Wisconsin Passes Benefit Corporation Statute to Take Effect February 2018
Those wishing to form a “benefit corporation” in the State of Wisconsin are now permitted to do so pursuant to the newly created Wisconsin Statutes Chapter 204. In November 2017, Governor Scott Walker signed into law 2017 Wisconsin Act 77, which creates and recognizes benefit corporation as a new category of business corporation. For a general discussion of what a “benefit corporation” is, check out “Benefit Corporations and B Corps: Socially Responsible For-Profit Companies.”
Formation of a benefit corporation is essentially the same as that of a general business corporation under existing Wisconsin Statutes Chapter 180 with one main difference: a benefit corporation’s articles of incorporation must also state that it is in fact a benefit corporation. An existing business corporation may also become a benefit corporation by amending its articles of incorporation to include this statement. Termination of benefit corporation status is as simple as amending the articles to delete this statement, and the entity will revert to a general business corporation governed by Chapter 180.
Newly created Chapter 204, like the corresponding laws of the 35 other states already recognizing benefit corporations, requires that one of the benefit corporation’s identified purposes be to create general public benefit. Chapter 204 defines “general public benefit” as “a material positive impact on society and the environment by the operations of a benefit corporation taken as a whole, through activities that promote some combination of specific public benefits.” A “specific public benefit” is any one of the following:
- Providing low-income or under-served individuals or communities with beneficial products;
- Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
- Preserving the environment;
- Improving human health;
- Promoting the arts, sciences, or advancement of knowledge;
- Increasing the flow of capital to entities with a public benefit purpose; or
- The accomplishment of any other particular benefit for society or the environment.
A benefit corporation may (but need not) choose to identify a specific public benefit purpose in its articles in addition to its general public benefit purpose. Likewise, identifying a specific public benefit purpose does not limit the entity with regard to general public benefit. A specific public benefit purpose can be added or removed by amending the articles of incorporation.
Unlike general business corporations, benefit corporations must identify a benefit director. This individual must be a duly elected member of the board of directors, or, if there is no board of directors, then a person from within the group of shareholders who perform the duties of a board. In addition to the general duties and responsibilities of a board member, the benefit director has additional duties and responsibilities as outlined in the section. Although not mandated, the benefit director will mostly likely be the person responsible for the organization and preparation of the annual benefit statement.
Chapter 204 requires benefit corporations to produce an annual benefit statement that must be provided to shareholders within 30 days of the end of the first fiscal year. The statement must also include details regarding the benefit corporation’s promotion of general public benefit or any specific public benefit identified in its articles, including: (1) any objectives established by the board to promote the identified benefits; (2) the standards adopted by the board to measure progress in promoting the identified benefits; (3) data gathered using the adopted measurement standards; and (4) an assessment of the success in meeting the identified objectives and benefits.
The newly enacted Chapter 204 will take effect in February 26, 2018.