What is a Public Benefit Corporation (“PBC”)?

Public Benefit Corporations (“PBCs") are a newer Delaware entity that blend the profit-driven structure of a C-Corp with some of the public benefit aspects of a non-profit. 

Governance and taxation. Corporate governance and taxation of PBCs are generally the same as that of C-Corps, but corporate actions are not limited to those that maximize economic shareholder value (as is the case with C-Corps). Instead, a PBC is able to expend resources on one or more specific public benefits that may be unrelated to increasing stockholder value.

Special requirements. To maintain PBC status, a Delaware corporation must adopt a specific public benefit purpose in its Certificate of Incorporation and adhere to statutory requirements, including a biennial report outlining the PBC’s public benefit efforts. Existing C-Corps can generally convert to PBCs and vice versa easily with the requisite Board and Stockholder approvals.

Not always a good fit for Venture Capital. While PBCs can usually accept venture capital and an increasing number of investors are seeking out PBCs, not all VCs are open to the structure. Before forming or converting to a PBC, founders should carefully consider the attitudes towards PBCs in their industry, current stockholder sentiments and the effect (whether positive or negative) that PBC status could have on future fundraising efforts.

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