Massachusetts Passes Legislation Recognizing Benefit Corporations

by Foley Hoag LLP

Socially minded entrepreneurs and businesses in the Commonwealth now have the option to more securely advance the public-benefit focus of their activities by using a new form of corporate entity: the benefit corporation.

On August 7, 2012, Governor Deval Patrick signed H. 4352 into law, thereby adding chapter 156E to the General Laws. This new statute governs the establishment and operation of benefit corporations. With the introduction of chapter 156E, Massachusetts became the eleventh state to permit the establishment of this socially minded form of corporate entity. Maryland and Vermont were the first two states to do so, in 2010.

Benefit corporations are similar to traditional for-profit corporations but they differ in one important respect. While directors and officers of traditional for-profit corporations must focus primarily on maximizing financial returns to investors, the directors and officers of benefit corporations are expressly permitted to consider and prioritize the social and environmental impacts of their corporate decision-making. As a result, benefit corporations may be an appealing choice of entity to members of the business community who seek to make corporations more “socially responsible.”

For example, the directors of a traditional corporation faced with financial hard times may opt to build up cash reserves by laying off employees, in order to fulfill their fiduciary duty to prioritize the financial returns to investors. A benefit corporation’s directors faced with similar economic circumstances could prioritize retaining the corporation’s workforce through the hard times, and opt to dip into cash reserves to do so, in order to continue to fully pursue the corporation’s public benefit goals.

Under the newly-adopted legislation, the boards of directors and officers of benefit corporations are required to consider the effects of their corporate decision-making on the following:

  • The shareholders of the benefit corporation;
  • The employees and workforce of the benefit corporation;
  • The interest of clients;
  • Community and societal factors, including those of each community in which offices or facilities of the benefit corporation are located;
  • The local, regional and global environment;
  • The short-term and long-term interests of the benefit corporation; and
  • The ability of the benefit corporation to accomplish its general and specific public benefit purposes.

Benefit corporations should not be confused with “B Corps” which are for-profit corporations, LLCs, partnerships and other business entities (including benefit corporations) that have been certified as B (for Beneficial) Corps by B Lab, an independent nonprofit. B Corp status is conferred by B Lab on business entities that meet certain criteria. The B Corp designation is a branding tool and has no legal significance.

Benefit corporations should also not be confused with nonprofit corporations even though both types of organizations may have similar public benefit purposes. The assets and earnings of nonprofit organizations must generally be used for the benefit of the public whereas a benefit corporation operates as a for-profit entity and may distribute earnings to shareholders and otherwise operate for the benefit of its investors.

Chapter 156E allows for the establishment of new benefit corporations, as well as for the conversion of existing corporations to benefit corporation status. In order to commence such a conversion, most existing corporations will need to obtain the approval of two-thirds of each outstanding class of their securities.

The new statute sets forth specific requirements for benefit corporations, including the appointment of a so-called benefits director to oversee and report on implementation of the corporation’s public benefit aims.

Benefit corporations are also required to prepare annual benefit reports detailing their activities and their progress implementing their public benefit initiative. Such reports must also include an assessment of the overall social and environmental performance of the benefit corporation against a third party standard. Benefit corporation statutes in other states have been criticized for leaving open the possibility that directors and officers could be attacked by shareholders for not doing enough to benefit the public. The new Massachusetts law provides specific protection for officers and directors from this kind of attack by specifying that directors and officers of benefit corporations organized under chapter 156E are not personally liable for monetary damages for any “failure of the benefit corporation to pursue or create general public benefit or a specific public benefit.”

Even though directors and officers of a benefit corporation are not personally liable for a failure of the corporation to pursue or create public benefit, the new statute does include procedures by which directors or shareholders may initiate so-called benefit enforcement proceedings against a benefit corporation that fails to pursue its public benefit purposes.

The effective date for Chapter 156E is December 1, 2012. On that date, companies may begin incorporating as benefit corporations, or may convert to benefit corporation status.

Foley Hoag has been closely following developments related to benefit corporations. We are available to advise emerging companies that may wish to register as a benefit corporation, as well as existing companies considering converting to benefit corporation status. For more information, please contact Sharon C. Lincoln or Noah J. Kaufman at Foley Hoag.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Foley Hoag LLP | Attorney Advertising

Written by:

Foley Hoag LLP

Foley Hoag LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.