California Governor Jerry Brown signed 2 bills that create new legal structures for social entrepreneurs, at the eleventh hour on Sunday, October 9th, 2011.With a few days for the blogosphere and twitterverse to react and inform, here’s a list of blog posts and resources about the new social innovation legislation.(Note: feel free to add on […]

With the midnight passage of AB 361 (benefit corporations) and SB 201 (flexible purpose corporations) you can imagine that the social media is abuzz with the news.(Learn more about the passage of AB 361 and SB 201, and learn about the key points of both the bills)Here’s what we’ve heard

“Entrepreneurs, investors and consumers are calling for this type of legislation,” said Assemblymember Huffman. “They believe this is the start of something transformational. AB 361 rolls out the welcome mat for businesses and investors ready to create high quality jobs in California and make economic and social contributions that will improve the quality of life in communities across to our state for years to come,” said Assemblymember Jared Huffman (sponsor of AB 361)

Twitter Bird logo
JaredHuffman Jared Huffman
Just before midnight @JerryBrownGov signed my benefit corporation bill AB 361! CA now on cutting edge of corporate social responsibility!marc_thibault Marc Thibault
Gov Brown signs into law #BenefitCorp Legislation #AB361. Thx@Jared Huffman, @ASBCouncil, @BCorporation 4ur leadership.
rtjohnson R. Todd Johnson
#CA becomes the first State to offer #socent a choice. Brown signs Flexible Purpose and Benefit Corporation
GTak Gene Takagi
California becomes leader in innovation in corporate forms for social entrepreneurs… – great move, Governor!
OmidyarNetwork Omidyar Network
Great news! @JerryBrownGov signed Flexible Purpose Corp & #BenefitCorp #Legislation into law! #BCorp #socent #impinv
GreenBizConsult Carolina Miranda
California passes #bcorp and green business legislation! William James Fnd
Go MoonBeam! Gov. Jerry Brown signs AB 361, for CA Benefit Corps. Moving forward……
vgiveadamn Give a Damn
Social Innovation Bills in CA signed by Governor Jerry Brown! #socent #CA #vgiveadamnTheHubLA The HUB LA
Social Innovation Bills in CA signed by Governor Jerry Brown! #socent #CAArthurSmid Arthur Smid
California at forefront of progressive legislation: Bill AB 361 – Benefit corporations. Brown signed B corps into law…

Innov8Social Neetal Parekh
@JerryBrownGov signed Into CA Law: AB 361 (#BCorps) & SB 201 (Flexible Purpose Corps) @BCorporation #socent #socentlaw

Mixtape_Media MixtapeMedia
Yeah, Cali! RT @TheHubLA Social Innovation Bills in CA signed by Governor Jerry Brown! #socent #CA

InVentureFund InVenture Fund
#California recognizes #bcorps! @bcorporation

echoinggreen Echoing Green
.@JerryBrownGov signs Flexible Purpose Corp & #BCorps into law in #California! Great news for #socialinnovation! #socent

ABLImpact Antony Bugg-Levine
Huge achievement for @BCorporation: @JerryBrownGov signed #BenefitCorp #Legislation into law! #BCorp #socent #impinv

ZambranoESQ Daniel S. Zambrano
Good news for #socialentreprenuers in #CA: “@BCorporation:@JerryBrownGov signed #BenefitCorp #Legislation! #BCorp

shawnlandres Shawn Landres
Great news: @JerryBrownGov has signed Flexible Purpose Corps & #BCorps into law! @BCorporation #socent #impinv #socentlaw

CultivatingCap Cultivating Capital
Great news: Governor Brown signed Benefit Corporation and Green Business legislation!

CauseWire Mickie Kennedy
California Benefit Corporation and Flexible Purpose Corporation: California Governor Jerry Brown anno… #nonprofit

greenchamber Green Chamber
California Passes Benefit Corporation and Green Business via@CultivatingCap

EucalyptusMag Eucalyptus Magazine
New legislation in CA.

lornali Lorna Li Social SEO
RT @TheHubLA – Social Innovation Bills in CA signed by Governor Jerry Brown! _#socent_ #CA

BCorporation B Corporation
Great news: @JerryBrownGov has signed #BenefitCorp #Legislation into law! #BCorp #CA #news#socent #impinv #socentlaw

California Capitol Building ceilingIn reviewing the last batch of the nearly 600 bills that he had to process, California Governor Jerry Brown signed into law both social innovation bills—just in time for the midnight deadline on October 10th, 2011.Both AB 361 (benefit corporations) and SB 201 (flexible purpose corporations) which create new legal structures for social enterprise are now officially California law.You can read the key points of each bill here.Read the official legislative update from the Governor’s office here.

California is #6

The passage of the benefit corporation legislation makes California the 6th state to recognize a new form of corporation that is for-profit and committed to creating a positive impact on society and the environment. California joins Maryland, Vermont, Hawaii, Virginia, and New Jersey in the benefit corporation club.

A Look Back

If you have been following the benefit corporation legislation movement on the B Corporation public policy page, here on Innov8Social, or on any number of sites following the developments, you may have been awaiting the midnight decision.

You can catch up on the progress of AB 361 in California:

A Look Ahead
Non-urgent bills such AB 361 and SB 201 signed into law will become effective January 1st, 2012. Until then, social entrepreneurs interested in becoming among the first benefit corporations in California, can use the time to decide which legal structure is the best fit, and become prepared to meet the various requirements.
Attorney Donald Simon shares some tips on how a company can get ready for benefit corporation certification or re-certification as a benefit corporation in these two videos:

Attorney Donald Simon Defines 3 Terms Related to AB 361 (Benefit Corporations) [VIDEO]

Attorney Donald Simon’s Q & A on California Benefit Corporation Legislation [VIDEO]


If you have even skimmed the contents of this blog you likely know about AB 361, the California legislation that would create a new corporate form for social enterprise called a benefit corporation.

California map iconYou may not have heard of SB 201, however. It is a different bill that also proposes a new corporate form for social enterprise in California, called a flexible purpose corporation.
Note: it is great coincidence that there are 2 social enterprise bills heading to the Governor’s desk at the same time. Additionally, they are not mutually exclusive—i.e. both bills can be passed into law. In fact, arguably, the fact that there are 2 different social enterprise bills seem do twice as much to suggest that the time is ripe for legislation recognizing social enterprise in California.
Key Features of AB 361 (Benefit Corporations)
Read the full text of AB 361 here. Summaries of key features are numbered in bold, while text exactly or very closely mirroring the actual language of AB 361 is in italics.
1. Creates Benefit Corporations (benefit corps). This bill would authorize and regulate the formation and governance of a new form of corporate entity known as a benefit corporation. 
2. Existing corporations can become benefit corps with 2/3 shareholder vote. The bill would also permit an existing corporation to become a benefit corporation by amendment to its articles of
incorporation, as specified, adopted by at least a minimum status vote (2/3 of vote or greater if required by articles of incorporation) and would permit a corporation to become a benefit corporation through a merger, reorganization, or conversion, or domestic other business entity, as specified.
3. Benefit corps must create material positive impact on society and the environment, as determined by an independent 3rd-party standard.  The bill would provide that a benefit corporation may be formed for the purpose of creating general public benefit, defined as a material positive impact on society and the environment, taken as a whole, as assessed against a 3rd-party standard. 
       Third-party standard is a comprehensive assessment of the impact of the business developed by an entity that has no material financial relationship with the benefit corporation or any of its subsidiaries and  where: A) not more than 1/3 of members of the governing body of the entity are representatives of associations of businesses in a specific industry, businesses whose performance is assessed against the standard; and B) the entity is not materially financed by an association of business described in (A).     
       Additionally, the third-party standard must be developed by an entity  that accesses necessary and appropriate expertise to assess overall corporate social and environmental performance; and uses balanced multistakeholder approach, including a public comment period of at least 30 days to develop the standard. The following information on the 3rd party standard must be made publicly available: criteria considered when measuring the overall social and environmental performance.
4. Benefit corps may be formed to create a general public benefit and can also identify additional specific public benefit(s). The bill would also provide that a benefit corporation may identify one or
more specific public benefits as an additional purpose of the corporation. Examples of specific public benefit include: providing low-income/underserved individuals or communities with beneficial products/services, providing economic opportunity beyond creation of jobs, preserving the environment, improving human health, promoting arts, science, or advancement of knowledge, increasing capital to entities with a public benefit purpose, or another particular benefit to society or the environment.
5. Board members must consider multiple stakeholders (including shareholders, beneficiaries of the public benefit, the environment) when making business decisions. This bill would require directors to consider the impacts of any action or proposed action upon specified considerations, including, among others, the shareholders and employees, and of customers who are beneficiaries of the general or specific public benefit purposes, and the environment, and would allow directors to consider the impacts of those actions on, among other things, the resources, intent, and conduct of any person seeking to acquire control of the benefit corporation.
6. Certain reporting accounting and transparency formalities must be met. This bill would require the board of directors to prepare a specified statement relating to the public benefit purposes of the corporation.  The bill would require the benefit corporation to prepare an annual benefit report.
7. Duties of director/officer with regard to public benefit may only be enforced in a benefit enforcement proceeding. This bill would include provisions governing the fiduciary duty
and liability of an officer or director of a benefit corporation. The bill would provide that the duties of a director or officer, and the general, and any specific, public benefit purpose of a benefit corporation, may be enforced only in a benefit enforcement proceeding, as defined, that would be permitted to be commenced or maintained only as specified.
Additional Features:

8. Is part of a nation-wide effort to create benefit corporations in various states. As of writing this 6 states have passed benefit corporation legislation.
9. There is an option for a voluntary certification. B corporation is a voluntary certification which calls for many of the same features as a benefit corporation. A company can choose to be both/either a B corporation and a benefit corporation (if their state has passed legislation)
Key Features of SB 201 (Flexible Purpose Corporations)
Read the full text of SB 201 here. Summaries of key features are numbered in bold, while text exactly or very closely mirroring the actual language of AB 361 is in italics.
1. Creates Flexible Purpose Corporations (flexible purpose corps). This bill would enact the Corporate Flexibility Act of 2011 and would authorize and regulate the formation and operation of a new form of corporate entity known as a flexible purpose corporation.
2. Existing corps can become flexible purpose corps with 2/3 vote of shareholders. The bill would authorize existing corporations and other forms of business entities to merge into or convert into a  flexible purpose corporation upon completion of specified requirements, including approval of the transaction by a supermajority 2⁄3 vote of shareholders, or a greater vote if required in the articles, as specified.
3. Flexible purpose corps can convert to corp, non-profit, etc. The bill would also authorize a flexible purpose corporation to convert into a nonprofit corporation, a corporation, or a domestic other business entity, upon satisfaction of equivalent conditions.
4. Can provide dissenters’ rights of appraisal for shareholders. The bill would also provide dissenters’ rights of appraisal for shareholders voting against certain transactions, as specified.
5. Must list special purpose and complete corporate formalities. The bill would specify the required and permitted contents of articles of incorporation that a flexible purpose corporation would be required to  file with the Secretary of State, including the special purposes, in addition to any other lawful purpose, that the corporation shall engage in, which may include, but are not limited to, charitable and public purpose activities that could be carried out by a nonprofit public benefit corporation.
6. Requires managers/directors to specify objectives for assessing achievement of special purpose. Certain formalities related to accounting and transparency must be met. The bill would also require management and directors to specify objectives for measuring the impact of the flexible purpose corporation’s efforts relating to its special purpose, and to include an analysis of those efforts in annual reports, together with specified financial statements, to shareholders and would require specified information to be made publicly available, as specified.