Before electing to use of the new corporate form, business owners and entrepreneurs should be aware of Minnesota’s rules governing PBCs. Whether this corporate form is right for your business will depend on your specific goals and priorities. Below is a brief summary of key provisions of the MPBCA:
Types and Purposes of PBCs.
The MPBCA provides for the formation of two types of PBCs, depending on the scope of the public benefits to be pursued: general benefit corporations and specific benefit corporations.
General Benefit Corporation. A general benefit corporation is a PBC that elects in its articles to pursue a “net material positive impact from the business and operations of a general benefit corporation on society, the environment, and the well-being of present and future generations. In addition, general benefit corporations may also pursue a specific public benefit or benefits. Minn. Stat. §§ 304A.021, subd. 3 and 304A.104 (Minn. 2014).
Specific Benefit Corporation. A specific benefit corporation means a PBC that states in its articles that it is electing to pursue one or more positive impacts, or reduction of a negative impact, on specified category of natural persons, entities, communities, or interests, other than shareholders in their capacity as shareholders, as enumerated in the articles of a public benefit corporation. Minn. Stat. §§ 304A.021, subd. 9 and 304A.104 (Minn. 2014).
Establishing a PBC?
Forming a New Corporation. In addition to satisfying the incorporation requirements enumerated in the Minnesota Business Corporation Act (chapter 302A), a PBC must file articles of incorporation with Minnesota’ secretary of state indicating whether the PBC is a:
(1) general benefit corporation;
(2) general benefit corporation that also elects to pursue a specific public benefit purpose as stated in its articles; or
(3) specific benefit corporation that elects to pursue a specific public benefit purpose as stated in its articles. Minn. Stat. § 304A.101, subd. 1 (Minn. 2014).
Amending an Existing Corporation. With approval from two-thirds vote of its shareholders, an existing corporation may elect to become a public benefit corporation by amending its articles to meet the requirements above. Minn. Stat. § 304A.102, subd. 1 (Minn. 2014). Any dissenting shareholders will be able to redeem their shares at fair value prior to conversion. Minn. Stat. § 304A.102, subd. 3 (Minn. 2014).
Standard of Conduct for Directors.
In governing a PBC, directors must consider the public benefit identified in the corporations articles, shareholder interests, and the interests of non-shareholders. Directors are not permitted to give permanent or presumptive priority to the pecuniary interests of the shareholders. Minn. Stat. § 304A.201 (Minn. 2014).
PBCs must file an annual report with the Minnesota secretary of state. The information to be provided in the report depends on the type of your PBC but generally requires disclosure of how the corporation pursued and created the specific public benefit stated in its articles. Minn. Stat. § 304A.301 (Minn. 2014). Failure to file the annual report results in revocation of the corporation’s status as a PBC. Minn. Stat. § 304A.301, subd. 5 (Minn. 2014).
Tax Implications. The MPBCA does not create a new corporate tax status and election to become a PBC does not confer any special tax advantages. PBCs are taxed as a traditional business corporation—either as a C-corporation or S-corporation.
Business Name. PBCs are must comply with naming requirements. For general benefit corporations, the words “general benefit corporation” or the abbreviation “GBC” must be included in the business name. For specific benefit corporations, the words “specific benefit corporation” or the abbreviation “SBC” must be included in the business name. Minn. Stat. § 304A.101, subd. 2 (Minn. 2014).
Non-Profits. Non-profit corporations are not allowed to become a PBC. PBCs are a type of business corporation with the added goal of achieving a general or specific public benefit. Nonprofit corporations are not formed to pursue business purposes and do not have owners.
Enforcement Authority. No person other than a shareholder may assert a claim against a PBC, its directors, or its officers on account of the PBC’s director's or officer's failure to pursue or create general public benefit or a specific public benefit. Minn. Stat. § 304A.202, subd. 1 (Minn. 2014).
Minnesota’s passage of the MPBCA provides business owners and entrepreneurs with a unique opportunity to pursue social goals while seeking to maximize shareholder value at the same time. When considering whether a PBC is right for you, it is important to keep in mind the unique rules governing PBCs.
This article was written by Michael J. Belaen. Michael serves as the Saint Paul Area Chamber of Commerce’s (SPACC) director of public affairs and legal counsel. Prior to joining SPACC, Michael was a civil litigator. Michael is a cum laude graduate of Hamline University School of Law.
Disclaimer: This article is intended to provide general information only and should not be construed as rendering any legal advice or opinion. An attorney-client relationship is not created by reading this article.