Bill Text: NJ S2260 | 2018-2019 | Regular Session | Introduced
Bill Title: Clarifies purpose of benefit corporations and standard of duty of board of directors.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2018-03-08 - Introduced in the Senate, Referred to Senate Commerce Committee [S2260 Detail]
Download: New_Jersey-2018-S2260-Introduced.html
Sponsored by:
Senator TROY SINGLETON
District 7 (Burlington)
SYNOPSIS
Clarifies purpose of benefit corporations and standard of duty of board of directors.
CURRENT VERSION OF TEXT
As introduced.
An Act clarifying the purpose of benefit corporations and amending P.L.2011, c.30.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 5 of P.L.2011, c.30 (C.14A:18-5) is amended to read as follows:
5. a. Every benefit corporation shall have the purpose of creating a general public benefit. This purpose is in addition to, and may be a limitation on, its purpose under its certificate of incorporation and any specific purpose set forth in its certificate of incorporation. Every benefit corporation shall be managed in a manner that balances the shareholders' pecuniary interests, the best interests of those materially affected by the benefit corporation's conduct, and the general and specific public benefits created by the benefit corporation.
b. The certificate of incorporation of a benefit corporation may identify one or more specific public benefits that is the purpose of the benefit corporation to create in addition to its purposes under its certificate of incorporation and subsection a. of this section. The identification of a specific public benefit under this subsection does not limit the obligation of a benefit corporation to create general public benefit.
c. The creation of general and specific public benefits, as provided in subsections a. and b. of this section, shall be in the best interests of the benefit corporation.
d. A benefit corporation may amend its certificate of incorporation to add, amend or delete a specific public benefit that is the purpose of the benefit corporation to create. The amendment shall not be effective unless it is adopted by at least the minimum status vote.
(cf: P.L.2011, c.30, s.5)
2. Section 6 of P.L.2011, c.30 (C.14A:18-6) is amended to read as follows:
6. a. The board of directors, committees of the board and individual directors of a benefit corporation, in considering the best interests of the benefit corporation shall consider and balance the effects of any action upon:
(1) the pecuniary interests of 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 or specific public benefit purposes of the benefit corporation;
(4) community and societal considerations, 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; [and]
(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 best interests of those materially affected by the benefit corporation's conduct.
b. The board of directors, committees of the board and individual directors of a benefit corporation, in considering the best interests of the benefit corporation may consider:
(1) matters listed in subsection (2) of N.J.S.14A:6-1[; and] .
(2) any other pertinent factors or the interests of any other group that they deem appropriate; and
c. The board of directors, committees of the board and individual directors of a benefit corporation shall not be required to give priority to the interests of any particular person or group referred to in subsection a. or subsection b. of this section over the interests of any other person or group unless the benefit corporation has stated its intention to give priority to interests related to a specific public benefit purpose identified in its certificate of incorporation. With respect to a decision implicating the balance requirement in subsection a. of this section, the decision shall satisfy a director's fiduciary duty to shareholders and the benefit corporation if the decision is both informed and disinterested and not such that no person of ordinary, sound judgment would approve.
d. A director is not personally liable for monetary damages for failure of the benefit corporation to create general or specific public benefits.
(cf: P.L.2011, c.30, s.6)
3. This act shall take effect immediately.
STATEMENT
This bill clarifies the purpose of benefit corporations, pursuant to P.L.2011, c.30 (C.14A:18-1 et seq.) and as organized and incorporated under the provisions of the "New Jersey Business Corporation Act," N.J.S.14A:1-1 et seq. P.L.2011, c.30 provides for the creation of benefit corporations with the purpose of generating a general public benefit, defined as a material positive impact on society and the environment, through activities that promote some combination of specific public benefits. This allows benefit corporations, at the direction of shareholders, to pursue a mission that goes beyond making profit for owners and investors.
This bill amends P.L.2011, c.30 to clarify that every benefit corporation must be managed by the board of directors, committees of the board, and individual directors in a manner that balances the shareholders' pecuniary interests, the best interests of those materially affected by the benefit corporation's conduct, and the general and specific public benefits created by the benefit corporation, among other certain factors. The bill provides that, with respect to a decision implicating this balancing requirement, the decision will satisfy a director's fiduciary duties to shareholders and the benefit corporation if the decision is both informed and disinterested and not such that no person of ordinary, sound judgment would approve.
