Q: What is a benefit corporation, and how is it different than a traditional corporation in New Hampshire?
A: A benefit corporation is a type of entity that was introduced to the Granite State in 2015 with the New Hampshire Benefit Corporation Act (RSA Chapter 293-C). Currently, there are 17 active New Hampshire benefit corporations.
While traditional business corporations exist to benefit shareholders and maximize profits, benefit corporations permit the corporation to also support an identified public good. The directors of benefit corporations have a different standard of conduct than directors of business corporations, which creates what is referred to as a “double bottom line.”
Directors of benefit corporations are required by statute to take into account not only the interests of the corporation and its shareholders, but the interests of its employees, suppliers, customers, community and environment. The Benefit Corporation Act allows directors to take a broad approach and consider any other factors they deem appropriate, as long as the operations of the corporation contribute to the general public benefit.
While this “double bottom line” may sound like a burden, these additional considerations allow directors of benefit corporations to pursue objectives other than shareholder profits, while still faithfully executing their duties. Instead of being obligated to maximize profits, directors of benefit corporations know that their shareholders also prioritize a public benefit, even if that means lower dividends or slower growth in value.
To form a benefit corporation, the founders must make certain filings with the New Hampshire Secretary of State. In addition to the business purpose that all corporations are required to include in their Articles of Incorporation, a benefit corporation must state a purpose that creates a general public benefit. The purpose can be vague, such as “to create a general public benefit,” or more specific, such as “to create healing products, to run a healthy business, and to make a difference in the world through the manufacture and sale of holistic body care.”
Each year, a benefit corporation must submit an annual benefit report to the secretary of state that reports on how the corporation has followed its stated public benefit purpose. Like other annual reports of New Hampshire corporations, this document can be accessed by the public through the New Hampshire Secretary of State’s website.