With Public Benefit Corporations now available as a business structure under Minnesota law (Minnesota Statutes Section 304A), many citizens and potential social entrepreneurs wonder about the Act’s annual reporting requirement. The annual reporting requirement for public benefit corporations in Minnesota depends on whether the public benefit corporation is a Specific benefit corporation or a General benefit corporation. So how do you know?
A general public benefit means a net material positive impact from the business and operations of the company on society, the environment, and the well-being of present and future generations. So, a GBC is a for-profit corporation that pursues one of these tenets.
A specific public benefit, however, means one or more positive impacts – or reduction of a negative impact – on specified categories of natural persons, entities, communities, or interests, other than shareholders in their capacity as shareholders. So, an SBC is a for-profit corporation with a specific public focus or goal.
For SBC’s, the Annual Report must contain a narrative description of:
- the ways in which the corporation pursued and created the specific public benefit stated in its articles
- the extent to which that specific public benefit purpose was pursued and created
- any circumstances that hindered efforts to pursue or create the specific public benefit
- a certification by the Board of Directors that they have reviewed and approved the annual report.
For GBC’s, the Annual Report requires the use of an independent, third-party standard. Note, however, it is the corporation that chooses the standard for which their performance is measured and judged. Once a Board of Directors certifies that they have identified and chosen an independent, third-party standard whose guidelines are publicly available, the Annual Report -with reference to that third-party standard – must describe:
- how the corporation has pursued general public benefit
- the extent to which and the ways in which the corporation has created general public benefit
- any circumstances that hindered efforts to pursue or create general public benefit
- (Only for the first filed report) how and why the board chose the third-party standard.
Subsequent GBC reporting must discuss whether the same third-party standard is being used; whether the standards are applied in a consistent manner; and (if a new standard is ever adopted) how and why the board chose a different third-party standard.
Both SBC and GBC Annual Reports are submitted to the MN Sec. of State Office (with $35 fee), where they will be published online for citizens to review and critique. Have more questions about benefit corps? Feel free to drop us a line and we’ll help you figure out the answers.