Benefit Corporation

There is time until December 31st for the establishment of / "transformation into" benefit company benefiting from the tax credit of 50% of the costs.

Article 38-ter of the Relaunch Decree entitled "Promotion of the Benefit Company ecosystem" recognizes a tax credit to the extent of 50% of the costs of incorporation or transformation into a benefit company incurred from the date the law enters into force until 31 December 2020. The credit can be used in compensation with F24 and, according to the Reading Notes of the Decree, it seems that it can be used in compensation as early as 2020.

But what are Benefit Companies and why should a company aspire to this "qualification"?

The law of 28 December 2015, n. 208 introduced the Benefit Company in Italy, which is not a corporate type in its own right but a company, attributable to the traditional categories, which pursues, in addition to the purpose of profit, a purpose of common benefit, operating in a responsible, sustainable and transparent way towards workers, customers, suppliers, lenders, creditors, public administration and civil society. It is therefore a model that tends to promote activities with a social background, increasing the positive social effects on people and the environment.

It differs from the certified B-Corp: B-Corp is the qualification obtained by a company following a certification issued by a third party (B-Lab). A B-Corp (also called Certified B Corporation) is, in fact, a company that has voluntarily submitted to the B-Impact assessment promoted by the B-Lab and, having obtained the certification, can use the relative trademark.

The status of SB does not involve tax breaks. However, it is reasonable to hypothesize that it can attract talent and capital, given that both the new generations and institutional investors are increasingly interested in those companies whose business produces a positive social and environmental impact and which offer serious legal protection, accountability and transparency in pursuing its mission.

From a technical point of view, the following regulatory peculiarities must be respected, which must also result from the statute.

Name

It is possible (therefore not mandatory although appropriate) to introduce, next to the company name, the words «Benefit company» or the abbreviation «SB» and use this name in the documentation and in communications to third parties.

Corporate purpose

The structure of the corporate object must be divided into two parts:

• the first closely linked to the profit nature of the company
• the second which identifies the social needs to be protected: the so-called common benefit.

Technically, pursuant to paragraph 378 of art. 1 of Law 208/2015, the common benefit can be identified in the "pursuit - in the exercise of the economic activity of the benefit companies - of one or more positive effects, or the reduction of the negative effects, on one or more categories referred to in paragraph 376". These categories can be identified as "people, communities, territories and the environment, cultural and social assets and activities, entities and associations and other stakeholders" to be understood as workers, customers, suppliers, lenders, creditors, public administration and civil society, i.e. any subject, individually considered or included in the community, who is directly or indirectly involved in the activity carried out by the benefit company. The explanatory report of the bill points out in this regard that the Benefit Companies " of their economic activity also have the objective of improving the natural and social environment in which they operate, reducing or eliminating negative externalities or better using practices, production processes and assets capable of producing positive externalities and which intend to allocate a part of their management and economic resources to the pursuit of growth in the well-being of people and communities, to the conservation and recovery of assets of the artistic and archaeological heritage present in the place where they operate or on the national territory, to the dissemination and support of cultural and social activities, as well as bodies and associations with purposes aimed at the community and social welfare". For example, the use of renewable energy sources or “km. 0”, as well as the policies adopted to support the families of employees (e.g. company welfare, work-life balance, company nursery schools). The above, however, does not preclude the possibility that the company may also pursue objectives of a more general nature in support of the local community (e.g. cultural, social, environmental initiatives).

The management of the Benefit Company

The Benefit Company is managed according to the rules of the type of company adopted, appropriately declined according to the provisions of paragraph 380 of law no. 208/2015. In particular, the law requires the appointment of one or more «responsible subjects to whom to entrust functions and tasks aimed at pursuing the purposes of common benefit». The task of proceeding with the appointment of the c.d. "benefit director" belongs to the administrative body. Being a figure of aid and functional control of management, he does not necessarily have to hold the position of director. It seems necessary to specify, however, that the presence of the manager does not exonerate the administrative body and the control body from the scrupulous fulfillment of their functions.

Annual report and evaluation of the generated impact

The administrative body must prepare an annual report concerning the activity carried out by the company, drawn up according to precise procedures, attached to the financial statements and published on the company's website. This relationship constitutes one of the few obligations that are added to the traditional ones to be borne by the directors following the inclusion of the company in the context of benefit companies and has the main purpose of strengthening the transparency of the company's work.

The annual report includes:

a) the description of the specific objectives, methods and actions implemented by the directors;

b) the description of the objectives that the company intends to pursue in the following financial year;

c) the assessment of the impact generated which must include the following areas of analysis:

1. Corporate governance, to evaluate the degree of transparency and responsibility of the company in pursuing the purposes of common benefit, with particular attention to the purpose, the level of involvement of stakeholders and the degree of transparency of the policies and practices adopted by the society;
2. Workers, to evaluate relations with employees and collaborators in terms of wages and benefits, training and opportunities for personal growth, quality of the work environment, internal communication, flexibility and job security;
3. Other stakeholders, to evaluate the company's relations with its suppliers, with the local area and communities in which it operates, voluntary actions, donations, cultural and social activities, and any action to support local development and its supply chain;
4. Environment, to evaluate the impacts of society, with a life cycle perspective of products and services, in terms of use of resources, energy, raw materials, production processes, logistics and distribution processes, use and consumption and end of life.

The impact report must be made using the so-called "external evaluation standard" which must be:

1. Exhaustive and articulated;
2. Developed by an entity that is not controlled by or affiliated with the benefit corporation;
3. Credible because it was developed by an institution with the necessary skills;
4. Transparent.

The external evaluation standard

There are numerous standards, composite indicators, guidelines, developed at national and international level, which can be used to describe and evaluate the generated impact. Among these are:

• the "Ethical Business" system proposed by the Center for Innovation and Economic Development - Special Agency of the Forlì-Cesena Chamber of Commerce (CISE) - which also provides for a certification process for companies inspired by the principles and practices contained in the Line UNI ISO26000 Guide (Corporate Social Responsibility);
• the Global Compact Self Assessment Tool developed by the UN Global Compact;
• the B Impact Assessment (BIA) developed by B-Lab.

Why become a Benefit Corporation?

As anticipated above, the status of SB does not currently have any impact (neither positive nor negative) on the tax treatment of the company. However, becoming a benefit company brings advantages for all the company's stakeholders, for management and employees, for customers and suppliers and for the territory. In particular: 

1. the legal form of SB gives investors the certainty that a company retains the responsibility to pursue its mission in the future. This can help companies attract investment capital;
2. SBs are at the forefront of an innovative growth movement leading to significant reputational growth;
3. “Millennials represent 50% today and will become 75% of the workforce by 2025; 77% of them say that the purpose of the company is the main reason they choose a certain employer. The Benefit Society assures future talent that the company is legally committed to pursuing a positive impact mission” (Deloitte Millennial Survey).