As of July 1, Virginia will be one of only four states to permit a stock corporation to be designated as a “Benefit Corporation” by complying with certain statutory requirements.
New stock corporations may elect Benefit Corporation status in their original Articles of Incorporation. Existing stock corporations may do so by amending their Articles of Incorporation or by merging into an existing Benefit Corporation. Limited liability companies, nonstock corporations and partnerships must first convert to a Virginia stock corporation to achieve this status.
Traditionally, the sole focus of a corporation was to create profits for its stockholders. Indeed, corporate managers may be subject to lawsuits for failure to do so.
Benefit Corporations may, and indeed must, create a positive charitable, social and/or environmental impact when making its financial and business decisions. The law allows for either a general or specific public benefit, which must be annually measured under a third party standard and described in an annual benefit report to stockholders.
More businesses are recognizing that promoting charitable, social and environmental innovation and sustainability can create a competitive advantage in attracting future customers. There is now legal recognition and protection from liability for doing so.
Businesses that have elected to operate as Benefit Corporations, in other states where authorized, have described very positive reactions from both existing and prospective customers and employees, who desire to work with a socially conscious company, in addition to a growing number of environmentally responsible investment groups.
Thanks to Carter Scott of the Richmond law firm DurretteCrump PLC for this brief notice of the new law.
For more information, Mr. Scott may be contacted at (804) 783-6821
or by email at firstname.lastname@example.org.