APPENDIX C

Quick Guide to Becoming a Delaware PBC

This outline describes the major steps required for an existing Delaware corporation to become a Delaware public benefit corporation.

1. Summary. In order to become a public benefit corporation (PBC), a traditional Delaware corporation must draft an amendment to its certificate of incorporation. The amendment must be approved by the board of directors and then by the shareholders. Once approved, the amendment must be filed with the Secretary of State of Delaware. Under certain circumstances, the corporation must provide its shareholders who do not approve the amendment with the right to cash out their stock for fair value (known as appraisal rights). Once the amendment is filed, the corporation should include a legend on its stock certificates, stating that the corporation is a PBC. A newly forming corporation may simply file its initial certificate of incorporation as a PBC.

2. Contents of Amendment. The following certificate provisions are either required or should be considered:

2.1. The heading of the certificate must state that the corporation is a public benefit corporation.

2.2. The name of the corporation may be changed to include the words “public benefit corporation,” the abbreviation “P.B.C.,” or the designation “PBC.” If the name does not include such indicators, then if the PBC is not publicly traded, the PBC must notify anyone who purchases stock that the corporation is a PBC.

2.3. The certificate must identify one or more specific public benefits to be promoted by the corporation.

2.4. Delaware gives a PBC the option of committing, in the certificate of incorporation or bylaws, to make its statement about its efforts to create public benefit either (1) available to the public (as opposed to its shareholders only); (2) annually (as opposed to biennially); or (3) in accordance with a third-party standard (as opposed to using its own methodology).

2.5. Delaware permits a PBC to include in its certificate a provision that a disinterested failure by a director to satisfy the requirements applicable to directors of a public benefit corporation will not constitute an act or omission not in good faith or a breach of the duty of loyalty. The purpose of such a provision is to protect directors and should be considered by any corporation considering an election to be a public benefit corporation. See the sample language in appendix D.

Note: The Delaware statute will permit the provisions described in 2.4 to be placed in the bylaws instead of the certificate. Placing them in the certificate of incorporation will make them more difficult to change.

3. Board approval. The board of directors must approve the amendment and recommend that the amendment be submitted to the shareholders for approval. The certificate of incorporation and bylaws should be reviewed to determine the vote required.

4. Shareholder approval. The shareholders must approve the amendment. The statute requires a two-thirds affirmative vote of the outstanding shares of the corporation. The certificate of incorporation and bylaws should be reviewed to determine whether any additional vote is required.

5. Appraisal rights. If the corporation is not publicly traded, shareholders who did not vote for an amendment are entitled to a Delaware Court of Chancery appraisal of the fair market value of the shareholders’ stock. The corporation is required to provide its shareholders with notice of their right to an appraisal. See appendix D for details regarding the process and requirements for appraisal rights in Delaware.

6. File Amendment. After the board and shareholders approve the amendment, the amendment must be prepared and filed with the secretary of state.

7. Print and issue new stock certificates. Delaware law requires that a stock certificate issued by a PBC note conspicuously that the corporation is a PBC. It is unclear whether that requirement applies to stock certificates issued before a corporation becomes a PBC. To avoid a later challenge by a person that acquires shares represented by a stock certificate without that notation, the corporation should consider printing new stock certificates with the required notation and issuing the new stock certificates to its existing shareholders.

8. Name change. If the PBC has adopted a new name, it should make the necessary changes to reflect the new name. The corporation should update, for example, bank accounts, business cards, registrations, and so forth. There is no set timing for completion of these changes; however, a corporation should aim to complete them within a commercially reasonable time following the PBC election.