• Texas Now Allows for the Existence of Benefit Corporations
  • December 5, 2017 | Author: Jeanne R. Solomon
  • Law Firm: Withers Bergman LLP - New York Office
  • As of September 1, 2017, Texas amended its Business Organizations Code to recognize public benefit corporations as a form of entity. The amendment allows a for-profit corporation to elect to be a public benefit corporation by including in its certificate of formation one or more specific public benefits to be promoted by the corporation and a statement that the filing entity is a for-profit corporation electing to be a public benefit corporation. The Texas law defines a public benefit as a positive effect (or a reduction of a negative effect) on one or more categories of persons, entities, communities or interests (other than shareholders in their capacities as shareholders of the corporation). Directors of a benefit corporation may promote non-monetary objectives intended to positively impact society and consider those interests in decision-making rather than only interests of stockholders. To fulfill their duties, directors must balance these interests and make decisions that are informed, disinterested and that a person of ordinary sound judgment would approve. While other interests may be considered, the directors do not owe any duties to any person other than the shareholders and the corporation. A benefit corporation may indicate that it is a public benefit corporation in its name or provide notice to prospective buyers indicating that it is a benefit corporation prior to issuing unissued shares, and the corporation must note conspicuously on stock certificates and notices that it is a public benefit corporation. For more information on Texas' new legislation, see https://webservices.sos.state.tx.us/legbills/files/RS85/HB3488.pdf.