Canada: B.C. Benefit Corporation Update

Last Updated: May 31 2019
Article by Sarah Fitzpatrick

We previously reported on how British Columbia may become the first jurisdiction in Canada to permit benefit corporations. A private member's bill (Bill M 216) on benefit corporations was introduced in the 2018 Legislative Session and passed second reading, which is rare for a private member's bill. Dr. Andrew Weaver, the MLA who introduced the bill, decided to do further consultation and the bill died when the Legislative Assembly was prorogued in January. In the current session, Dr. Weaver introduced Bill M 209, Business Corporations Amendment Act (No. 2), 2019, which contains some amendments to the previous bill. Bill M 209 received royal assent on May 16, and the majority of its provisions will come into force by regulation of the Lieutenant Governor in Council.

What is a benefit corporation?

Benefit corporations are a type of U.S. corporation that is gaining traction internationally. In the U.S., shareholder primacy is generally the model for corporate governance. This means that directors exercise their fiduciary duties by acting in the best interests of the shareholders. U.S. jurisprudence has prohibited directors from taking into account the interests of stakeholders, putting a priority on maximizing profit shareholder benefit.

The benefit corporation is a response to shareholder primacy. It is a type of for-profit corporation with a mandate to conduct business for the purpose of creating a general public benefit. Directors may take into account public benefits and act in the best interests of those public benefits, without breaching their fiduciary duties.

Bill M 209

Bill M 209 proposes to amend the British Columbia Business Corporations Act ("BCBCA") by introducing "benefit companies." It is an opt-in model. Any B.C. company may become a benefit company by, on a special resolution of the shareholders, changing its notice of articles and its articles. The notice of articles must include the following benefit statement:

This company is a benefit company and, as such, is committed to conducting its business in a responsible and sustainable manner and promoting one or more public benefits.

The articles must also contain a provision setting out a commitment to conduct business in a a responsible and sustainable manner and to promote specific public benefits. A public benefit is "a positive effect, including of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature." A positive effect must be for the benefit of either a class of persons (excluding the company's shareholders), communities or organizations, or the environment. Responsible and sustainable manner is a manner of conducting business that takes into account the well-being of persons affected by the company's operations and endeavours to use a fair and proportionate share of available environmental, social and economic resources and capacities.

A company may cease to be a benefit company by removing the benefit statement from its notice of articles on authorization of a special resolution of the shareholders. A special resolution to include or remove the benefit statement in the notice of articles will trigger the shareholder dissent rights under the BCBCA. Otherwise, there are no consequences for becoming or ceasing to be a benefit company.

In the previous bill, a benefit company would have been required to include the words "Benefit Company" or "B.Co." as part of its name. As currently proposed, Bill M 209 does not require a company to change its name when it becomes a benefit company.

On an annual basis, a benefit company must publish a publicly accessible benefit report on how it conducted its business in a responsible and sustainable manner and promoted its public benefits. The report must also include an assessment of these commitments using a third-party standard.

Directors and officers of a benefit company will be required to act honestly and in good faith with a view to conducting business in a responsible and sustainable manner and promoting the company's public benefits. Directors and officers will be required to balance these duties with their duty under s. 142(1)(a) of the BCBCA to act honestly and in good faith with a view to the best interests of the company. A director or officer will not contravene their duty under s. 142(1)(a) only by reason of acting in accordance with their public benefit duty. The only persons who have the ability to bring a legal proceeding in relation to the public benefit duty are the shareholders who hold, in aggregate, at least 2% of the issued shares of the company or, in the case of a public company, at least the lesser of 2% of the issued shares of the company and issued shares of the company with a fair market value of at least $2,000,000. No monetary damages can be ordered by a court against a director or officer for breaching the public benefit duty.


Unlike the U.S., Canada does not have a shareholder primacy model of corporate governance. The seminal cases on directors' duties, Peoples Department Stores Inc. (Trustee of) v. Wise, 2004 SCC 68, and BCE Inc. v.1976 Debentureholders, 2008 SCC 69, set out that directors owe their fiduciary duties to the company. They do not owe their duties to shareholders or other stakeholders. Although they may be obligated in certain situations to take into account stakeholder interests, if there is a conflict between those interests and those of the company, then they must act in the best interest of the company.

The legal community has been debating whether benefit corporations have a role to play in Canada. Directors of Canadian companies can take into account interests of stakeholders. As such, is there a role for benefit corporations in Canada? On the other hand, Canadian jurisprudence is not clear on whether directors can prioritize a public benefit over the traditional interests of the company. In fact, if there is a conflict, the directors have the duty to act in the best interests of the corporation. A benefit corporation can give clear direction to directors on which stakeholder interests or purposes they can and should prioritize when carrying out their responsibilities.

Benefit corporations are also an alternative to the B.C. community contribution companies (C3s) and Nova Scotia community interest companies (CICs). The C3s and the CICs have not been very successful because they are subject to a number of restrictions (on dividends, asset-lock on dissolution, and conversion to another form of company). The proposed B.C. benefit company will not be subject to such restrictions and may be a more popular vehicle for for-profit social enterprises.

We will keep our readers updated on the progress of benefit corporations in B.C. and in the rest of Canada. If you have questions about setting up a benefit corporation in Canada, our Social Impact lawyers would be happy to assist.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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