Kentucky just became the thirty-second state to pass legislation that permits companies to operate as benefit corporations. Unlike most states, Kentucky’s new law follows the “Delaware model” for benefit corporations. (You can read more about the Delaware model here.)
Although Kentucky followed Delaware’s lead, there are notable differences between the two laws. For example, Kentucky’s law says that ninety percent of shareholders must approve before an existing company can become a benefit corporation. Delaware’s original law required a similarly high threshold, but Delaware amended its law in 2015 to require the approval of only two-thirds of shareholders. (Note that if a Kentucky benefit corporation elects to drop its status as a benefit corporation, the law only requires two-thirds of shareholders to approve.)
Interestingly, Kentucky’s law provides appraisal rights for shareholders when a company becomes a benefit corporation, and also provides appraisal rights when a benefit corporation changes the public benefit that is set forth in the company’s articles of incorporation.
Finally, Kentucky’s law requires annual shareholder reports (rather than biennial reports, as in Delaware) regarding the company’s efforts to benefit the public.
With roughly 5000 benefit corporations having sprung up nationwide—including some large, wealthy companies—it’s unlikely that Kentucky will be the last state to pass benefit corporation legislation.