We are celebrating the second full year of public benefit corporations in Minnesota. Public benefit corporations are for-profit corporations that have elected to add a social “benefit” purpose in addition to a general business purpose. This additional social purpose allows public benefit corporations to elevate pursuing a social good through business to a status at least equal to profit making.
Annual Benefit Report
Minnesota’s Public Benefit Corporation Act was enacted in the Spring of 2014 with the first public benefit corporations being formed in Minnesota on January 2, 2015. In 2015 we had 60 public benefit corporations in Minnesota and as of the end of 2016 we had 79 public benefit corporations. One of the unique features of the benefit corporation is the requirement to file an Annual Benefit Report.
Prior to April 1, all public benefit corporations must file their Annual Benefit Report with Secretary of State that covers the previous year. What is required to be in the report depends on the type of public benefit corporation.
For specific benefit corporations, the Annual Benefit Report must contain:
- The ways and extent the corporation pursued the specific benefit purpose stated in its articles;
- Any circumstances that hindered the specific benefit corporation’s efforts to pursue its specific benefit purpose; and
- A certification that the corporation’s board of directors reviewed and approved the report.
For general benefit corporations, the Annual Benefit Report must:
- Certify that the corporation’s board of directors has determined and chosen an independent third-party standard and some other details about the third party standard;
- With reference to that third-party standard, describe the extent of how the general benefit corporation pursued its general benefit purpose and any circumstances that hindered those efforts;
- If the general benefit corporation has also stated a specific benefit purpose in its articles,, the corporation must describe the extent of how they pursued that specific public benefit and any circumstances that hindered those efforts; and
- Certify that the corporation’s board of directors has approved the report.
Annual benefit reports are not required to be audited by a third party. If a public benefit corporation does not file its report by the April 1 deadline, the Secretary of State will revoke the public benefit corporation’s status as a public benefit corporation. In order to get reinstated as a public benefit corporation, the organization must pay $500 and file a renewal with the secretary of state within thirty days of the revocation.
Purpose of Annual Benefit Reports
Annual Benefit Reports serve an important role with respect to the commitment of social entrepreneurs to operate as a public benefit corporation. While these reports are intended to provide transparency to the public, they also serve as an opportunity to celebrate what is possible and what is now in the social business world. The reports provide a social business the vehicle and mechanism to demonstrate to the state and the world how businesses can do well and do good at the same time.
Here is a Benefit Report Template for public benefit corporation entrepreneurs to use for preparing their annual benefit reports. JUX Law Firm will be hosting a series of public workshops to help with the preparation of these reports as well. Check on our events page for dates as they are posted.
This article was written by attorney Kim Lowe.