Directors of benefit corporations are afforded certain protections under the Model Legislation. 

First, the Model Legislation expressly states that the consideration of all stakeholders shall not constitute a violation of the general standards for directors, which require good faith, the care of an ordinarily prudent person and the consideration of the best interests of the corporation.  

In an effort to restrict potential liability, the Model Legislation specifically excludes director, officer and corporate liability for monetary damages.  This decision was driven by twin desires to (i) eliminate concerns of directors that they will be subject to personal liability in the face of no court precedent by which such liability could be quantified and (ii) focus courts on the exclusive remedy of awarding injunctive relief requiring the benefit corporation to simply live up to the commitments it voluntarily undertook.

Directors are also protected from suits by beneficiaries of the corporation’s public purpose.  The Model Legislation expressly states that third parties have no right of action.  The Model Legislation further states that it does not create a fiduciary duty to anyone who cannot bring a “benefit enforcement proceeding.”  Benefit enforcement proceedings are a right of action only for shareholders, directors, investors in the parent company of a benefit corporation subsidiary with a 5% or more equity interest, and any other persons specified in the company’s articles of incorporation.

A shareholder is expressly given the right to bring a legal action on the basis that a director or officer failed to pursue or create the stated general or specific public benefit purposes, failed to consider the interests of the various stakeholders set forth in the statute, or failed to meet the transparency requirements in the statute. 

This expanded accountability to shareholders is specifically desired by most of the mission-driven entrepreneurs and investors interested in new corporate form legislation.  Similarly, the exclusion of any right of action by third parties protects the benefit corporation from unknown, expanded liability that would otherwise operate as a disincentive to becoming a benefit corporation.