There is a new corporate form gaining acceptance, and insurance agents & brokers should be aware of this, particularly when applying for directors & officers (D&O) liability insurance. Wikipedia provides a definition (see here, here, here & here):
A benefit corporation is a class of corporation required by law to create general benefit for society as well as for shareholders.
This new form of corporate entity is called a variety of names, including for-benefit corporation, benefit corporations and B corp. These entities are not to be confused with public benefit corporations, which are quasi-governmental entities.
The purpose of for benefit corporation law is to protect directors and officers from shareholder suits alleging any deviation from maximizing shareholder profits. This provides management with leeway to run a benefit corporation for the benefit of parties in addition to shareholders and for the benefit of the environment.
A number of states have passed benefit corporation legislation. According to the website B Corporation, 7 states have passed the enabling legislation. Maryland was the first, in 2010, and most recently California passed enabling legislation. There is also an organization called B Lab which certifies benefit corporations, and claims 450 certified entities to date.
It is unlikely that all professional liability underwriters will be up to speed on this new corporate form, and some education may be necessary when a for benefit corporation is requesting D&O and other liability insurances. (See here and here for additional information.)
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