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| Public Act 097-0885
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| SB2897 Enrolled | LRB097 13492 JLS 62053 b |
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AN ACT concerning business.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Article 1. General Provisions
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Section 1. Short title. This Act may be cited as the |
Benefit Corporation Act.
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Section 1.05. Application and effect of the Act. |
(a) This Act shall be applicable to all benefit |
corporations. |
(b) The existence of a provision of this Act shall not of |
itself create an implication that a contrary or different rule |
of law is applicable to a corporation which is not a benefit |
corporation. This Act shall not affect a statute or rule of law |
that is applicable to a business corporation that is not a |
benefit corporation. |
(c) The Business Corporation Act of 1983, as heretofore or |
hereafter amended, shall be applicable to such benefit |
corporations, including their organization, and they shall |
enjoy the powers and privileges and be subject to the duties, |
restrictions, and liabilities of other corporations, except so |
far as the same may be limited or enlarged by this Act. If any |
provision of this Act conflicts with the Business Corporation |
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Act of 1983, this Act shall take precedence. |
(d) A provision of the articles of incorporation or bylaws |
of a benefit corporation may not relax, be inconsistent with, |
or supersede a provision of this Act.
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Section 1.10. Definitions. As used in this Act, unless the |
context otherwise requires, the words and phrases defined in |
this Section shall have the meanings set forth herein. |
"Benefit corporation" means a corporation organized under |
the Business Corporation Act of 1983:
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(1) which has elected to become subject to this Act; |
and
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(2) whose status as a benefit corporation has not been |
terminated under Section 2.10.
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"Benefit director" means either:
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(1) the director designated as the benefit director of |
a benefit corporation under Section 4.05; or
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(2) a person with one or more of the powers, duties, or |
rights of a benefit director to the extent provided in the |
bylaws pursuant to Section 4.05.
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"Benefit enforcement proceeding" means a claim or action |
for:
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(1) the failure of a benefit corporation to pursue or |
create general public benefit or a specific public benefit |
set forth in its articles of incorporation; or
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(2) a violation of an obligation, duty, or standard of |
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conduct under this Act.
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"Benefit officer" means the individual designated as the |
benefit officer of a benefit corporation under Section 4.15.
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"General public benefit" means a material positive impact |
on society and the environment, taken as a whole, assessed |
against a third-party standard, from the business and |
operations of a benefit corporation.
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"Independent" means having no material relationship with a |
benefit corporation or a subsidiary of the benefit corporation. |
A person serving as benefit director or benefit officer may be |
considered independent. For the purposes of this definition, a |
percentage of ownership in an entity shall be calculated as if |
all outstanding rights to acquire equity interests in the |
entity have been exercised. A material relationship between a |
person and a benefit corporation or any of its subsidiaries |
will be conclusively presumed to exist if:
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(1) the person is, or has been within the last 3 years, |
an employee other than a benefit officer of the benefit |
corporation or a subsidiary of the benefit corporation;
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(2) an immediate family member of the person is, or has |
been within the last 3 years, an executive officer other |
than a benefit officer of the benefit corporation or its |
subsidiaries;
or |
(3) there is beneficial or record ownership of 5% or |
more of the outstanding shares of the benefit corporation |
by:
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(A) the person; or
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(B) an entity:
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(i) of which the person is a director, an |
officer, or a manager; or
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(ii) in which the person owns beneficially or |
of record 5% or more of the outstanding equity |
interests.
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"Minimum status vote" means that:
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(1) in the case of a corporation, in addition to any |
other approval or vote required by the Business Corporation |
Act of 1983, the bylaws, or the articles of incorporation:
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(A) the shareholders of every class or series shall |
be entitled to vote on the corporate action regardless |
of a limitation stated in the articles of incorporation |
or bylaws on the voting rights of any class or series; |
and
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(B) the corporate action shall be approved by vote |
of the outstanding shares of each class or series |
entitled to vote by at least two-thirds of the votes |
that all shareholders of the class or series are |
entitled to cast on the action; and
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(2) in the case of an entity organized under the laws |
of this State that is not a corporation, in addition to any |
other approval, vote, or consent required by the statutory |
law, if any, that principally governs the internal affairs |
of the entity or any provision of the publicly filed record |
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or document required to form the entity, if any, or of any |
agreement binding on some or all of the holders of equity |
interests in the entity:
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(A) the holders of every class or series of equity |
interest in the entity that are entitled to receive a |
distribution of any kind from the entity shall be |
entitled to vote on or consent to the action regardless |
of any otherwise applicable limitation on the voting or |
consent rights of any class or series; and
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(B) the action must be approved by a vote or |
consent of at least two-thirds of such holders.
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"Specific public benefit" means:
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(1) providing low-income or underserved individuals or |
communities with beneficial products or services;
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(2) promoting economic opportunity for individuals or |
communities beyond the creation of jobs in the ordinary |
course of business;
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(3) preserving the environment;
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(4) improving human health;
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(5) promoting the arts, sciences or advancement of |
knowledge;
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(6) increasing the flow of capital to entities with a |
public benefit purpose; or
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(7) the accomplishment of any other particular benefit |
for society or the environment.
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"Subsidiary" of a person means an entity in which the |
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person owns beneficially or of record 50% or more of the |
outstanding equity interests. For the purposes of this |
subsection, a percentage of ownership in an entity shall be |
calculated as if all outstanding rights to acquire equity |
interests in the entity have been exercised.
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"Third-party standard" means a standard for defining, |
reporting, and assessing overall corporate, social, and |
environmental performance that:
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(1) is a comprehensive assessment of the impact of the |
business and the business' operations upon the |
considerations listed in subdivisions (a)(1)(B) through |
(a)(1)(E) of Section 4.01; |
(2) is developed by an entity that has no material |
financial relationship with the benefit corporation or any |
of its subsidiaries; |
(3) is developed by an entity that is not materially |
financed by any of the following organizations and not more |
than one-third of the members of the governing body of the |
entity are representatives of:
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(A) associations of businesses operating in a |
specific industry, the performance of whose members is |
measured by the standard;
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(B) businesses from a specific industry or an |
association of businesses in that industry; or
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(C) businesses whose performance is assessed |
against the standard; and
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(4) is developed by an entity that:
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(A) accesses necessary and appropriate expertise |
to assess overall corporate social and environmental |
performance; and
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(B) uses a balanced multi-stakeholder approach, |
including a public comment period of at least 30 days |
to develop the standard; and
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(5) makes the following information regarding the |
standard publicly available:
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(A) the factors considered when measuring the |
overall social and environmental performance of a |
business and the relative weight, if any, given to each |
of those factors;
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(B) the identity of the directors, officers, any |
material owners, and the governing body of the entity |
that developed, and controls revisions to, the |
standard, and the process by which
revisions to the |
standard and changes to the membership of the governing |
body are made; and |
(C) an accounting of the sources of financial |
support for the entity, with sufficient detail to |
disclose any relationships that could reasonably be |
considered to present a potential conflict of |
interest.
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Article 2. Formation of Benefit Corporations
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Section 2.01. Formation of benefit corporations. A benefit |
corporation must be formed in accordance with Article 2 of the |
Business Corporation Act of 1983. In addition to the formation |
requirements of that Act, the articles of incorporation of a |
benefit corporation must state that it is a benefit corporation |
in accordance with the provisions of this Article.
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Section 2.05. Election of status. |
(a) A corporation may become a benefit corporation under |
this Act by amending its articles of incorporation so that they |
contain a statement that the corporation is a benefit |
corporation. In order to be effective, the amendment must be |
adopted by at least the minimum status vote.
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(b) For any entity that is a party to a merger or |
consolidation or is the exchanging entity in a share exchange, |
where the surviving, new, or resulting entity in the merger, |
consolidation, or share exchange is intended to be a benefit |
corporation, such plan of merger, consolidation, or share |
exchange must be adopted by at least the minimum status vote in |
order to be effective.
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Section 2.10. Termination of status. |
(a) A benefit corporation may terminate its status as such |
and cease to be subject to this Act by amending its articles of |
incorporation to remove the statement that the corporation is a |
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benefit corporation. In order to be effective, the amendment |
must be adopted by at least the minimum status vote.
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(b) If a plan of merger, conversion, or share exchange |
would have the effect of terminating the status of a |
corporation as a benefit corporation, in order to be effective, |
the plan must be adopted by at least the minimum status vote.
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(c) A sale, lease, exchange or other disposition of all or |
substantially all of the assets of a benefit corporation, |
unless the transaction is in the usual and ordinary course of |
business, shall not be effective unless the transaction is |
adopted by at least the minimum status vote.
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Article 3. Corporate Purposes
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Section 3.01. Corporate purposes. |
(a) A benefit corporation shall have a purpose of creating |
general public benefit. This purpose is in addition to its |
purposes under Section 3.05 of the Business Corporation Act of |
1983 and any specific purpose set forth in its articles of |
incorporation in accordance with subsection (b).
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(b) The articles of incorporation of a benefit corporation |
may identify one or more specific public benefits the creation |
of which is a purpose of the benefit corporation in addition to |
its purposes under Section 3.05 of the Business Corporation Act |
of 1983 and subsection (a). The identification of a specific |
public benefit under this subsection does not limit the |
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obligation of a benefit corporation under subsection (a).
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(c) The creation of general public benefit and specific |
public benefit under subsections (a) and (b) is in the best |
interests of the benefit corporation.
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(d) A benefit corporation may amend its articles of |
incorporation to add, change, or remove a specific public |
benefit. In order to be effective, the amendment must be |
adopted by at least the minimum status vote.
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(e) A professional corporation that is a benefit |
corporation does not violate Sections 3.4 or 6 of the |
Professional Service Corporation Act by having the purpose to |
create general public benefit or a specific public benefit.
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Article 4. Accountability
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Section 4.01. Standard of Conduct for Directors. |
(a) Without regard to whether the benefit corporation is |
subject to Section 8.85 of the Business Corporation Act of |
1983, in discharging the duties of their respective positions, |
the board of directors, committees of the board, and individual |
directors of a benefit corporation in considering the best |
interests of the benefit corporation:
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(1) shall consider the effects of any action upon:
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(A) the shareholders of the benefit corporation;
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(B) the employees and work force of the benefit |
corporation, its subsidiaries, and its suppliers;
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(C) the interests of customers as beneficiaries of |
the general public benefit or specific public benefit |
purposes of the benefit corporation;
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(D) community and societal considerations, |
including those of each community in which offices or |
facilities of the benefit corporation, its |
subsidiaries or its suppliers are located;
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(E) the local and global environment;
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(F) 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
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(G) the ability of the benefit corporation to |
accomplish its general public benefit purpose and any |
specific public benefit purpose; and
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(2) may consider:
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(A) considerations listed in Section 8.85 of the |
Business Corporation Act of 1983; and
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(B) any other pertinent factors or the interests of |
any other group that they deem appropriate; but
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(3) need not give priority to the interests of a |
particular person or group referred to in paragraphs (1) or |
(2) over the interests of another person or group unless |
the benefit corporation has stated in its articles of |
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incorporation its intention to give priority to certain |
interests related to its accomplishment of its general |
public benefit purpose or a specific public benefit purpose |
identified in its articles of incorporation.
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(b) The consideration of interests and factors in the |
manner required by subsection (a) is in addition to the ability |
of directors to consider interests and factors as provided in |
Section 8.85 of the Business Corporation Act of 1983.
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(c) A director is not personally liable for monetary |
damages for:
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(1) any action taken as a director if the director |
performed the duties of office in compliance with Article 8 |
of the Business Corporation Act of 1983 and this Section; |
or
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(2) a failure of the benefit corporation to pursue or |
create general public benefit or a specific public benefit.
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(d) A director does not have a duty to a person that is a |
beneficiary of the general public benefit purpose or a specific |
public benefit purpose of a benefit corporation arising from |
the status of the person as a beneficiary.
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Section 4.05. Benefit director. |
(a) The board of directors of a benefit corporation shall |
include a director, who:
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(1) is designated as the benefit director; and
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(2) has, in addition to the powers, duties, rights, and |
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immunities of the other directors of the benefit |
corporation, the powers, duties, rights, and immunities |
provided in this Section.
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(b) The benefit director shall be elected, and may be |
removed, in the manner provided by Article 8 of the Business |
Corporation Act of 1983 and shall be an individual who is |
independent, as defined in Section 1.10. The benefit director |
may serve as the benefit officer at the same time as serving as |
the benefit director. The articles of incorporation or bylaws |
of a benefit corporation may prescribe additional |
qualifications of the benefit director not inconsistent with |
this Section.
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(c) The benefit director shall prepare, and the benefit |
corporation shall include in the annual benefit report to |
shareholders required by Section 5.01 of this Act, the opinion |
of the benefit director on:
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(1) whether the benefit corporation acted in |
accordance with its general public benefit purpose and any |
specific public benefit purpose in all material respects |
during the period covered by the report;
and |
(2) whether the directors and officers complied with |
subsection (a) of Section 4.01 and subsection (a) of |
Section 4.10, respectively, and if, in the opinion of the |
benefit director, the directors and officers did not so |
comply, a description of the failure to comply.
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(d) The acts of an individual in the capacity of a benefit |
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director shall constitute, for all purposes, acts of that |
individual in the capacity of a director of the benefit |
corporation.
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(e) If the bylaws of a benefit corporation provide that the |
powers and duties conferred or imposed upon the board of |
directors shall be exercised or performed by a person or |
persons other than the directors, in contrast to subsection (a) |
of Section 8.05 of the Business Corporation Act of 1983, or if |
the bylaws of a close corporation that is a benefit corporation |
provide that the business and affairs of the corporation shall |
be managed by or under the director of the shareholders, then |
the bylaws of the benefit corporation must provide that the |
person, persons, or shareholders who perform the duties of a |
board of directors shall include a person with the powers, |
duties, rights, and immunities of a benefit director. |
A person who exercises one or more of the powers, duties, |
or rights of a benefit director pursuant to this subsection: |
(i) does not need to be independent of the benefit |
corporation;
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(ii) shall have the immunities of a benefit director;
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(iii) may share the powers, duties, and rights of a |
benefit director with one or more other persons; and
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(iv) shall not be subject to the procedures for |
election or removal of directors in Article 8 of the |
Business Corporation Act of 1983 unless the person is also |
a director of the benefit corporation or the bylaws make |
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those procedures applicable.
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(f) Regardless of whether the bylaws of a benefit |
corporation include a provision eliminating or limiting the |
personal liability of directors authorized by paragraph (3) of |
subsection (b) of Section 2.10 of the Business Corporation Act |
of 1983, a benefit director shall not be personally liable for |
an act or omission in the capacity of a benefit director unless |
the act or omission constitutes self-dealing, willful |
misconduct, or a knowing violation of law.
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Section 4.10. Standard of conduct for officers. |
(a) Each officer of a benefit corporation shall consider |
the interests and factors described in subsection (a) of |
Section 4.01 in the manner provided in that subsection if:
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(1) the officer has discretion to act with respect to a |
matter; and
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(2) it reasonably appears to the officer that the |
matter may have a material effect on the creation by the |
benefit corporation of general public benefit or a specific |
public benefit identified in the articles of incorporation |
by the benefit corporation.
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(b) Exoneration from personal liability. An officer is not |
personally liable for monetary damages for:
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(1) action taken as an officer if the officer performed |
the duties of the position in compliance with this Section; |
or
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(2) failure of the benefit corporation to pursue or |
create general public benefit or specific public benefit.
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(c) Limitation on standing. An officer does not have a duty |
to a person that is a beneficiary of the general public benefit |
purpose or a specific public benefit purpose of a benefit |
corporation arising from the status of the person as a |
beneficiary.
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Section 4.15. Benefit officer. |
(a) A benefit corporation may have an officer designated as |
the benefit officer.
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(b) A benefit officer shall have:
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(1) powers and duties relating to the purpose of the |
benefit corporation to create general public benefit or |
specific public benefit provided:
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(A) by the bylaws of the benefit corporation; or
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(B) absent controlling provisions in the bylaws, |
by resolutions or orders of the board of directors; and
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(2) the duty to prepare the benefit report required by |
Section 5.01 of this Act.
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Section 4.20. Right of action; benefit enforcement |
proceeding. |
(a) No person may bring an action or assert a claim against |
a benefit corporation or its directors or officers with respect |
to failure to pursue or create general public benefit or a |
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specific public benefit set forth in its articles of |
incorporation or violation of a duty or standard of conduct |
under this Act except in a benefit enforcement proceeding.
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(b) A benefit enforcement proceeding may be commenced or |
maintained only:
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(1) directly by the benefit corporation; or
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(2) derivatively by:
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(A) a shareholder;
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(B) a director;
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(C) a person or group of persons that owns |
beneficially or of record 5% or more of the equity |
interests in an entity of which the benefit corporation |
is a subsidiary; or
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(D) other persons as specified in the articles of |
incorporation or bylaws of the benefit corporation.
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(c) A benefit corporation shall not be liable for monetary |
damages under this Act for any failure of the benefit |
corporation to pursue or create general public benefit or a |
specific public benefit.
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Article 5. Transparency
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Section 5.01. Annual benefit report. |
(a) A benefit corporation shall prepare an annual benefit |
report including all of the following:
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(1) A narrative description of:
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(A) the process and rationale for selecting the |
third party standard used to prepare the benefit |
report;
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(B) the ways in which the benefit corporation |
pursued general public benefit during the year and the |
extent to which general public benefit was created;
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(C) the ways in which the benefit corporation |
pursued a specific public benefit that the articles |
state it is the purpose of the benefit corporation to |
create and the extent to which that specific public |
benefit was created; and
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(D) any circumstances that have hindered the |
pursuit by the benefit corporation of its general |
public benefit purpose and any specific public benefit |
purpose or the creation by the benefit corporation of |
general public benefit and any specific public |
benefit.
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(2) An assessment of the overall social and |
environmental performance of the benefit corporation |
against a third-party standard:
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(A) applied consistently with any application of |
that standard in prior benefit reports; or
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(B) accompanied by an explanation of the reasons |
for any inconsistent application.
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(3) The name of the benefit director and the benefit |
officer, if any, and the address to which correspondence to |
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each of them may be directed.
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(4) The compensation paid by the benefit corporation |
during the year to each director in the capacity of a |
director.
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(5) The name of each person that owns 5% or more of the |
outstanding shares of the benefit corporation either:
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(A) beneficially, to the extent known to the |
benefit corporation without independent investigation; |
or
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(B) of record.
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(6) The statement of the benefit director required by |
subsection (c) of Section 4.05.
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(7) A statement of any connection between the |
organization that established the third-party standard, or |
its directors, officers, or material owners, and the |
benefit corporation or its directors, officers or material |
owners, including any financial or governance relationship |
that might materially affect the credibility of the use of |
the third-party standard.
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(8) If the benefit corporation has dispensed with, or |
restricted the discretion or powers of, the board of |
directors, its annual benefit report must describe the |
persons who exercise the powers, duties, and rights, and |
have the immunities of the board of directors and the |
benefit director as required by subsection (e) of Section |
4.05.
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(b) The benefit corporation shall send a benefit report |
annually to each shareholder:
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(1) within 120 days following the end of the fiscal |
year of the benefit corporation; or
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(2) at the same time that the benefit corporation |
delivers any other annual report to its shareholders.
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(c) A benefit corporation shall post all of its benefit |
reports on the public portion of its Internet website, if any, |
but the compensation paid to directors and financial or |
proprietary information included in the benefit reports may be |
omitted from the benefit reports as posted.
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(d) If a benefit corporation does not have an Internet |
website, the benefit corporation shall provide a copy of its |
most recent benefit report, without charge, to any person that |
requests a copy.
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