Monday, August 6, 2012

Illinois Becomes Eleventh State to Allow Benefit Corporations

On August 2, 2012, Illinois governor Pat Quinn signed Senate Bill 2897 into law, officially recognizing benefit corporations  in the state. The bill had previously passed the house and senate by  votes of 66/47 and 30/21, respectively.

The new corporate entity type will be effective January 2013. Existing firms will be able to switch to this new entity type with at least a two-thirds shareholder vote.

The provisions of this Illinois statute are generally consistent with the boilerplate benefit corporation legislation promoted by B Lab, a non-profit corporate social responsiblity (CSR) auditor based in Pennsylvania.  Firms incorporating under this law must adopt and be assessed under an independent third party CSR standard, such as those provided be B Lab, Ceres, Green Seal, GRI, People4Earth, etc.

The only substantive difference in the Illinois statute is the removal of the requirement for the corporation to file its annual report with the Secretary of State each year.  This change may be prescient, since most other benefit corporation states have not yet implemented a process for receiving these annual reports, leaving BenCorps in their respective states no way to comply with this particular provision of the law.

BenCorps in Illinois must provide a "specific public benefit." They must also consider the needs of many constituencies above and beyond financial returns for shareholders.  The lists of these public benefits and constituencies is identical to those of Louisiana, therefore please refer to previous article about Louisiana's new benefit corporation statute for more detail.

Illinois is the eleventh state to adopt benefit corporation legislation, following California, Hawaii, Louisiana, Maryland, New Jersey, New York, South Carolina, Vermont, Virginia, and Washington State.

A full list of states with benefit corporation statutes is available on my website, along with a listing of companies that have adopted this new corporate entity type.

Craig R. Everett, PhD
Graziadio School of Business and Management
Pepperdine University