatin r advancement f expenses f fficers, directrs emplyees and agents, cnstitute an act r missin nt in gd faith, r a breach f the duty f lyalty. Any repeal r mdificatin f this ARTICLE shall nt adversely affect any right r prtectin f a directr f the Crpratin existing at the time f such repeal r mdificatin. 4

5 Appendix B Appraisal rights (als smetimes referred t as dissenters rights ) are a statutry remedy available t stckhlders wh bject t certain extrardinary actins taken by a crpratin (such as mergers, and nw, under the public benefit crpratin statute, charter amendments t elect public benefit crpratin status). This remedy allws stckhlders t require the crpratin t buy their stck at a price equal t its fair market value (plus interest) immediately befre the extrardinary crprate actin is taken. The Crpratin s Obligatins Relating t Appraisal Rights Vte at a stckhlder meeting. If the charter amendment is t be submitted t apprval at a meeting f the stckhlder, the crpratin must: ntify all f the stckhlders (as f the recrd date fr ntice) at least 20 days prir t the meeting that appraisal rights are available; and include in the ntice a cpy f Sectin 262 f the DGCL. Apprval by written cnsent. If the charter amendment is apprved by written cnsent f the stckhlders (in accrdance with DGCL 228), the crpratin must: befre the effective date f the amendment r within 10 days thereafter, ntify each stckhlder f the apprval f the amendment and that appraisal rights are available; include in the ntice a cpy f Sectin 262 f the DGCL; the ntice may, and, if given n r after the effective date f the amendment, must, als ntify such stckhlders f the effective date f the amendment. Hw a Stckhlder Perfects Appraisal Rights T perfect appraisal rights in Delaware, a dissenting stckhlder must cmply with all f the fllwing prcedures: Demand appraisal. The stckhlder must file a written demand fr appraisal with the crpratin befre the stckhlder vte n the charter amendment t becme a public benefit crpratin (r, if the merger is apprved by written cnsent, within 20 days f the appraisal ntice). Nt vte in favr f r cnsent t the charter amendment t becme a public benefit crpratin. The stckhlder may either vte against the charter amendment r abstain frm the vte. Maintain cntinuus recrd wnership. The stckhlder making the demand must be the recrd (registered) hlder f the stck frm the date f the demand fr appraisal thrugh the effective date f the charter amendment. File a petitin with the Delaware Curt f Chancery and serve a cpy f the petitin n the crpratin. Within 120 days after the effective date f the charter amendment, the 5

6 stckhlder must file a petitin with the Curt f Chancery and demand that it determine the value f the stck f all stckhlders. It is nt necessary fr all dissenting stckhlders t file the petitin, but ne stckhlder must file t start the prceeding t determine the fair value f the crpratin s stck (DGCL 262(e)). All dissenting stckhlders share in the cst f the prceeding. Hw a Crpratin s Must Respnd t a Demand fr Appraisal Rights The crpratin must fllw certain prcedures set ut in the statute when respnding t a demand fr appraisal. These requirements include: Prviding a statement stating the aggregate number f shares fr which demands fr appraisal have been received if requested by a stckhlder wh has perfected the right t an appraisal. This statement must be prvided within ten days f the request ((DGCL 262(e)). Filing a verified list f stckhlders wh have demanded appraisal with the ffice f the Register in Chancery within 20 days frm receiving service f the appraisal petitin (DGCL 262(f)). 6