This article does not constitute legal advice and information herein may have been updated by B Lab.
The Benefit Corporation legal form originated in the US where the shareholder is the legally protected primary interest. Under English company law there is, in theory, more leeway. But shareholder primacy is so philosophically and behaviourally dominant that it’s necessary to create a stated provision for companies to consider the wide variety of stakeholders impacted by a business.
So, the legal change required to become a B Corp shifts the focus from the shareholder to stakeholder.
The legal change involves an amendment to a company’s Articles of Association. It uses Companies Act Article 172 as the legal basis to ensure a B Corp enshrines a commitment to:
- creating a material positive impact on society and the environment through its business and operations
- not putting shareholder interests above other stakeholder interests, including employees, suppliers, society and the environment
It does not create additional liability for Directors, but it does give additional rights to shareholders to hold Directors accountable for taking these various stakeholder interests under consideration. So, under the change, Directors become responsible for evidencing these considerations.
For more information on the legal process, see B Corporation: Legal Pathway.
For more information on the Legal Test itself, see The Legal Requirement for a B Corp in the UK - An Explanation