Representative Pete Lee and Senator John Kefalas are sponsoring a bill – HB 13-1138 - to create a new type of legal entity in Colorado – a Public Benefit Corporation.
In an effort to attract ‘impact investors’ to invest in new Colorado businesses that prioritize social missions over earning profits, it is proposed to legislate a new entity that will be a hybrid of a for profit corporation and a nonprofit corporation. The entity will still work to earn a profit, but the fiduciary obligation of the officers and directors to ‘optimize’ profits will be removed. This will allow the new entity to pursue the achievement of social missions without concern for shareholder claims.
In 2011, over $4.5 billion dollars was invested by social funds and institutions into more than 2,200 social enterprises according to a study by the Global Impact Investing Network and J.P. Morgan. The idea of social investing - combining a for profit business model with philanthropy - has been the topic of annual conferences since 2008 in San Francisco held by Social Capital Markets (SOCAP).
The bill allows a corporation to use the words ‘public benefit’ in its name if it has a “material positive impact” on any of the following:
• Providing low-income or underserved individuals or communities with beneficial products or services;
• Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
• Protecting or restoring the environment;
• Improving human health;
• Promoting the arts, sciences, or advance of knowledge;
• Increasing the flow of capital to entities that have a purpose of benefitting society or the environment; and
• Conferring any other material benefit on society or the environment.
The bill has passed House Committee on Business, Labor, Economic, & Workforce Development and now goes to the Senate.
Representative Lee can be reached at: pete.lee.house@state.co.us
Senator Kefalas can be reached at: john.kefalas.senate@state.co.us
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