On November 27, 2017, legislators in Wisconsin passed a law creating a category of business corporation identified as a benefit corporation, which are for-profit corporations that exist to not only to maximize profits for shareholders, but to permit the board directors to consider other factors in running the business, such as the environment or other socially beneficial merits. The new statutes will be found in Chapter 204, and take effective February 26, 2018, Since 2010, when Maryland became the first state in the U.S. to permit the creation of “benefit corporations,” 33 other states plus Washington, D.C., have passed legislation to permit the creation of benefit corporations, making Wisconsin the 34th state to recognize this special designation.
Benefit corporations, which are not to be confused with “B Corps” (more on this later), are corporations that are still formed under Chapter 180, but specify in their articles of incorporation that they have a purpose of creating a general public benefit. If not initially formed as a benefit corporation, an existing corporation may amend its articles to become a benefit corporation. A benefit corporation may also terminate its status as a benefit corporation and cease to be subject to the provisions of chapter 204 by amending its articles to delete the provision.
There are two types of “public benefit” recognized, general and specific. Section 204.102(5) defines a “general public benefit" as “having 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.” In addition, a corporation’s articles may state that it is formed for a “specific public benefit, which, under Section 204.102(7), is defined as:
(a) Providing low-income or underserved individuals or communities with
beneficial products or services.
(b) Promoting economic opportunity for individuals or communities beyond the
creation of jobs in the normal course of business.
(c) Preserving the environment.
(d) Improving human health.
(e) Promoting the arts, sciences, or advancement of knowledge.
(f) Increasing the flow of capital to entities with a public benefit purpose.
(g) The accomplishment of any other particular benefit for society or the
Generally, traditional corporations exist for the profit of its shareholders. If its board of directors take actions to which the shareholders object, they can be removed from the board by a vote of the shareholders. In some circumstances, the shareholders can even sue a director for failing to act in the best interests of the shareholders.
The designation of “benefit corporation” is intended to shield officers and directors from personal liability, such as for monetary damages, for any action taken as an officer or director if he or she performed the duties of his or her office in compliance with this section and the provisions of chapter 180. Directors would also be protected for the failure of the benefit corporation to pursue to create general or specific public benefit, or for any act or omission in their capacity of a benefit director unless the act or omission constitutes self-dealing, willful misconduct, or a knowing violation of law. Moreover, section 204.302 makes clear that directors do not have a duty to a person that is a beneficiary of the general or specific public benefit.
Under section 204.301 of the new statute, directors must consider the effects of any action or inaction on all of the following:
The legislature also requires benefit corporations to be transparent. Section 204.401(1) requires the corporation to provide an annual report to its shareholders on the corporation’s promotion of the general or specific benefit identified in its articles, including:
(a) The objectives the board of directors has established to promote general
public benefit or any specific public benefit.
(b) The standards the board of directors has adopted to measure the corporation's progress in promoting general public benefit or any specific public benefit.
(c) Objective, factual information based on the standards under par. (b)
regarding the benefit corporation's success in meeting the objectives under par. (a)
and in promoting public benefits and interests.
(d) An assessment of the corporation's success in meeting the objectives under par. (a) and in promoting general public benefit or any specific public benefit.
The articles or bylaws of a benefit corporation may further require that the benefit corporation make the statement described in sub. (1) available to the public, or that the benefit corporation use a 3rd-party standard in connection with or attain a periodic 3rd-party certification addressing the corporation's promotion of general public benefit or any specific public benefit identified in its articles. A “3rd-party standard” is something like “B Corp” mentioned above. “Certified B Corporation™” is a certification the non-profit B Lab gives to for-profit corporations that meet its standards of social and environmental performance, accountability, and transparency. They liken it to products that are certified organic. B Lab describes its work as a global movement of people using business to support the best interests of not only the corporation but of society. As such, any corporation electing to become a benefit corporation should take care not to call itself a “B Corp” without garnering the stamp of approval from B Lab, lest it expose itself to an action for trademark infringement and a host of other likely claims.
Establishing a benefit corporation in Wisconsin is not only a way for a corporation to free its officers and directors to pursue goals without being completely wedded to the profit of the shareholders, but also provides a way for corporations to distinguish themselves from their competitors. Time will tell how many corporations take advantage of this new tool in the coming months and years.
The State of Wisconsin requires all corporations and limited liability companies to file annual reports. Each year near the anniversary of the organization of the company, the Department of Financial Institutions sends out a Notice card to the company’s Registered Agent several weeks before the deadline for filing an annual report that the report is due. The annual report confirms basic information, such as the name and address of the Registered Agent and the principle address of the business. This is also an opportunity to change the registered agent without having to pay an additional fee as you would have to any other time during the year. The report is filed online, takes about 10 minutes to complete, and requires payment of $26.
If you don’t file the annual report before the due date, the company will be deemed “delinquent” until the report(s) are filed and the filing fees (for each year, even the missed years) are paid. After two successive years not filing the annual report, the company will be on track to be administratively dissolved.
Once dissolved, your company would lose the right to the exclusive use of the company name, and may not carry on any business other than the winding up process of liquidating assets, paying creditors, and distributing the remainder to the members.
While there is a process for reinstating the company and bringing it up to date, it is more costly and time consuming than simply filing timely reports in the first place. So when that postcard comes, resist the temptation to toss it into a pile. If you want to keep your company in good standing, file the annual report, or ask your attorney to do it for you.
Wisconsin Annual Reports can be filed at: