The legislature’s Commerce Committee has taken a step toward adopting a new organizational business form in Connecticut aimed at encouraging social entrepreneurship: the benefit corporation.
Proponents of SB 23 say it could spur small business growth and bring new jobs to Connecticut. That’s because young, financially able investors have begun seeking out states that allow for the creation of social-mission-focused benefit corporations so that they can invest in them.
Already, nearly 600 such companies have been organized in 21 states across the country.
Under SB 23, organizers will be able to elect the benefit corporation as the method of incorporation for their business. The benefit corporation would receive no advantage not otherwise given other for-profit business entities (tax, legal, or otherwise).
The biggest difference between benefit corporations and other for-profit businesses is that benefit corporations would have to identify, and fulfill, a social benefit of their choosing that meets standards specified in the bill.
Most important, if the benefit corporation fails to fulfill its social mission, shareholders could go to court to force the company to fulfill that mission.
With socially-minded investors actively seeking states where benefit corporations are permissible, passage of SB 23 could make our state more attractive to such investment.
SB 23 also contains an optional "legacy preservation" provision that allows the benefit corporation to permanently preserve its social mission by stating that it cannot not be changed. While CBIA supports the majority of the bill as a way to attract new investments, we have reservations and concerns regarding this legacy preservation provision.
For more information, contact Eric George at firstname.lastname@example.org.