Jessica FriesenCommunity Development

Featuring B Lab Staff:

Hosted by: Holly Ensign-Barstow

Mngr, Mission Alignment TeamRick AlexanderHead of Legal Counsel

Matt NabhanStandards Analyst

Poll:

How familiar you are with the legal requirement for B Corp certification?

● Very familiar● Somewhat familiar● Not familiar at all

B Lab’s Mission

B Lab is Changing Systems

We believe the path to systemic change is to:

• Shine light on leaders

• Create paths for others to follow

Shine a light on leaders

Building a global community of Certified B Corporations who meet the highest standards of verified, overall social and environmental performance, public transparency, and legal accountability.

1600+

CERTIFIED B CORPS

40+

COUNTRIES

130+

INDUSTRIES

1

UNIFYING VISION

47+

COUNTRIES

Earn a verified score of 80 points on the B Impact Assessment

Adopt legal protection and permission to consider all stakeholders through legal Mission Alignment.

Make a profile showing topline performance on Bcorporation.net.

Certified B Corps

Adopt legal protection and permission to consider all stakeholders through legal Mission Alignment.

Legal Framework

Goals for Today

Learn about why there is a legal requirement for Certification

Understand how and when to meet the legal requirement for your state and corporate entity

Recognize that B Lab is here to help you with this process!

Earn a verified score of 80 points on the B Impact Assessment

Adopt legal protection and permission to consider all stakeholders through legal Mission Alignment.

Why is there a Legal Requirement?

Traditional corporations must be managed only to produce value for stockholders.

Corporate commitment to other interests in order to create sustainable long term value for shareholders is precluded.

Under Traditional Corporate Law

“Directors cannot . . . defend a business strategy that openly eschews stockholder wealth maximization.”

- eBay v. Newmark (Craigslist) (2010)

“The object of the corporation is to produce profits for the stockholders and . . . the social beliefs of the managers, no more than their own financial interests, cannot be their end in managing the corporation.”

- Chief Justice of the DE Supreme Court Leo Strine,Wake Forest L. Rev. (2012)

Duties

Profit maximization is the ultimate obligation of corporate directors:

“[C]oncern for non-stockholder interests is inappropriate when an auction among active bidders is in progress, and the object no longer is to protect or maintain the corporate enterprise but to sell it to the highest bidder.”

- Revlon v. MacAndrews & Forbes Holding (1986)

“Under Revlon in the traditional public company context, a board of directors that has decided to sell the corporation in a change of control transaction must, within the discretion afforded it by positive regulatory law, sell the corporation to the bidder offering to pay the highest price to the company’s stockholders.”

- Chief Justice of the DE Supreme Court Leo Strine, (2014)13

Exit

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Benefits of the Legal Requirement

LLC/LLP/LP Legal Requirement

Amend governing documents with B Lab language

Corporation Legal Requirement

Corporations Have Two Options

1. Constituency Statute Amendment: Amend articles of traditional corporation with B Lab language

2. Benefit Corporation Amendment: Amend articles to elect benefit corporation status

Become a Benefit Corporation or Constituency State Amendment: CT, DC, FL, HI, ID, IL, IN, LA, MA, MD, MN, NJ, NY, NV, OR, PA, RI, or VT

Become a Benefit Corporation: AR, AZ, CA, CO, DE, MT, NE, NH, SC, UT, VA, or WV

Constituency State Amendment: GA, IA, KY, ME, MS, MO, ND, NM, OH, SD, TN, WI, or WY

Wait until an option is available: AL, AK, KS, MI, NC, OK, or TX

Availability of Two Options Depends on State

COOPs/Sole Proprietors/ Professional Corps….

The Rest of the World

B Lab works with local experts to identify legal pathways for mission-aligned companies to consider impact over time.

Deadlines

Deadline to meet legal requirement depends on the state of incorporation and entity type:

• LLCs/LLPs/LPS: 90 days from Certification

• Constituency statute amendment: 1 year from Certification

• Benefit Corporations: Varies from 2 to 4 years from Certification

Benefit Corporation

Traditional corporations must be managed only to produce value for stockholders. Corporate commitment to other interests in order to create sustainable long term value for shareholders is precluded.

Benefit corporations are designed to create long term value through broad commitment to sustainable growth. They are ideally suited to impact business models and companies that integrate sustainable practices into their operations.

Basics of a Benefit Corp

• Expanded purpose beyond maximizing share value to explicitly include general and specific public benefit

• Directors are accountable to considering stakeholder interests when making decisions

• Transparent with respect to the expanded purposes

Benefit Corp Details

• Protection

• Flexibility

• Attraction and Retention of Employees

• Marketing

• Succession Planning

Benefits of Benefit Corp

33 New Statutes Since 2010

Rapid Growth of Benefit Corporations

27

3,000

1,500

0‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘to date

Leading Benefit Corporations

Benefit Corps Can Raise Capital

IPO: Laureate Education

30

Poll:

Are you exploring becoming a benefit corporation?

● Yes● No● Not applicable or eligible

Educating the Market “Ecosystem”

Resources & help

How to meet the legal requirement: on www.bcorporation.net, including all roadmaps and legal requirements by entity and states

Benefit corporation information: www.benefitcorp.net, including how to become a benefit corp, FAQs for investors, boards and attorneys, and guides to decision making.

B Lab is here to help!

Learn to Love the Legal!

Redefine success in business.Help create the new economy. Build a better business.

Compete to be not only the best in the world, but the best for the world.

How to become a benefit corp

● Prepare article amendment by adding required language “This corporation is a benefit corporation” and choosing a specific benefit purpose that reflects the mission of your company if required by your state.

● Obtain Board approval

● Obtain shareholder approval (2/3)

● File amendment with the Secretary of State

● Notify stockholders of appraisal rights rights if required by our state

▪ B Impact Assessment: http://bimpactassessment.net/

▪ How to Certify as a B Corp: http://www.bcorporation.net/become-a-b-corp/how-to-become-a-b-corp

▪ Legal Requirements: http://www.bcorporation.net/become-a-b-corp/why-become-a-b-corp/protect-your-mission

▪ FAQ for Investors & Directors: http://www.bcorporation.net/sites/all/themes/adaptivetheme/bcorp/pdfs/faqs_investors_and_directors4.pdf

▪ Pending B Corp Status for Start Ups: http://www.bcorporation.net/become-a-b-corp/how-to-become-a-b-corp/steps-start-ups

▪ Case Studies: http://bimpactassessment.net/case-studies

▪ B Corp Press: http://www.bcorporation.net/news-media

Jessica FriesenB Lab: Community Teamjessica@bcorporation.net

Legal Framework Resources

▪ Legal Requirements: http://www.bcorporation.net/become-a-b-corp/why-become-a-b-corp/protect-your-mission

▪ FAQ for Investors & Directors: http://www.bcorporation.net/sites/all/themes/adaptivetheme/bcorp/pdfs/faqs_investors_and_directors4.pdf

▪ General Legal Roadmap: http://www.bcorporation.net/become-a-b-corp/how-to-become-a-b-corp/legal-roadmap

▪ LLC Legal Language: http://www.bcorporation.net/become-a-b-corp/how-to-become-a-b-corp/legal-roadmap/llc-legal-roadmap

▪ Corporation Legal Roadmap: http://www.bcorporation.net/become-a-b-corp/how-to-become-a-b-corp/legal-roadmap/corporation-legal-roadmap

Legal Framework Resources

▪ Benefit corporation basics: : http://benefitcorp.net/

▪ How to become a benefit corp: http://benefitcorp.net/businesses/how-become-benefit-corporation

▪ Benefit reporting: http://benefitcorp.net/businesses/benefit-corporation-reporting-requirements

▪ FAQ for investors: http://benefitcorp.net/sites/default/files/FAQs%20Investors%206_9.pdf

▪ FAQ for directors: http://benefitcorp.net/sites/default/files/FAQs%20Directors%20and%20Officers_6_17.pdf

▪ Guide to board room decision making: http://benefitcorp.net/sites/default/files/Board%20Procedures%20for%20Public%20Benefit%20Corporations.pdf

▪ How to choose a specific public benefit: http://benefitcorp.net/sites/default/files/Delaware%20Public%20Benefit%20Corporations_%20Choosing%20A%20Specific%20Benefit%20FINAL_6_3.pdf

▪ Case studies of benefit corps raising capital: http://benefitcorp.net/benefit-corporations-raising-capital

Becoming a benefit corporation: AltSchool

AltSchool operates a growing network of K-8 micro-schools and improves access to quality schooling for all children

•2013: Incorporated in Delaware as a C Corp

•2013: Raised $33 M Series A funding

•2014: Received unanimous support to become a public benefit corporation from its investors, including Founders Fund and Andreessen Horowitz

•2015: Raised $100 M from Andreessen Horowitz, Founders Fund, Learn Capital and First Round Capital

AltSchool’s benefit corporation legal status allows the team to think beyond short-term profits and focus on fundamentally improving the education system for many decades to come” – Founders Fund

Becoming a benefit corporation: Farmigo

• During financing, intent to become a benefit corporation was clear

• Investors determined that director liability wouldn’t change

• Benefit corporations status did not pose an upfront obstacle in investor discussions

Farmigo, founded in 2009, is an online farmer’s market

• Raised $10M from Benchmark, Sherbrooke Capital, Toby Coppel and Hadi Partovi

Raising capital as a benefit corporation: Cotopaxi

Cotopaxi is a vertically-integrated outdoor gear and apparel brand, with a social mission at its core

•2013: Incorporated as a PBC and started fundraising

•No pushback from investors on corporate form

•Raised $3 M in seed funding NEA, Lerer Hippeau Ventures, and Forerunner Ventures

•2015: Raised 6.5M in Series A led by Greycroft Partners with NEA, Lerer Hippeau Ventures, Forerunner Ventures and Brand Foundry

Raising capital as a benefit corporation: Yerdle

•2012: Incorporated as a benefit corporation

•Raised capital from angel investors and $1.7M in seed funding via capped convertible note

Yerdle , founded in 2012, by former executives at Walmart and Satchi & Satchi, is an app for exchanging used goods

•Raised $5M from VC funds in series A financing round from The Westly Group, Claremont Creek, Prelude, Mindful Investors and DBL Investors

•Benefit corporations status did not pose an upfront obstacle in early investor discussions

The Fortune 500 are supporting benefit corporations

Founded in 2006, Plum Organics is the No. 1 brand of organic baby food in US

• June 2013: Acquired by Campbell Soup Company

• Plum approached Campbell about converting to benefit corporation status in time for DE effective day 2 months later

• Campbell approved the transition so that Plum could continue to balance profitability mission, an important brand attribute consumers expect and value.

“There’s a lot more authenticity in the process today and there’s a lot more strategy around long-term shareholder value. If you get in line with that, it’s not a scary proposition. Frankly, I kind of like being the only [publicly-held owner of a DE Public Benefit Corporation] — it’s a great story for us to tell. But it’s a model that a lot of others could follow.” - Dave Stangis, VP Corporate Affairs and Social Responsibility, Campbell Soup Co

“Schoolzilla's transition to a Public Benefit Corporation and their stated social purpose make it clear to school districts that Schoolzilla is committed to their students' success now and in the future. That is especially important for schools. Furthermore, Schoolzilla's PBC status has enabled them to hire amazing, mission-driven talent.” – Reach: New Schools Capital

Schoolzilla, founded in 2013, is a data organization and insight platform for K12 schools

• Before 2015, raised $3M from impact investors plus Foundry Group and Angel List

• Customers particularly supportive of benefit corp transition

• Raised $2M after transition from Serious Change, Reach: New Schools Capital, Hallett Capital, Impact America Fund & others

Becoming a benefit corp: Schoolzilla