Benefit companies: They're (almost) here
By Duncan Delano, Tonkon Torp LLP
Duncan Delano is an attorney with Tonkon Torp LLP's environmental and natural resources practice group.
Last week, Gov. John Kitzhaber signed into law House Bill 2296, which creates a new form of business entity called the “benefit company.”
A benefit company is a business that, in addition to its principal purpose, has another purpose to provide a benefit to the community — that is, a “material positive impact on society and the environment.” Thus, a benefit company is a business that focuses on both profit and sustainability.
Under the new law, which becomes effective Jan. 1, a benefit company can be organized and taxed as a limited liability company, an S corporation or a C corporation. But in its business registration documents, a benefit company commits to sustainable practices in all its operations.
So how exactly does it do that? What makes a benefit company different than a traditional business?
Three things: purpose, transparency and accountability.
In a traditional company, the directors and officers have a fiduciary duty to make decisions based primarily on the best financial interest of the company’s shareholders or members. But in a benefit company, the directors and officers are not only allowed to also consider sustainability issues in decision-making, they must consider the company’s effect on social and environmental interests when making business decisions. A benefit company’s purpose is to pursue the triple bottom line.
While a benefit company has this added purpose of providing a general public benefit, it may also choose a specific public benefit as an additional purpose. For example, it might have an additional specific purpose to source locally or to have carbon neutral operations.
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