Bill Text: MI HB5387 | 2023-2024 | 102nd Legislature | Introduced
Bill Title: Businesses: business corporations; benefit corporations; create. Amends 1972 PA 284 (MCL 450.1101 - 450.2098) by adding ch. 9A. TIE BAR WITH: HB 5388'23
Spectrum: Strong Partisan Bill (Democrat 13-1)
Status: (Introduced) 2024-02-28 - Placed On Third Reading [HB5387 Detail]
Download: Michigan-2023-HB5387-Introduced.html
HOUSE BILL NO. 5387
A bill to amend 1972 PA 284, entitled
"Business corporation act,"
(MCL 450.1101 to 450.2098) by adding chapter 9A.
the people of the state of michigan enact:
CHAPTER 9A
BENEFIT CORPORATIONS
Sec. 951. (1) As used in this chapter:
(a) "Benefit enforcement proceeding" means a claim asserted or action brought directly by a benefit corporation, or derivatively on behalf of a benefit corporation, against a director for either of the following:
(i) A failure to pursue a public benefit.
(ii) A violation of a duty or standard of conduct under this chapter.
(b) "Minimum status vote" means an authorization or approval of a corporate action that meets all of the following:
(i) The shareholder approval or vote requirements of this act.
(ii) Any shareholder approval or vote requirement that is included in a provision of the articles of incorporation.
(iii) The approval by at least 2/3 of the votes entitled to be cast on the corporate action, and, if a class or series of shares is entitled to a vote as a separate group on the corporate action, the corporate action is approved by at least 2/3 of the votes entitled to be cast by the voting group.
(c) "Public benefit" means any of the following purposes for which the corporation is formed, as identified in the articles of incorporation under section 953:
(i) Creating a positive effect, or reducing a negative effect, for at least 1 community or category of persons, other than shareholders solely in their capacity as shareholders, or on the environment. As used in this subparagraph, "effect" means an effect that is artistic, charitable, economic, educational, cultural, literary, medical, religious, social, ecological, or scientific in nature.
(ii) Acting in a responsible and sustainable manner.
(d) "Responsible and sustainable manner" means the corporation does both of the following:
(i) Pursues through the business of the corporation the creation of a positive effect, or a reduction of a negative effect, on society and the environment, that when taken as a whole, is material in light of the corporation's size and the nature of the corporation's business.
(ii) Considers, in addition to the interests of the shareholders, the separate interests of stakeholders known to be affected by the conduct of the business of the corporation.
(2) If there is a conflict between a specific provision of this chapter and a general provision of this act, the provision of this chapter applies with respect to a benefit corporation.
Sec. 953. (1) A domestic corporation that meets both of the following is a benefit corporation and subject to this chapter:
(a) The corporation is formed under this act.
(b) The articles of incorporation of the corporation state that it is a benefit corporation. However, an amendment to the articles of incorporation to include the statement described in this subdivision is not effective unless it is adopted by a minimum status vote.
(2) In addition to the purposes described in section 202(b), the purposes of a benefit corporation must include 1 or more public benefits, which must be identified in 1 or more provisions in the articles of incorporation.
(3) An amendment to the articles of incorporation of a benefit corporation to change the purposes of the corporation by adding, amending, or deleting 1 or more public benefits is not effective unless it is adopted by a minimum status vote.
(4) A benefit corporation may terminate its status as a benefit corporation by amending its articles of incorporation to remove its public benefits. However, an amendment to the articles of incorporation described in this subsection is not effective unless it is adopted by a minimum status vote.
Sec. 955. (1) In addition to the requirements of chapter 7, if a domestic corporation that is not a benefit corporation is a constituent corporation in a merger or an exchanging corporation in a share exchange, and the surviving or acquiring corporation will be a benefit corporation under the plan of merger or share exchange, the plan must be approved by a minimum status vote of that constituent or exchanging corporation.
(2) In addition to the requirements of chapter 7, a plan of merger or share exchange that would have the effect of terminating the status of a domestic corporation as a benefit corporation must be approved by a minimum status vote of that corporation.
(3) In addition to the requirements of chapter 7, if a benefit corporation affects a conversion into a business organization with the result that the shares of a voting group of the benefit corporation would become, or would be converted into or exchanged for the right to receive, shares or interests in a business organization that is not subject to law that governs the internal affairs of the business organization that is analogous to those in this chapter, the conversion must be approved by a minimum status vote of the benefit corporation. However, if the shares of 1 or more, but not all, of the voting groups are affected by the conversion, a minimum status vote is required with respect to the shares in the voting group affected by the conversion.
(4) In addition to the requirements of chapter 7, if a benefit corporation affects a conversion into a business organization with the result that the shares of a voting group of the benefit corporation would become, or would be converted into or exchanged for the right to receive, shares or interests in a business organization that is subject to law that governs the internal affairs of the business organization that is analogous to those in this chapter, the conversion does not require a minimum status vote.
(5) As used in this section, "business organization" means that term as defined in section 736.
Sec. 957. (1) The board shall consider all of the following:
(a) The interests of the shareholders.
(b) The separate interest of stakeholders known to be affected by the conduct of the business of the corporation.
(c) Any public benefit.
(2) A consideration made by a director of a benefit corporation under subsection (1) in the discharge of the director's duties does not constitute a violation of section 541a.
(3) A director who makes a business judgment in good faith fulfills the director's duties under this section if the director is not interested in the subject of the business judgment and is informed with respect to the subject of the business judgment to the extent that the director reasonably believes that it is appropriate under the circumstances.
(4) A director of a benefit corporation is not liable for monetary damages to the corporation, the shareholders, or any person that claims to be a beneficiary of a public benefit for a failure to fulfill a duty arising under this chapter or solely because the director performed duties in compliance with this section.
(5) A director of a benefit corporation does not have a duty to a person that is a beneficiary of a public benefit arising from the status of the person as a beneficiary.
Sec. 959. (1) The duties of any director of a benefit corporation arising under this chapter or any public benefit may be enforced only in a benefit enforcement proceeding under this section. A person shall not bring an action or assert a claim against a benefit corporation or its directors with respect to the duties under this chapter of any directors of the benefit corporation or any public benefit except in a benefit enforcement proceeding under this section.
(2) A benefit enforcement proceeding may be commenced or maintained only by 1 of the following:
(a) Directly, by the benefit corporation.
(b) Derivatively, by any of the following:
(i) A shareholder of the benefit corporation that owns beneficially or of record, individually or collectively, as of the date the benefit enforcement proceeding is instituted, either of the following:
(A) At least 5% of the corporation's outstanding shares.
(B) If the shares of the benefit corporation are listed on a national securities exchange, 5% of the corporation's outstanding shares, or shares that have a market value of $5,000,000.00, whichever is less.
(ii) Any other person specified in the articles of incorporation or bylaws of the benefit corporation.
(3) A benefit corporation and its directors are not liable for monetary damages under this chapter for any failure of the benefit corporation to pursue or create a public benefit.
(4) An action against a director for failure to perform a duty imposed under this chapter must be commenced within 3 years after the cause of action has accrued, or within 2 years after the time when the cause of action is discovered or should reasonably have been discovered by the complainant, whichever occurs first.
Sec. 961. (1) A benefit corporation shall prepare an annual benefit report that includes all of the following:
(a) A summary addressing the efforts of the benefit corporation during the preceding year to pursue its public benefits.
(b) The objectives that the board have established for the corporation to pursue its public benefits.
(c) The standards that the board have adopted to measure the corporation's progress in pursuing its public benefits.
(d) If the articles of incorporation or bylaws require that the corporation use an independent third-party standard in reporting on the corporation's progress in pursuing its public benefits, or if the board has chosen to use a third-party standard, a summary of the third-party standard.
(e) An assessment of the corporation's success in meeting the objectives and standards under subdivisions (b) and (c), and subdivision (d), as applicable, and the basis of the assessment.
(2) Subject to subsection (3), a benefit corporation shall, not later than 4 months after the end of the fiscal year of the benefit corporation, deliver to each shareholder, or make available and provide written notice of the availability to each shareholder, a copy of the annual benefit report described in subsection (1).
(3) The benefit corporation may distribute the annual benefit report described in subsection (1) by electronic transmission or by making the annual benefit report available for electronic transmission. If the annual benefit report is distributed electronically under this subsection, the corporation must provide the annual benefit report in written form, if requested by a shareholder.
(4) A shareholder that has not received or been given access to an annual benefit report in the time described in subsection (2) may make a written request that the corporation deliver or make the annual benefit report available to the shareholder.
(5) If a benefit corporation subject to a request under subsection (4) does not deliver or make the annual benefit report available to the shareholders within 5 business days of receiving the request under subsection (4), the requesting shareholder may petition the circuit court of the county in which the corporation's principal place of business or registered office is located for an order requiring the delivery of, or access to, the annual benefit report.
(6) Except as otherwise provided in subsection (7), a benefit corporation shall post its 3 most recent annual benefit reports on the public portion of its website.
(7) If a benefit corporation does not have a website, the benefit corporation must provide a copy of its most recent annual benefit report, without charge, to a person that submits a written request to the benefit corporation for a copy of its most recent annual benefit report.
(8) A benefit corporation shall include a copy of its annual benefit report with the report it is required to file with the administrator under section 911. A benefit corporation shall pay a fee of $25.00 when the annual benefit report is delivered to the administrator. The administrator's filing of a benefit report does not relate to the validity or invalidity of the information contained in the annual benefit report.
Enacting section 1. This amendatory act does not take effect unless Senate Bill No.____ or House Bill No. 5388 (request no. 03023'23) of the 102nd Legislature is enacted into law.
