South Carolina is a Benefit Corporation State: What, You Didn’t Know?, 0513 SCBJ, SC Lawyer, May 2013, #3

Author:Lukas R. Gleissner
 
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South Carolina is a Benefit Corporation State: What, You Didn’t Know?

Vol. 24 Issue 6 Pg. 22

South Carolina BAR Journal

May 2013

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0 Lukas R. Gleissner

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Introduction

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0In a July 2008 Time Magazine article discussing the importance of business and capitalism, Bill Gates stated, “We need a more creative capitalism: an attempt to stretch the reach of market forces so that more companies can benefit from doing work that makes more people better off.”1 The 2006 Nobel Peace Prize Laureate Muhammad Yunus in an article for Forbes Magazine similarly found that, “Social business is a complement to traditional profit-maximizing business. Social business takes into account the multidimensional nature of human beings and uses business principles to achieve one or more social goals.”2 Further, Thomas Friedman, New York Time columnist and Pulitzer Prize winning author, is quoted as saying: “If we’ve learned anything from September 11, it is that if you don’t visit a bad neighborhood, it will visit you, ” while arguing that the need for a sustainable economy is a national security imperative.3 It would appear the business community is trying to stress a need to fundamentally change the structure of capitalism in order to better use business to meet human needs. One of the states on the forefront of this movement is South Carolina.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0While not greatly publicized, South Carolina has slowly become one of the best states for doing business. Area Development Magazine's editors, in their annual survey of a select group of highly respected location consultants, named their top-five state choices in 14 site selection categories. South Carolina was determined to be the number two state for doing business.4 The Palmetto State brought in a total investment of $3.37 billion from new and expanding businesses in 2011.5 Driving much of the expansion was manufacturing, with total exports up by 21 percent in 2012.6 These were just some of the reasons South Carolina was ranked second by the consultants among the Top States for Doing Business, up from fourth place in 2011. IBM's Global Location Trends study for 2012, similarly, listed South Carolina as the number one state in job creation by foreign companies.7

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Not resting on its laurels, South Carolina has continued to push the business environment to succeed and better meet the current demands. In June 2012, the South Carolina legislature passed a bill that added the State of South Carolina to a list of only 12 states that allow for benefit corporations. What are benefit corporations? Well, first some background.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The definition of a benefit corporation lies in its goal

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Very early in a law student’s class on corporations, they learn that while not technically trustees, directors stand in a fiduciary relationship to the corporation and its shareholders. They learn that the goal of every corporation is to maximize shareholder value and, because of this goal, those acting as directors of the corporation must also share this goal. In many ways, this offers a great deal of stability to the corporate form and, in turn, the capital market in which it operates. No matter what the decision is, the director must make that decision based upon what will bring the shareholders the most money.8 Many business owners, however, do not share the s ingular goal of making money for the shareholders. What are the options for such a business owner? There are some protections in an LLC, some flexibility in a 501(c) non-profit organization, and some investment opportunities with a partnership. As an attorney, there are limited options for a client that has goals outside of making the shareholders money. How can a business create goals that are distinct from the profit to shareholders? This is where benefit corporations come into play.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Under the recently enacted South Carolina Benefit Corporation Act, S.C. Code Ann. Section 33-38-110 et seq. (1976 Supp. 2012), “a corporation shall have as one of its corporate purposes the creation of a general public benefit, ” meaning “a material positive impact on society and the environment taken as a whole …”9...

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