The Minnesota Public Benefit Corporation Act creates a new legal structure that will become available January 1, 2015. It is designed to bridge the gap between for-profit and non-profit corporations. Under the Minnesota Public Benefit Corporation Act, a Benefit Corporation is a for-profit business with owners that has the additional purpose of creating some sort of material positive impact on society, the environment, and the well-being of present and future generations. The Minnesota Public Benefit Corporation Act is contained in Minnesota Statutes Chapter 304A. Under the statutory framework, there are two types of benefit corporations: (1) a General Benefit Corporation and (2) a Specific Benefit Corporation. Unlike a General Benefit Corporation, which elects to pursue a material positive impact on society, the environment, and the well-being of present and future generations, a Specific Benefit Corporation has a specified category on which it focuses that is set forth in its Articles of Incorporation.
Though similar, there are some important differences between for-profit corporations and benefit corporations. Minnesota Statutes Chapter 304A is an overlay of Minnesota Statutes Chapter 302A. Therefore, Chapter 302A applies unless a specific provision of Chapter 304A governs. In order to elect to be governed by Chapter 304A, a Benefit Corporation must specify its benefit purpose in the Articles of Incorporation. This means a new corporation must make this election at the time of formation. Alternatively, an existing corporation may amend its Articles of Incorporation to become a Benefit Corporation. A Benefit Corporation’s directors have a duty to consider the effects of their decisions on all constituencies, including the stated purpose of the corporation. Moreover, a Benefit Corporation must annually report how it creates a social benefit. Failure to report will result in a loss of status under the Benefit Corporation Act.
The Public Benefit Corporation is a hybrid legal structure. The benefit corporation is not a non-profit or tax exempt organization. It is a for-profit entity and can return profits to its shareholders; however, unlike a traditional business entity, it is not required to maximize the financial return for those shareholders. This new legal structure represents an attractive tool for socially and environmentally conscious entrepreneurs.
If you have any questions regarding this new legal structure or whether or not your business could benefit from a Benefit Corporation designation please contact Paul Shneider at 507-345-1166.