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This summer, Vermont is poised to become the second state in the country to allow businesses to formally organize as "Benefit corporations."  The legislation was passed last year and will take effect on July 1, 2011.  Several other states are considering legislation as well.

As Maryland is currently the only state that has a Benefit Corporation statute in effect, I thought a quick compare/contrast of the two laws would be interesting.  As was the case with Maryland, B Lab was the driving force behind the legislation, so it is not surprising that the basic structure between Vermont's and Maryland's law remains similar.  If you are not familiar with Maryland's statute, I encourage you to read this.

How is Vermont's law similar to Maryland’s Benefit Corporation statute?

1.       Requires Benefit Corporations to achieve a general public benefit through providing specific public benefits, using the same definition and examples of specific public benefits as Maryland's law. 

2.       Requires a Benefits Report with a third party assessment like the Maryland law.

3.       Again, the legislation makes it relatively easy to become a Benefit Corporation.  The process is basically the same as in Maryland.

4.       Requires directors to take into account same sort of factors when making decisions.

How is it different from Maryland’s statute?

1.       Requires  the appointment of a "Benefits Director" who is specifically charged with preparing the annual Benefits Report, as well as preparing a statement offering his or her opinion on the corporation's performance with respect to achieving general and specific public benefits.

2.       Requires officers to take into account same factors as directors, thus ingraining social ethos even more on the day to day operations.

3.       Allows, though does not require, the appointment of a Benefits Officer who would presumably be in charge of overseeing the fulfillment of the general and specific public benefits on a more operational level.

4.       Allows for certain parties (such as shareholders of the Benefit Corporation, a Director or certain shareholders of the parent entity of a Benefit Corporation) a "benefit enforcement proceeding" against the directors or officers for failure to pursue a general public benefit, or any specific public benefit set forth in the corporation's articles of incorporation.

5.       More stringent disclosure requirements in the Benefits Report, requiring disclosure of such things as director compensation and identities of shareholders owning 5% or more of the corporation.

In my next post, I will give my thoughts on some of the different aspects of Vermont's law, where I see improvement over Maryland's as well as some potential problems from the perspective of a business considering the Benefit Corporation model.




 

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