Corporate Purpose and Litigation Risk in Publicly Held U.S. Benefit Corporations

With the likely prospect of publicly held U.S. benefit corporations in mind, this Article engages in a thought experiment. Specifically, the Article views the publicly held U.S. benefit corporation from the perspective of litigation risk. It first situates, in Part I, the U.S. benefit corporation in its structural and governance context as an incorporated business association. Corporate purpose and the attendant managerial authority, responsibilities, and fiduciary duties are the key points of reference.

Then, in Part II, the Article seeks to identify and describe the salient, unique litigation risks that may be associated with publicly held corporations with the structural and governance attributes of a benefit corporation. These include both state litigation under the ultra vires doctrine and similarly situated statutory causes of action, as well as actions for breach of a corporate law fiduciary duty, and federal law causes of action for securities fraud and misstatements. The reflections in Part III draw conclusions from the synthesis of the observations made in Parts I and II. Specifically, Part III links the importance of a publicly held benefit corporation’s public benefit purpose to litigation risk management from several perspectives.

The commentary in Part III is intended to be of use to government officials, policymakers, legal advisors of corporations, benefit corporation management, and academic observers, among others.