Tag Archives: Benefit Corporations

Summary of Tennessee’s For-Profit Benefit Corporation Statute

By Daniel A. Horwitz

On January 1, 2016, Tennessee’s For-Profit Benefit Corporation law will take effect.  Here’s a summary of the law and what it’s going to do.

1.  What is a For-Profit Benefit Corporation?

A For-Profit Benefit Corporation is defined under Tennessee law as: “a domestic business corporation . . . that intends to pursue a public benefit or public benefits.”[1]

2.  What’s the difference between a For-Profit Benefit Corporation and a “traditional” corporation?

By law, “officers and directors of a [“traditional”] for profit corporation are to be guided by their duty to maximize long term profit for the benefit of the corporation and the shareholders.”[2]

In contrast, “[a] for-profit benefit corporation shall be managed in a manner that considers the best interests of those materially affected by the corporation’s conduct, including the pecuniary interests of shareholders, and the public benefit or public benefits identified in its charter.”[3]  Thus, by law, directors of for-profit benefit corporations are obligated to take the interests of both shareholders and the corporation’s publicly beneficial purpose into account when discharging their duties.[4]

3.  What counts as a “public benefit”?

A “public benefit” is a positive effect (or a reduction of a negative effect) on one or more people, entities, communities, or interests other than the corporation’s shareholders.  This includes, but is not limited to:  artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific, or technological benefits.[5]

4.  Does the “public benefit” have to be specified in any formal way?

Yes.  Under Tennessee law, Continue reading Summary of Tennessee’s For-Profit Benefit Corporation Statute