Creation of a category of business corporation identified as a benefit corporation

A business corporation's status as a benefit corporation may be terminated by amending the articles of incorporation to delete this statement. When creating or terminating a business corporation's status as a benefit corporation requires amending the articles of incorporation, the vote to amend must meet specified voting requirements.

A benefit corporation must have a purpose of creating general public benefit and the benefit corporation may also specify in its articles of incorporation additional specific public benefit purposes. A "general public benefit" is defined as a material positive impact on society and the environment by the operations of a benefit corporation taken as a whole, as measured by a third-party standard, through activities that promote some combination of specific public benefits. Examples of "specific public benefit" include all of the following: 1) providing low-income or underserved individuals or communities with beneficial products or services; 2) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; 3) preserving the environment; 4) improving human health; 5) promoting the arts, sciences, or advancement of knowledge; 6) increasing the flow of capital to entities with a public benefit purpose; and 7) the accomplishment of any other particular benefit for society or the environment.

The board of directors of a benefit corporation must include one director designated as the "benefit director." The benefit director must prepare, for inclusion with the benefit corporation's annual benefit report to shareholders (discussed below), a statement whether, in the opinion of the benefit director, the benefit corporation acted in accordance with its general public benefit purpose and any specific public benefit purpose in all material respects and whether the benefit corporation's directors and officers complied with specified duties. Notwithstanding provisions of the business corporation law, the board of directors, committees of the board, and individual directors of a benefit corporation, in considering the best interests of the benefit corporation, must consider the effects of any action or inaction on all of the following: 1) the shareholders of the benefit corporation; 2) the employees and workforce of the benefit corporation and its subsidiaries and suppliers; 3) the interests of customers as beneficiaries of the general public benefit or specific public benefit purposes of the benefit corporation; 4) community and societal factors, including those of any community in which offices or facilities of the benefit corporation or its subsidiaries or suppliers are located; 5) the local and global environment; 6) the short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests may be best served by the continued independence of the benefit corporation; and 7) the ability of the benefit corporation to accomplish its general public benefit purpose and any specific public benefit purpose. In addition, the board, committees, and individual directors may consider the resources, intent, and conduct of any person seeking to acquire control of the benefit corporation and any other pertinent factors or the interests of any other group.

A benefit corporation may also designate a "benefit officer," who has the powers and duties relating to the benefit corporation's purpose of creating general public benefit or specific public benefit and is also responsible for preparing an annual benefit report (described below). Each officer of a benefit corporation must consider the same interests and factors applicable for directors, identified as 1) to 7) immediately above, when the officer has discretion to act with respect to a matter that may have a material effect on the creation of general or specific public benefit by the benefit corporation.

A benefit corporation must prepare an annual benefit report that contains certain information for the reporting year, including the following: 1) a narrative description of the ways in which the benefit corporation pursued general public benefit and specific public benefit and the extent to which such public benefit was created; 2) an assessment of the social and environmental performance of the benefit corporation, prepared in accordance with a third-party standard; 3) the names of the benefit director and benefit officer and the address to which correspondence to each may be directed; 4) the compensation paid by the benefit corporation to each director;

5) the name of each person with a 5 percent or greater ownership interest in the benefit corporation; and 6) the benefit director's statement (discussed above). This benefit report must be annually delivered to the shareholders, filed with the Department of Financial Institutions, and posted on the benefit corporation's Web site if it has one.

The bill generally restricts the ability to bring actions to enforce the general or specific public benefit purposes of a benefit corporation or the duties of directors or officers with respect to these purposes. However, the benefit corporation itself and, derivatively, shareholders, directors, and certain other persons do have a right of action to enforce these purposes. The bill also includes certain limitations on imposing personal liability on directors and officers of benefit corporations.