In December 2015, Italy became the first European state and the second country in the world creating a new legal status for companies, called “Società Benefit” (in the US, Benefit Corporation). A Società Benefit is a company which combines the goal of profit with the purpose of creating a positive impact for society and the environment and which operates in a transparent, responsible and sustainable way.
The Società Benefit is a new legal tool to create a solid foundation for long term mission alignment and value creation. It protects mission through capital raises and leadership changes, creates more flexibility when evaluating potential sale and liquidity options, and prepares businesses to lead a mission-driven life post-IPO.
A Società Benefit is neither a social enterprise nor a non-profit organisation, but rather an evolution of the concept of for-profit business to take on the challenges of the 21st century and bring about common benefits both for society and the environment.
The law defines a common benefit as the creation of positive effects (or the reduction of negative ones) vis-à-vis individuals, communities, territories and the environment, cultural and social heritage, entities and associations as well as other stakeholders.
In order to become Società Benefit, a company have to amend its articles of association including in the object clause the aims of common benefit that it intends to pursue. This means that the company will not only pursue the purpose of profit, but also the specific purpose(s) of common benefit that it has inserted in its articles of association.
The amendment of the object clause is closely linked to directors’ duties. Indeed, directors of a Società Benefit have to manage the company with the aim of pursuing the common benefit, taking into consideration both the interests of shareholders, and also the interest of all stakeholders.
Moreover, a Società Benefit needs to identify one or more individuals to be appointed as impact manager with the specific tasks of pursuing the common benefit and reporting regarding the activities of the company in a complete and transparent way.
In this regard, a Società Benefit is required to produce and publish on the website an annual benefit report and to attach it to the annual financial statement. The annual benefit report is a fundamental aspect of the legislation and serves not only to inform the public about the overall social and environmental performance of the benefit corporation, but also to inform directors so they are better able to meet their duties and shareholders so they are better able to exercise their rights.
Annual Benefit Report
The annual benefit report is to include:
a) the description of the specific objectives, modalities and actions implemented by the directors in order to pursue the aims of common benefit and the possible mitigating circumstances which have prevented, or slowed up, the achievement of the above aims;
b) the evaluation of the general impact of the company, using a third party evaluation having the requirements listed in the law (annex A) and which includes the evaluation areas identified under Annex B;
c) a specific section containing the description of the new objectives which the benefit corporation intends to pursue in the following fiscal year.
Italian Competition Authority Competence
Despite the US, Italy has entrusted the Competition Authority (AGCM) with the competence of controlling the actual pursuit of the common benefits and the power to fine those companies that do not, according to unfair commercial practice and misleading advertisement legislation.