By Nick Woltman
Pioneer Press, St. Paul, Minn.
A new type of legal business entity will allow Minnesota corporations to operate for the benefit of society instead of just shareholders.
A public benefit corporation, or B-Corp, is allowed to use its resources to pursue a social purpose that doesn’t necessarily boost profits.
“Many companies have found that saying their values out loud has been very good for them in the marketplace,” Secretary of State Mark Ritchie said.
The new law took effect Jan. 1, and Ritchie’s office held a ceremony on Friday to register the state’s first B-Corps. He estimated about 25 companies participated.
The new corporate entity was approved during the 2014 legislative session. While it doesn’t come with any tax benefits, B-Corp status is intended to protect companies from shareholder lawsuits if they divert resources for a public purpose, said Kim Lowe, a Fredrikson & Byron attorney who helped draft the law.
“It gives a company the freedom to focus on that social purpose without being at risk of getting sued for it,” Lowe said.
For an existing corporation, a two-thirds majority of shareholders must vote to approve a transition to a B-Corp.
But the benefit of B-Corp status may be as much reputational as anything, says Sarah Duniway, an attorney with Gray Plant Moody.
“I don’t know that the risk of a shareholder lawsuit is really that great,” she said.
However, the statement a company makes in organizing as a B-Corp — both to employees and to consumers — is a strong one.
Duniway says corporations are increasingly interested in being seen as a force for good, rather than just profit machines. This idea is also attractive to many consumers.
“That movement among entrepreneurs and consumers is very real,” she said.
B-Corp status also holds the company accountable for actively pursuing the public purpose it sets out to achieve. Under the statute, Minnesota B-Corps must file annual reports outlining their efforts to achieve their public purpose. Those that fail to do so will lose their status as a public benefit corporation.
Can Can Wonderland, which is set to open in September in the former American Can building in St. Paul’s Midway neighborhood, was among the businesses that filed as B-Corps on Friday.
While Can Can Wonderland will make the bulk of its revenue from miniature golf, food and beverage sales, it will also be an arts venue, hosting poetry readings, puppet shows and other events.
“Our social purpose is to become an economic engine for the arts,” CEO Jennifer Pennington said. “The idea is to be self funded and to put money into the arts at the same time. We’d be introducing people to the arts and making them more accessible, but also providing opportunities for artists to make money.”
