AB 742

This bill creates a category of business corporation identified as a benefit

corporation. A benefit corporation may also fall within other categories of business

corporations, such as service corporations or statutory close corporations.

Under the bill, a benefit corporation may be created by including in the articles

of incorporation at the time of formation, or by later amending the articles of

incorporation to include, a statement that the corporation is 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