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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Been in the insurance business for over 25 years and found this article very informative. Thank you!
Posted by: Jim Dinneen | July 03, 2012 at 01:52 AM
Interesting article! I wasn't aware of this new business entity but I can see how useful it could be. Do you see a lot of organizations switching over to this type from a different type or will it mainly be new businesses starting up?
Posted by: Aaron Hoos | May 14, 2012 at 10:37 PM
Thank you! Very helpful blog!
Posted by: Alex | March 05, 2012 at 02:32 AM
will definitely utilize your resources here. thanks for the insightful information regarding the corporate form being used.
Posted by: Business Insurance | February 23, 2012 at 04:23 PM
fun and really nice post i love it a lot
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