3 ms·

Can't the VCs change the charter after they get a sizable chunk of ownership?

• jrochkind1 10y ago
  If you are incorporated as a 'public benefit corporation', you can't just change the charter to no longer be so, it's part of your incorporation. But it's unclear to me if 'public benefit corporation' is actually anything more than marketting, I don't know if it really constrains your corporation in any way.
  • basseq 10y ago
    Externally, it's mainly marketing: the stated mission of a nonprofit with the equity and operating ability of a C-Corp (and the taxation that goes along with the latter). Internally, being a PBC adds "protection" of the mission in two ways: 1. Directors are protected from shareholders (e.g., VCs). Since shareholders are not primary to stakeholders in a PBC, directors can make business decisions that may not be in the "best interests" of shareholders and be protected from lawsuits. 2. Shareholders are protected from directors doing the same. Shareholders are able to demand external auditing of the mission and bring lawsuits alleging breach of the mission. There are a ton of details depending on the state of incorporation.
  • lgas 10y ago
    There's always some way to get around this kind of thing. If nothing else you could start a C corp and sell off the "profitable division" of the PBC to the C corp, etc.
  • allenz 10y ago
    To the contrary, you can generally file a certificate of amendment to change the corporation however you like, as long as you have a shareholder majority. E.g. in New York: "An existing benefit corporation may terminate its status as a benefit corporation by amending its certificate of incorporation" https://www.dos.ny.gov/corps/benefit_corporation_formation.html https://www.dos.ny.gov/corps/benefit_corporation_formation.h...