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.

Conclusion

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions