Georgia Legislature Considers Amending Business Code to Allow for Creation of Benefit Corporations
Initially introduced during the 2019 session of the Georgia General Assembly, a bill proposing an amendment to Georgia’s corporate code to allow for the creation of Benefit Corporations is again being proposed by Representative Scott Holcomb of the 81st district.
Benefit Corporations are for-profit companies that are obligated to meet strict standards of social and environmental performance, accountability and transparency. While they share with non-profit corporations a similar mission of generating an overall societal benefit, Benefit Corporations are for-profit, which can open doors to funds that might otherwise be off-limits.
A Benefit Corporation still retains the goal of generating profits for its shareholders, however, maximizing profits cannot be the underlying goal given the internal safeguards built in to the company’s structure to ensure that the underlying purpose of the company is priority number one. Because of this, investors who may have funds available to invest but would primarily prefer such wealth be directed towards creating positive societal impacts can invest in a Benefit Corporation, having confidence that company management is bound to their mission statement. Further, because non-profits can be severely limited in the level of growth and overall impact they create due to being purely charitable in nature and structure, a Benefit Corporation has the potential to expand the impact that an investment can create, far and above what a donation in the same amount would achieve.
Because the type of investor who has both money to invest in addition to a desire to maintain a positive mission statement is not common, Benefit Corporations are by no means the best fit for the average business venture. Yes, shareholders have the ability to seek profits, but the company still pays taxes at the corporate level like a normal corporation does. However, due to the strict reporting guidelines and requirements for the internal structuring of a benefit corporation, these aspects have the potential to prevent a hostile takeover by a predatory competitor, given the permanence of a benefit company’s guiding mission. For successful businesses that prefer to adhere to certain principles, fearing that a buyout would dilute or even eliminate the company’s original mission, a benefit corporation is a perfect fit.
It has yet to be determined whether Georgia will ultimately sign the legislation allowing for benefit corporations into law, and whether the availability of benefit corporations will have an overall economic benefit in Georgia, nobody can yet say for sure. Whether this form of business structure is right for your business or whether another business model has the best chance of bringing you success, Bodker, Ramsey, Andrews, Winograd & Wildstein has the knowledge and expertise to help any business owner find their identity and achieve their full potential.