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“Converting” a Corporation to a Delaware Public Benefit Corporation

By IncNow | Published June 7, 2018

Convert to PBCA conversion from a corporation to a Delaware Public Benefit Corporation has many advantages for existing Delaware corporate directors.

A Delaware public benefit corporation is a for-profit corporation “that is intended to produce a public benefit or public benefits and to operate in a responsible and sustainable manner.” Del. Code Ann. tit. 8, § 362. A public benefit corporation enables the business to be managed in a way that balances the stockholders’ interests, the best interests of people “outside the corporate box” who are affected by the corporation’s conduct, and the specific public benefits identified in its Certificate of Incorporation.

Many businesses in practice are already operating with a public benefit or “green” goal in mind. By becoming a PBC, they simply want to protect their directors from fiduciary concerns and maximize the goodwill from the label.

Corporate directors are realizing the effect that converting to a public benefit corporation can have not only on their customers and the general public, but ultimately the effect it will have on the bottom line. Beyond the legal status of being a public benefit corporation, a PBC can apply to be “B Lab Certified” as a B Corp. This allows them to display the B Corp badge on their website and literature as long as they pass B Lab’s biennial evaluation.

Starting off as a PBC may be a simpler process than converting from a traditional corporation or LLC, but that does not mean it isn’t worth the time and money. If Directors follow the right process to convert, it ensures the continuity of their business and gives the change the legal efficacy they need.

How to Go From a Corporation to a PBC

First, the decision to change from a traditional corporation to a PBC must be adopted in the annual meeting minutes of stockholders by a two-thirds vote in favor and through a unanimous action by the directors of the corporation.

A PBC is not a different legal entity than a standard Delaware corporation, but it must meet certain requirements to be legally qualified as such. The corporation must amend its Certificate of Incorporation to list a specific public benefit. This puts the state, the public and stockholders on notice of the change. There are no statutory limits to this public benefit. It can conceivably be anything the directors want to include, provided the Secretary of State approves the filing. The taxes will be just like a C or S-Corporation, regardless of PBC status.

Next, the corporation may want to announce the change on company literature, websites and internal company materials. The directors should also consider applying for B Corp status with B Lab and place its badge on the website. This will maximize the goodwill website visitors will associate with the certification.

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When deciding where to form your company, consider that Delaware has advantages over your home state that may benefit you. Go