After many years of thinking, drafting and discussion, on April 29th Governor Dayton signed the Minnesota Public Benefit Corporation Act. That signature means that Minnesota has joined the growing number of states that permit a hybrid form of corporation—one which explicitly permits a for-profit business to inject public benefit considerations directly into its organizational DNA.
By electing to become a public benefit corporation, a corporation will be obligating itself to pursue general or specific public benefits among the corporation’s primary objectives—that is, the public benefits do not take a backseat to maximization of profits. Instead, a public benefit corporation is operated with an eye toward a “triple bottom line”: people, the planet, and profits. This is a familiar concept in the social enterprise sector, which has for years been populated by entrepreneurs who have been reluctant to agree to hidebound divisions between activities aimed at making money and activities aimed at doing good. What’s new in the Public Benefit Corporation Act is that, for the first time, there is a choice of corporate form that is specifically designed to allow business owners, just by choosing a public benefit corporation, to put shareholders and the wider marketplace alike on notice about organizational priorities.
What It Is
A public benefit corporation is, at its heart, a business corporation. The new statute is designed to function in tandem with the existing Minnesota Business Corporations Act, and as a result, most of the statutory provisions and case law interpreting the Business Corporations Act will apply to public benefit corporations. However, a public benefit corporation opts to be defined by a number of distinguishing characteristics:
What It Isn’t
Forming a public benefit corporation may provide helpful clarity to business owners, directors, shareholders, and the public concerning a business’s operating mission, but there are some important considerations that the Act does not attempt to address:
How To Make the Election
A new Minnesota corporation may elect to be a public benefit corporation by filing conforming articles of incorporation with the Minnesota Secretary of State. An existing corporation may amend its articles with shareholder approval—dissenting shareholders will be allowed to redeem their shares at fair value prior to a corporation’s conversion to public benefit status.
Is a Public Benefit Corporation Right for You?
Business owners have a variety of entity choices available to them—the public benefit corporation simply adds another means (but not the only means!) by which socially minded businesses can distinguish themselves from other businesses. Whether this new form is the right choice for your business will always depend on your specific goals and priorities. We can help you make a selection that suits your business.
Jennifer Reedstrom Bishop and Greg Larson are members of Gray Plant Mooty’s Health and Nonprofit Practice Group, and both are members of the Nonprofit Corporations subcommittee of the Minnesota State Bar Association’s Business Law section. In addition, Jennifer Reedstrom Bishop served as a member of the MSBA’s public benefit corporation drafting committee, which assisted the legislature with researching and drafting the Minnesota Public Benefit Corporation Act.
Gray Plant Mooty is recognized as one of the leading corporate law firms in Minnesota and one of the top franchise firms in the world. Our roots go back to 1866. Today, we are a full-service firm with nearly 180 attorneys and offices in Minneapolis and St. Cloud, Minnesota; Washington, D.C.; and Fargo, North Dakota.