Recent changes under the Business Corporations Act (British Columbia) as of June 30, 2020 have resulted in the formation of a new type of company know as a “benefit company”.
A benefit company is like a standard corporation in the sense that it is a for-profit entity. However, benefit companies have two additional requirements. A benefit company must be committed to conducting business in a “responsible and sustainable” way. Second, a benefit company must promote one or more “public benefits”. A public benefit is defined in the Business Corporations Act as a “positive effect” that benefits a class of persons other than the shareholders of the company. This is intended to be interpreted broadly, as a positive effect can include an effect on artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological groups.
The general provisions of the Business Corporations Act apply to benefit companies, and in this regard, they are no different than a normal company from a maintenance and organization perspective. Additional organization features of benefit companies include the following:
- A benefit company must have a “benefit statement” in its notice of articles
- A benefit company must include a “benefit provision” in the articles which states the public benefits that the company will promote, as well as the company’s intent and to conduct business in a responsible and sustainable manner
- A benefit company must publish an annual benefit report that provides an assessment of the company’s performance against a third-party standard. A third-party standard means a standard for defining, reporting and assessing the performance of a benefit company in conducting its business in a responsible and sustainable manner and in relation to its public benefits.
There is also an additional requirement for directors and officers. For a standard company, directors and officers have a duty to act in the best interests of the company. Directors and officers of a benefit company have an additional duty to act honestly and in good faith with a view to conducting the business of the company in a responsible and sustainable manner, and promoting the public benefits of the company. This is very important, as directors and officers of a benefit company will have to balance the duty to act in the best interests of the company with this new benefit duty. In other words, directors and officers of benefit companies must consider broader stakeholders and goals than a normal company.
Why would a benefit company be beneficial (no pun intended)? Given society’s ever increasing intent to promote and emphasize key corporate concepts such as sustainability, social responsibility and good corporate governance, a benefit company may be popular for those who wish to emphasize these characteristics, or want to enhance community recognition as it relates to the company’s core values. This also may be desirable for a company when attracting key investors who are focused on these concepts and values as it relates to the greater community.
At present, there does not appear to be any tax advantages to being a benefit company.
This article is provided as information only and should not be construed as legal advice. Always consult with a lawyer to provide you with advice specific to your own situation. For more information, please contact Patrick Bobyn by calling (250) 869-1286 or by email at [email protected].
Patrick Bobyn is a solicitor practicing in the areas of business law, real estate, estate planning and estate administration. His business experience includes assisting clients right from the beginning by discussing the different business structures, incorporating, buying and selling businesses, assisting with lending or financing needs, drafting and advising on contracts, and providing general advice to business owners.
