On October 9, 2011, California Governor Jerry Brown signed into law competing bills that create two new corporate forms in California — a “flexible purpose corporation” and a “benefit corporation” — intended to allow entrepreneurs and investors the choice of organizing companies that can pursue both economic and social objectives. The new corporate forms differ from traditional for-profit corporations that are organized to pursue profit (and not social purposes) and non-profit corporations that must be used solely to promote social benefits. These laws will take effect on January 1, 2012.
The flexible purpose corporation is created by California Senate Bill 201 (“SB 201”), which adds Division 1.5 to Title 1 of the California Corporations Code (the “Code”) and amends other related sections of the Code, and the benefit corporation is created by California Assembly Bill 361 (“AB 361”), which adds Part 13 to Division 3 of Title 1 of the Code. State Senator Mark DeSaulnier authored SB 201, and a full copy is available here. AB 361 was authored by Assemblyman Jared Huffman, and a full copy is available here. Both new laws take effect January 1, 2012.