B Corp – Enshrining the social objective and special administrative duty in the articles of association
21 - 09 - 2020 • Sjoerd van der Velden
B Corps (Benefit Corporations) are companies with a for-profit motive. However, it is not the interests of shareholders that are prioritised; these companies have an explicit focus on the interests of all stakeholders. There are now more than 3,500 B Corps in 75 countries around the world. This includes both small companies and listed companies. In the Netherlands, B Corps can be a private limited company (BV), public limited company (NV) or cooperative association. The listed food group Wessanen is a prime example of one of the most recently certified Dutch companies. The aim of B Corps is to make a positive environmental and social impact.
The aim of B Corps is to make a positive impact
B Impact assessment
For a company to become a B Corp, it must first pass an extensive assessment, the so-called B Impact Assessment (BIA) as developed by B Lab (the originally American certification body). The BIA assesses various sub-areas, such as governance, employees, customers, environment, and communities the company is active in (local, national and global). This is then repeated every three years.
The BIA assesses various sub-areas
The BIA requires substantiation by various documents, written explanations, mission statements, etc. Points are conditionally awarded based on those documents. On a scale from 0-200, certification requires a minimum of 80 points. B Lab then verifies and validates everything, including a phone call to review the documents supplied and the answers to the questions, after which the final assessment takes place.
Amendment of the articles of association
A B Corp is also obligated to amend the articles of association. The first step is to lay down the company’s social objective in the articles of association. The articles of association must also define the administrative duties of the board to include observance of this social objective at all times in its decision-making.
A B Corp is obligated to amend the articles of association
Under the so-called B Agreement, the B Corp undertakes to enshrine the impact of its actions on all stakeholders in its articles of association within ninety days of signing the agreement. The articles of association must stipulate that it is ‘one of the company’s objectives to have a significant positive impact on society and the environment in general through its business operations and activities.’ The objective of the company may be further specified in the articles of association.
The articles of association should further stipulate that the board members must ‘also take into account the social, economic, legal or other consequences of the Company’s business operations with respect to (i) the employees, the subsidiaries and suppliers, (ii) the interests of the customers of the Company and its subsidiaries, (iii) the communities and society in which the Company, its subsidiaries and suppliers conduct their business, (iv) the local and global environment and (v) the short- and long-term interests of the enterprise.’
Legal significance: indicative in decision-making, defining open standards and inquiry procedure Enterprise Chamber
This has legal significance. These statutory provisions are relevant in matters of liability and provide an interpretation of open standards such as those of reasonableness and fairness (Article 2:8 of the Dutch Civil Code). Moreover, the Enterprise Chamber of the Amsterdam Court of Appeal may take these statutory provisions into account in an inquiry procedure.
It is less conceivable that third parties can successfully hold the company or its directors liable for acts that do not relate to provisions in the articles of association. These third parties are not among those involved in the organisation of the company by law or the articles of association. They are not (legal) persons with rights or obligations under the law or the articles of association who can be directly influenced through actions within the sphere of the legal entity.
This does not alter the fact that a B Corp certification leads to increased media interest and that the company may be held accountable (non-legally) quicker than other companies should there be a lack of corporate responsibility.
Irrevocable articles of association
The articles of association of a BV can be amended at any time. This can be done even if the same articles of association stipulate that this is not possible, provided that a unanimous shareholders’ resolution is passed. There are, however, various ways of preventing this from happening. For example, a special purpose foundation can be issued a priority share, which gives it special control over amendments to the articles of association.
A special purpose foundation with a priority share
With that share, the foundation alone has the power to decide whether or not to amend the BV’s articles of association. If so desired, the articles of association of that foundation could also include a provision to the effect that the objective and management duties of the board of the BV may not be altered.
Alternatively, the BV may voluntarily commit itself to explicit accountability in the annual accounts regarding the impact on human, social and natural capital. A voluntary ‘dividend cap’ and/or ‘blocked assets’ can also be considered. This means not all of the profit will be disbursed to shareholders, as would be the case with a sale, for example, where perhaps half of the proceeds are disbursed to the shareholders. The remainder should then be invested in the company’s social objective.
If you have any questions, please feel free to get in touch with us.
BVDV is B Corp certified and supports social entrepreneurs and Social Impact Factory Utrecht, the physical hotspot for social entrepreneurship.