On August 1, 2013, the Delaware legislature effected amendments to the Delaware General Corporation Law allowing corporations to elect to be formed as, or convert to, a public benefit corporation (PBC) (Subchapter XV of Chapter 1, Title 8 of the Delaware Code). We previously summarized Delaware’s PBC statute here. Since then, have businesses taken advantage of the PBC statute? And have other jurisdictions followed Delaware’s lead?
Since the amendments became effective, nearly 90 Delaware corporations have incorporated as, or have converted to, PBCs. In the first three months, after the law was enacted, 55 Delaware PBCs were created: 39 newly formed and 16 converted from existing entities (see Plerhoples, Alicia E.Delaware Public Benefit Corporations 90 Days Out: Who's Opting In? 14 U.C. DAVIS BUS. J. L. 2 (forthcoming June 2014)). That breaks down into approximately 70 percent newly formed PBCs versus 30 percent converted PBCs. This is a very small percentage of the more than 130,000 businesses formed or incorporated in Delaware in a typical year, but is more than any other PBC jurisdiction except California, where similar legislation was adopted over a year earlier. It has been estimated that, in total, approximately 350 PBCs (including similar forms) have been incorporated in the United States.
Trends indicate that PBCs will become more common. Additional jurisdictions are following suit; Delaware was the 19th U.S. jurisdiction with effective legislation permitting PBCs, and since then similar legislations have become effective in eight more states (in some states, PBCs are called “B corporations” or “social purpose corporations”). In New Hampshire, the legislation is awaiting the Governor’s signature, which will bring the total number of U.S. jurisdictions with some form of PBC classification to 27.
It remains an open question whether PBCs will become a viable entity form for a significant number of businesses incorporating in Delaware. But with Delaware as the recognized leader in American corporate law, the development of the Delaware amendments is likely to influence the rest of the country.