May 2026
In recent years, a new type of business entity has emerged to accommodate entrepreneurs who wish to pursue profits while at the same time driving positive social change. These entities are typically called Public Benefit Corporations (“PBCs”). Statutes permitting PBCs have now been enacted in roughly 40 states and the District of Columbia, including Massachusetts, Delaware, New York, and California.
In Massachusetts, PBCs are referred to as Benefit Corporations (“BCs’”) and are governed by Massachusetts General Laws, chapter 156E. A corporation organized under MGL chapter 156A (professional corporations) or under chapter 156D (business corporations) can elect to be treated as a BC either at the time it is organized or by converting to a BC in the manner set forth in chapter 156E. In most respects, BCs have all the characteristics of typical for-profit corporations which focus on maximizing returns to stockholders. However, unlike pure for-profit entities, they are also permitted to consider and prioritize the environmental and social impact of actions taken by the corporation.
Under Chapter 156E, the articles of organization must clearly state that the corporation is a BC or that it has the purpose of creating a general public benefit. In practice, the corporation typically lists the specific public benefits it plans to focus on. Further, the statute expressly requires that one director be designated as the Benefit Director, whose function is to oversee the company’s public benefits goals. Notably, the Benefit Director must be independent and is not permitted to hold any other position with the company, including that of an employee. While the position of Benefit Director is mandatory, the statute permits, but does not require, the appointment of a benefit officer, who may be the same person as the Benefit Director. If a corporation is converting to a BC, its Benefit Director cannot have held any other position with the company in the past year.
Annual reports filed by a BC must include all of the usual information as well as a report which summarizes the corporation’s efforts and progress in implementing its public benefit goals. This benefit report adds an additional $75.00 to the usual filing fee for the annual report.
Some Practical Takeaways
The decision to organize as or convert to a BC should not be taken lightly. While being a BC may help make the stockholders, management, and employees feel good, the board has a fiduciary duty to balance the interests of the stockholders with the public benefit and with the interests of other constituencies affected by the company’s actions. This is not always easy to accomplish and typically increases costs. The boards of most private companies are usually comprised of stockholders and key employees who serve as directors without separate compensation. Given the independence requirements of the Benefit Director, finding a qualified person who is willing to volunteer his or her services is often difficult.
If we can provide any additional information, please contact Bill Miller at wmiller@bizlawma.com.
This memorandum is intended to provide general information of potential interest to clients and others. It does not constitute legal advice. The receipt of this memorandum by any party who is not a current client of the Business Law Group does not create an attorney-client relationship between the recipient and the firm. Under certain circumstances, this memorandum may constitute advertising under the Rules of the Massachusetts Supreme Judicial Court and the bar associations of other states.