Starting from July 1, 2014, Florida allowed for-profit companies to focus on public interest goals instead of just making profits. This means they can use some of their resources for activities that benefit society. There are two new types of for-profit companies – benefit corporations and social purpose corporations. These companies are different from traditional for-profit companies because they have to consider their impact on society and they have to report on their efforts to achieve their public benefit goals. Florida is different from other states because it allows for a choice between a broader public-oriented corporation and a more limited public benefit corporation.
Corporations used to be focused only on making as much money as possible for their shareholders. But now, there’s a growing movement of socially minded entrepreneurs and investors who want to use private businesses to help the public. They’re creating new types of corporations called benefit corporations and social purpose corporations. These new entities are for-profit, but they also have a legal duty to do good things for society. They can still make money for their shareholders, but they also have to think about how their actions affect the public. These new types of corporations are becoming more popular and are seen as a way for businesses to do good while still making a profit. B corporations and SP corporations have different purposes. B corporations aim to benefit the public in general, while SP corporations can choose to focus on specific goals. Directors and officers of B corporations are mandated to consider the effects of their actions on various societal interests, while directors and officers of SP corporations are only mandated to consider the effects on shareholders and the specific public benefit. A B corporation has to consider more things like employee programs and environmental concerns, while an SP corporation can focus on a single benefit program. For example, if a company wants to make and sell a drug to help people in Africa, a B corporation would have to think about other social factors, while an SP corporation could just focus on helping people in Africa. In California, more companies are choosing to be B corporations because they want to consider more social factors. We will have to wait and see which type of corporation becomes more popular. Both B and SP corporations have laws that say creating public benefits is considered to be in the best interest of the company. This allows them to focus more on doing good for the public, even if it means making less money. The laws also protect the company and its leaders from being sued for not creating public benefits. This gives the company’s leaders more freedom to prioritize public good without worrying about getting in trouble with shareholders. In Florida, a benefit or social purpose corporation can be formed in a few ways, like starting from scratch or changing an existing corporation. Shareholders have a say in these changes, and if they disagree, they can get their shares appraised. Directors and officers of these corporations have to think about the company’s benefit goals, but they don’t have to actually do anything about them. This might lead to concerns about companies pretending to be socially conscious without really doing anything, or about investors not getting what they expected. To solve these issues, companies have to submit reports every year and can face consequences if they don’t follow through on their benefit goals. Every business corporation that is focused on making a positive impact is required to report on what it has done to achieve its goals each year. The report must be posted on the company’s website and shared with shareholders. It should include a description of what the company did to meet its goals and any challenges it faced. The company also needs to assess its overall performance using a recognized standard. If the company doesn’t follow through on its goals, shareholders can take legal action, but they canât ask for money as a penalty. The best way for shareholders to hold the company accountable is by participating in director elections or removal processes. Some lawyers wondered if new benefit corporations were really necessary. They questioned if regular corporations could already do socially helpful things, and if directors could already spend money on public benefit projects without punishment. But the benefit corporation concept creates explicit goals for public benefit and allows for more use of corporate assets for those purposes. It also shields directors and officers from claims related to using corporate money for public welfare. And while regular corporations have to consider their financial welfare, benefit corporations require their leaders to also think about public welfare. Florida has a law that lets company directors think about things like the community and society when making decisions. This is similar to the rules for benefit corporations, which are companies that try to do good things for society as well as make money. More and more states are making laws for benefit corporations, and investors like the idea. It seems like these types of companies are becoming more popular. The new Florida legislation allows for the creation of benefit and social purpose corporations, which are different from traditional corporations because they focus on public benefit goals instead of just making a profit. Potential investors should be told about these goals and how they may affect their investment, as well as the limitations on shareholder rights. This new option gives entrepreneurs more choices for running their businesses in a socially responsible way. As of 2010, about 10% of all money invested in the US, which is about $2.3 trillion, was in companies that are considered socially responsible. The idea of “socially responsible” means these companies are trying to make a positive impact on society and the environment, not just make a profit. There’s a new type of corporation called a benefit corporation that’s legally required to make a positive impact on society and the environment. They have to consider things like helping low-income communities and improving people’s health, not just making money. This type of corporation might be important for businesses that want to show they are doing good in the world, not just making money. The law in Florida allows for the creation of two types of corporations: Benefit (B) corporations and Substantial Public Benefit (SP) corporations. These types of corporations have specific rules and requirements, including a duty of care for their directors, the ability to provide appraisal rights, and the need to report on their public benefit goals. They also have legal protections for their directors, officers, and the corporations themselves. It is expected that some existing traditional and nonprofit corporations may choose to transform into a B or SP corporation. In Dodge v. Ford Motor Co., the court said that a business’s main goal is to make money for its stockholders, so the company can’t reduce profits to benefit others. But in A.P. Smith Mfg. v. Barlow, the court said it’s okay for a company to make small donations. In Florida, there’s nothing stopping a company from doing good things for the public, but some people worry that directors might get in trouble for spending too much money on public benefits. In Delaware, the court has said that directors can consider the interests of the community, but they still have to make sure it benefits the stockholders. Within the first three months after Delaware passed a new law for benefit corporations, 55 companies were formed under that law. There are concerns that investors and creditors may not fully understand the goals of benefit corporations. Florida considered but decided against requiring benefit corporations to have a special notation in their name. Florida also did not give the same status to limited liability companies as some other states. The authors of the benefit corporation legislation in Florida are Stuart D. Ames and Stuart R. Cohn. They work with the Business Law Section of The Florida Bar.
Source: https://www.floridabar.org/the-florida-bar-journal/now-its-easier-being-green-floridas-new-benefit-and-social-purpose-corporations/
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