Can a Minnesota Public Benefit Corporation Lose its Status?

Yes. A public benefit corporation can lose its status as a public benefit corporation in three ways: termination, revocation, or dissolution.

1) Termination

Under the Minnesota Public Benefit Corporation Act, there are two ways a public benefit corporation can terminate its public benefit corporation status: by amendment or by transaction. Additionally, a court may order termination by amendment.

Amendment

A public benefit corporation may amend its articles of incorporation to terminate its status as a public benefit corporation.

By Amendment. 

In accordance with the procedures stated in chapter 302A and with approval of 66 2/3 of all shareholders (regardless of voting rights) , a public benefit corporation may terminate its status as a public benefit corporation and cease to be subject to chapter 304A by amending its articles of incorporation  to delete the requirements of section 304A.101, subdivision 1, and change its name to remove the information required by section 304A.101, subdivision 2.

Minn. Stat. § 304A.103, subdivision 1.

Transaction

A transaction may cause a public benefit corporation to lose its status as a public benefit corporation.

Merger, exchange, conversion, or transfer.

If a merger, exchange, conversion, or transfer would have the effect of terminating the status of a public benefit corporation under this chapter, the transfer or the plan of merger, exchange, or conversion must be approved by 66 2/3 of the shareholders .

Minn. Stat. § 304A.103, subd. 2.

 

Both methods for terminating public benefit corporation status require the approval of 66 2/3 minimum status vote.

Minimum status vote.

“Minimum status vote” means that the shareholders shall take action by the affirmative vote of the holders of at least two-thirds of all of the issued and outstanding shares.

Minn. Stat. § 304A.021, subd. 5.

In connection with an action by one or more shareholders asserting that a public benefit corporation’s directors or officers have failed to pursue or create general public benefit or a specific public benefit, a court may order a public benefit corporation to amend its articles to terminate its status as a public benefit corporation.

Particular Relief Available. 

In an action under this chapter, in addition to granting any other equitable relief the court deems just and reasonable in the circumstances, the court may order the public benefit corporation to terminate its status as a public benefit corporation pursuant to section 304A.103, subdivision 1.

Minn. Stat. § 304A.202, subd. 3(a)(1).

Terminating status as a public benefit corporation has significant consequences. With respect to a termination by amendment or transaction, a shareholder may dissent from the termination of status and obtain fair value for their shares. If a public benefit corporation terminates or loses its public benefit corporation status, the corporation may not elect to become a public benefit corporation again for a period of three years.

Rights of dissenting shareholders.

A shareholder of a public benefit corporation may dissent from, and obtain payment for the fair value of the shareholder’s shares pursuant to sections 302A.471 and 302A.473 in the event of a termination of public benefit corporation status pursuant to this section.

Minn. Stat. 304A.103, subd. 3

Effects of termination.

A public benefit corporation that terminates its status, or has its status revoked more than once pursuant to section 304A.301, subdivision 5, may not elect to become a public benefit corporation under this chapter until three years have passed since the effective date of termination or revocation.

Minn. Stat. § 304A.103, subd. 4

2) Revocation

A public benefit corporation’s status will be revoked by the secretary of state when a public benefit corporation fails to file its annual report.

Failure to file an annual benefit report.

If a public benefit corporation fails to file, before April 1 or any calendar year, the annual benefit report required by this section, the secretary of state shall revoke the corporation’s status as a public benefit corporation under this chapter and must notify the public benefit corporation of the revocation using the information provided by the corporation pursuant to section 5.002 or 5.34 or provided in the articles.

Minn. Stat. § 304A.301, subd. 5

A revoked public benefit corporation loses the statutory benefits of being a public benefit corporation.  Reinstatement must be timely made and costs $500.

Effects of revocation; reinstatement.

(a)A public benefit corporation that has lost its public benefit corporation status for failure to timely file an annual benefit report is not entitled to the benefits afforded to a public benefit corporation under this chapter as of the date of revocation.

(b) Within 30 days of issuance of revocation of public benefit corporation status by the secretary of state, filing a renewal complying with this section and a $500 fee with the secretary of state will reinstate the corporation as a public benefit corporation under this chapter as of the date of revocation.

Minn. Stat. § 304A.301, subd. 6

3) Dissolution

A public benefit corporation can be dissolved under the Minnesota Corporation Act.  Additionally, a public benefit corporation may be ordered by a court to dissolve. The procedure for dissolving a public benefit corporation is the same as the procedure for dissolving a corporation.

Methods of dissolution.

A corporation may be dissolved:

(a) before the issuance of shares, pursuant to section 302A.711;

(b) after the issuance of shares, pursuant to sections 302A.721 to 302A.7291;

(c) by order of a court pursuant to sections 302A.741 to 302A.765; or

(d) by the secretary of state according to section 302A.821.

Minn. Stat. § 302A.701

A court may appoint a receiver to wind up and liquidate the activities of a public benefit corporation.

Particular relief available.

In an action under this chapter, in addition to granting any other equitable relief the court deems just and reasonable in the circumstances, the court may appoint a receiver of the public benefit corporation to wind up and liquidate the activities and business of the public benefit corporation.

Minn. Stat. § 304A.202, subd. 3(a)(3)(i)


Attorney Kim Lowe helps enterprises in both the for-profit and nonprofit sectors, navigate the complex legal and business issues faced by the modern organization. Utilizing decades of legal, business and leadership experience, as well as her nationally recognized unique cross-sector expertise, Kim helps business and thought leaders create, fund and operate for-profit enterprises, benefit corporations, cooperatives and/or nonprofit organizations.

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