6 Steps to a Benefit Corporation Conversion
For those business owners who are considering converting into a Benefit Corporation, the process is not as difficult as you may think. Whether you are a LLC or traditional corporation with investors, the actual conversion takes little time while the advantages you will receive from being a “B” will last a lifetime! We broke it down into six easy steps to show you just how simple the process is:
1st Step: Achieving a minimum status vote to make the conversion. A minimum status vote is a vote by the shareholders of every class of the entity (i.e. both voting and non-voting stock). To approve the conversion into a benefit corporation, the minimum status vote must result in a two-thirds majority for the conversion (or a greater vote if required in the articles of incorporation).
2nd Step: Addressing the concerns of dissenting shareholders. If a minority shareholder is against the conversion, then that shareholder retains her “dissenting rights”. These rights usually require the converting entity to buy the dissenting shareholder’s shares at their fair market value.
3rd Step: Amending your entity’s articles of incorporation and operation so as to include a statement that the entity is a benefit corporation, serves a general public purpose and possibly a specific public purpose.
4th Step: Alert the Secretary of State, California Department of Business Oversight and the Securities Exchange Commission. The type of notice you put each of these governmental agencies depends on the makeup of your original organization.
5th Step: Choosing your third party standard! B Labs is the most commonly used third party standard, however, you might want to consider another standard that deals with your particular industry. For a list of popular third party standards please click here. Although there is often the option to be certified by your third party standard (e.g. we are certified by B Labs), you do not have to get certified. The purpose of the standard is to act as the basis for producing your annual benefit report. Please note that the third party standard must comply with the statutory language of the State you plan to convert in (i.e. you should call the lawyers)!
6th Step: Reap the Benefits! Corporate citizenship is not just a theory; it is a rewarding business strategy. Become part of an ever-growing community of like-minded folks with a mission to make meaningful change.
If you’d like to find out more information about converting into a Benefit Corporation, please give us a call at (310) 883 7923 or drop us an email at firstname.lastname@example.org. We have a whole team experienced both in the formation of and conversion into Benefit Corporations and are excited to help your business grow in this increasingly relevant field. Even if you don’t reach out to us, it’s important you speak to a lawyer experienced in Benefit Corporations because statutes vary from state-to-state.