Primer on Benefit Reports
A Benefit Company is a for-profit company, provincially incorporated in British Columbia (Canada), that commits to conducting its business in a responsible and sustainable way. It must also promote one or more public benefits of the company’s choosing. Public benefits must have a positive effect for a group of people (other than shareholders), communities, organizations, or the environment.
There are a few simple (but key) differences in setting up a Benefit Company, compared to a regular provincial company, under BC law:
· the notice of articles must include a “benefit statement”;
· the articles for benefit companies must include a “benefit provision” stating that the company commits to conducting business “in a responsible and sustainable manner” and to promoting the company’s specified public benefits; and
· each year, the directors of a Benefit Company are required to produce and publish a Benefit Report on or before the company’s incorporation anniversary date
While the first two requirements above are pretty straight forward, it is the third requirement of a Benefit Report that surfaces the most questions. To answer those frequently asked questions, we’ve prepared a short summary of the key things you need to know about Benefit Reports.
The Legal Requirements
The annual Benefit Report is the primary requirement for maintaining status as a Benefit Company. There is no prescribed form or process relating to the Benefit Report. As a result, you have much freedom to create the Benefit Report in a form and style that best reflects your story, values and vision.
Ultimately, for legal compliance, you need only to:
(1) meet the requirements set out in the Business Corporations Act (British Columbia) (the “Act”);
(2) approve the Benefit Report by resolution of the Board; and
(3) publish the Benefit Report.
Let’s look at each of these in more detail:
(1) Compliance with the Act
The legal compliance requirements for a Benefit Report are quite simple and set out in section 51.994 of the Act. We recommend reviewing that - it’s short, promise!
In summary though, the Benefit Report must contain:
1. a fair and accurate description of being responsible, sustainable, and promoting the public benefits that are in the company’s articles;
2. an assessment of the performance of the company against a third-party standard that is selected by the directors;
3. a summary of the circumstances, if any, that have hindered the company in its benefit focus; and
4. the process and rationale the directors used for selecting or changing the third-party standard (more on this below).
(2) Approval by the Board
The Benefit Report must be approved by the Company’s directors, evidenced by a board resolution. Our corporate team can help you prepare that, if needed. The Benefit Report must also be signed by at least one director to confirm that board approval was obtained.
(3) Publishing
Once approved, the Benefit Report must be published, meaning that:
1. your registered and records office—will keep a copy of the report on file; and
2. the Benefit Report must be published on the company’s website (if the company has one).
Selecting a Third-Party Standard
Third-party standards are a means for defining, reporting, and assessing the overall performance of a benefit company in relation to its conducting business in a responsible and sustainable manner, and to the public benefits specified in the company’s articles.
Third-party standards are produced by third-party standard-setting bodies. The third-party standard-setting body must meet the following legal requirements:
the standard-setting body cannot be related to the benefit company, meaning it cannot be a subsidiary or controlled by the same person; and
the standard-setting body must publish the following information publicly:
o the members of its governing body;
o the selection process for membership in the governing body;
o the name of each person who controls it or its operations;
o a description of its sources of funding in sufficient detail to disclose any relationship that could compromise its independence from the benefit company; and
o a description of the process used to develop the third-party standard, and the standard’s performance criteria and relative weight.
Directors may select a third-party standard for assessing the performance of their Benefit Company based on which third-party standard best aligns with the company’s objectives.
Examples of third-party standards
B Lab’s B Impact Assessment – “a digital tool that can help measure, manage, and improve positive impact performance for environment, communities, customers, suppliers, employees, and shareholders” - this is the third-party standard we see most often used
The Global Reporting Initiative (GRI) Standards – universal and sector-specific standards that enable organizations “to understand and report on their impacts on the economy, environment and people”
The Sustainability Accounting Standards Board (SASB) Standards – 77 industry-specific standards that “identify the subset of environmental, social and governance issues most relevant to financial performance and enterprise value”
Green Seal – performance, safety and health standards for cleaning, sanitary and facilities care products and services
Note that third-party standards, certifications, or ecolabeling (e.g., B Corp certification) are private standards, and are not the same as the legal status of a BC Benefit Company.
Other Resources
If you’d like further assistance in preparing the Benefit Report, we recommend engaging a third-party consultant, such as Decade Impact.
Ink LLP provides legal counsel to high-growth companies and those that build them. Contact one of our lawyers to discuss your business and how our team might be able to help you tackle the challenges of your business and the opportunities for growth.
This information is provided for informational purposes only and is not legal advice.