The below has been developed by attorneys for companies interested in electing and operating as benefit corps in Massachusetts, New York and Maryland. While the specifics will vary by state, this information will provide a general overview of the process. As similar information is developed by local attorneys for other states it will be made available here.
How to elect benefit corporation status in Massachusetts
The below was developed by the Massachusetts Secretary of the Commonwealth as a guide for companies interested in registering as benefit corporations.
How to elect benefit corporation status in New York
How to elect benefit corporation status in Maryland
Disclaimer: This document is for educational purposes only and it does not contain any specific legal advice. If you have any questions concerning your specific circumstances, we encourage you to contact a licensed attorney.
Below is a brief outline of the steps one needs to take to create a benefit corporation or, if an existing Maryland corporation, elect benefit corporation status.
Incorporating a new corporation as a Maryland Benefit Corporation
A new business that wants to elect benefit corporation status can do so by filing the appropriate documents with the State Department of Assessments and Taxation (SDAT), as every new business does when it selects its legal status. A template corporate charter (aka articles of incorporation) form is available at: http://www.dat.state.md.us/sdatweb/sdatforms.html.
First, the law requires that reference to the fact that a corporation is a benefit corporation appear prominently at the head of the corporate charter. Therefore, when electing to become a benefit corporation, a business should refer to itself as such, in bold, at the top of its new or amended charter. In a typical filing by a new benefit corporation, the first section of the standard documents available on the SDAT website should provide that ‘the undersigned do(es) hereby form a benefit corporation under the laws of the State of Maryland’. Reference to a business’s benefit corporation status also should appear on any subsequent charter documents and on each certificate of outstanding stock in the corporation.
Second, the law provides that a benefit corporation shall have the purpose of creating a general public benefit, which is defined as a material positive impact on society or the environment. For this reason, it is recommended that a Benefit Corporation should state in the “purposes” section of its corporate charter that it has the purpose of creating a general public benefit. This is in addition to any other business-related purposes described in the “purposes” section of the charter.
Third, if a business chooses to do so, it may include in its “purposes” section any “specific public benefit” that the business wants to promote. This is not required; however, if there is a particular manner in which a business is committed to having a positive impact on the environment or society, it can state such as a specific public benefit. For instance, if a business is committed to creating jobs in a particular underserved community, it may choose to state that as a specific public benefit that it aims to promote.
A benefit corporation must file its corporate charter with SDAT. This can be done in person, by facsimile, or through the mail. The fee is $100, and there is an additional $20 Organization and Capitalization Fee if the filing is the business’s original corporate charter. For an additional $50, a business also can have its filing processed in an expedited manner. Regular service can take eight weeks or more, and expedited service can take up to seven days when filing is by facsimile or mail. Same day service is available, however, for hand-delivered filings with the expedited service fee. Finally, there is a $5 fee to have the original documents returned. It is generally recommended that a business filing documents with SDAT have the originals date-stamped and returned. Further information is available at: http://www.dat.state.md.us/sdatweb/fees.html
Electing benefit corporation status as an existing corporation
For an existing corporation, electing to become a benefit corporation requires the approval of the corporation’s shareholders by the affirmative vote of two thirds of all the votes entitled to be cast. After such vote is obtained appropriate documents should be filed with SDAT, as every business does when making an amendment to its governing documents. A template article of amendment form is available at: http://www.dat.state.md.us/sdatweb/sdatforms.html. A sample article of amendment is at the end of this document.
In addition to the above language recommended for the “purposes” section of a new business incorporating as a benefit corporation, a typical amendment in which a business elects to become a benefit corporation should state in a separate paragraph that the business elects to be a benefit corporation as provided by the Corporations and Associations Article of the Maryland Code.
Filing articles of amendment with SDAT is handled in the same manner as stated above.
A business that already exists, but not as a corporation (for instance an LLC or LLP), should review its governing documents and consult with an attorney to determine how to re-form as a benefit corporation, if doing so is something that the business’s owners are interested in pursuing.