Bankruptcy & the Benefit Corporation

53 Pages Posted: 2 Aug 2021 Last revised: 5 Sep 2023

See all articles by Christopher Hampson

Christopher Hampson

University of Florida Levin College of Law

Date Written: July 30, 2021

Abstract

As pressure grows for money-making businesses to prioritize social goals, the benefit corporation—a recent innovation in corporate governance—promises to require the directors of socially minded businesses to balance public benefit with shareholder interests. But will that promise survive the crucible of financial distress? While most discussions of the benefit corporation give only passing treatment to insolvency (or ignore it altogether), this Article provides the first complete analysis of how bankruptcy principles would apply to benefit corporations, informed by the practical context of out-of-court workouts and negotiations that take place in the shadow of the bankruptcy laws. After analyzing three normative models, including an innovative application of the chanelling function of law, this Article answers that the benefit corporation’s key innovations should persist in bankruptcy. But with the reticulated provisions of creditor-debtor law and the Bankruptcy Code, the Article warns that the application of that principle is complicated and provides a detailed map of some of the major considerations—and pitfalls.

Keywords: bankruptcy, benefit corporation, benefit corporations, social entrepreneurship

Suggested Citation

Hampson, Christopher, Bankruptcy & the Benefit Corporation (July 30, 2021). 96 Am. Bankr. L.J. 99 (2022), University of Florida Levin College of Law Research Paper No. 23-1, Available at SSRN: https://ssrn.com/abstract=3896383 or http://dx.doi.org/10.2139/ssrn.3896383

Christopher Hampson (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

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