Bill Text: OR HB2318 | 2013 | Regular Session | Introduced
Bill Title: Relating to benefit corporations.
Sponsorship: Partisan Bill (Democrat 1)
Status: (Failed) 2013-07-08 - In committee upon adjournment. [HB2318 Detail]
Download: Oregon-2013-HB2318-Introduced.html
77th OREGON LEGISLATIVE ASSEMBLY--2013 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 225
House Bill 2318
Sponsored by Representative BUCKLEY (Presession filed.)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Permits creation of, or conversion of other business entity
into, benefit corporation for purpose of providing general public
benefit or specific public benefit in addition to other corporate
purposes. Specifies approval requirements from holders of equity
interests in benefit corporation. Specifies nature of general and
specific public benefits. Prescribes requirements for and duties
of benefit director and benefit officer and specifies limits on
benefit director's and benefit officer's liability. Requires
annual benefit report.
Specifies requirements for objective standard against which
benefit corporation measures whether benefit corporation provided
general public benefit and any required specific public benefit.
A BILL FOR AN ACT
Relating to benefit corporations.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + Sections 2 to 13 of this 2013 Act are added to
and made a part of ORS chapter 60. + }
SECTION 2. { + As used in sections 2 to 13 of this 2013 Act:
(1) 'Benefit corporation' means a corporation that is
incorporated, formed or created under the provisions of section 4
of this 2013 Act.
(2) 'Benefit director' means an individual who is elected as
the benefit director of a benefit corporation under section 8 of
this 2013 Act.
(3) 'Benefit officer' means an individual who is designated as
the benefit officer of a benefit corporation under section 10 of
this 2013 Act.
(4) 'General public benefit' means an aggregate improvement in
the material condition of society and in the natural environment
that, when measured against an objective standard of the type
described in section 13 of this 2013 Act, can be shown to have
resulted from the operations of a benefit corporation.
(5) 'Specific public benefit' means:
(a) Providing beneficial products or services to low-income or
underserved individuals or communities;
(b) Providing individuals or communities with economic
opportunities other than employment with the benefit corporation;
(c) Preserving the natural environment;
(d) Improving human health;
(e) Promoting the arts, science or the advancement of
knowledge;
(f) Providing or enabling another person to provide capital to
an entity that provides a general or specific public benefit; or
(g) Providing any other specific and measurable benefit to
society or the natural environment.
(6) 'Subsidiary' means an entity, the outstanding equity
interests of which a person owns in an amount equivalent to or
greater than 50 percent of the equity interests that have been
exercised, presuming for the purposes of this definition that all
rights to acquire equity interests in the entity have been
exercised. + }
SECTION 3. { + (1) Except as otherwise provided in sections 2
to 13 of this 2013 Act, this chapter applies to a corporation
that states in the corporation's articles of incorporation or
articles of conversion that the corporation is subject to
sections 2 to 13 of this 2013 Act and to a corporation that
elects to become a benefit corporation under section 4 of this
2013 Act.
(2) To the extent that a provision of sections 2 to 13 of this
2013 Act conflicts with another provision of this chapter, a
specific provision of sections 2 to 13 of this 2013 Act controls
over a general provision of this chapter.
(3) The provisions of sections 2 to 13 of this 2013 Act do not
apply to a corporation that is not a benefit corporation. + }
SECTION 4. { + (1) Notwithstanding ORS 60.074 (2), a
corporation incorporated under this chapter is a benefit
corporation under sections 2 to 13 of this 2013 Act if the
corporation's articles of incorporation state that the
corporation is a benefit corporation subject to sections 2 to 13
of this 2013 Act.
(2) A corporation that is incorporated under this chapter may
become a benefit corporation by amending the corporation's
articles of incorporation to state, in addition to the
requirements set forth in ORS 60.047, that the corporation is a
benefit corporation subject to sections 2 to 13 of this 2013 Act.
The amendment to the articles of incorporation must be approved
as provided in section 5 of this 2013 Act.
(3) A benefit corporation may be formed by means of a
conversion if articles of conversion that state that the
converted entity will be a benefit corporation that is subject to
sections 2 to 13 of this 2013 Act are approved as provided in
section 5 of this 2013 Act.
(4) An entity that is not a benefit corporation may become a
benefit corporation by merging or exchanging shares with a
benefit corporation if the shareholders or holders of equity
interests of the entity that is not the benefit corporation
approve, as provided in section 5 of this 2013 Act, a plan of
merger or a plan for share exchange with a benefit corporation
under which the surviving entity will be a benefit corporation.
(5) A benefit corporation may become an entity other than a
benefit corporation only if an action to remove the provision in
the articles of incorporation or in the articles of conversion
that states that the entity is a benefit corporation subject to
sections 2 to 13 of this 2013 Act is approved as provided in
section 5 of this 2013 Act.
(6)(a) A plan for a benefit corporation must be approved as
provided in section 5 of this 2013 Act if the plan would:
(A) Merge the benefit corporation with an entity that is not a
benefit corporation, if the surviving entity would not be a
benefit corporation;
(B) Provide for exchanging shares with an entity that is not a
benefit corporation, if the share exchange would create an entity
that is not a benefit corporation;
(C) Convert the benefit corporation to an entity that is not a
benefit corporation; or
(D) Otherwise cause the provisions of sections 2 to 13 of this
2013 Act not to apply to the benefit corporation.
(b) A sale, lease, exchange or other disposition of all or
substantially all of a benefit corporation's assets must be
approved as provided in section 5 of this 2013 Act unless the
benefit corporation conducts the sale, lease, exchange or other
disposition in the ordinary course of the benefit corporation's
business.
(7) A provision of a benefit corporation's articles of
incorporation, articles of conversion or plan described under
subsection (6) of this section may be inconsistent with or
supersede a provision of sections 2 to 13 of this 2013 Act only
to the extent that the provision in the articles of
incorporation, articles of conversion or plan imposes a more
stringent requirement on the benefit corporation, in keeping with
the purposes set forth in sections 2 to 13 of this 2013 Act, than
a provision of sections 2 to 13 of this 2013 Act imposes. + }
SECTION 5. { + An approval of an action described in section 4
(2) to (6) or 6 of this 2013 Act is effective only if, in
addition to any other applicable requirements:
(1)(a) The shareholders of every class or series of shares of a
corporation are entitled to vote on the action regardless of a
provision in the corporation's articles of incorporation or
bylaws that limits voting participation for a class or series of
shares.
(b) At least two-thirds of the shares of each class or series
of shares that are entitled to vote on the action are voted to
approve the action.
(2)(a) The holders of every class or series of equity interest
that is entitled to receive a distribution of any kind from an
entity that is not a corporation are entitled to vote on or
consent to the action regardless of an otherwise applicable
limitation on voting participation for, or consent required from,
a class or series of equity interest.
(b) The holders of at least two-thirds of the equity interests
that are entitled to receive a distribution from the entity, and
are entitled to vote on or consent to the action, approve the
action. + }
SECTION 6. { + (1) In addition to the purpose set forth in ORS
60.074 (1), a benefit corporation has the purpose of providing a
general public benefit.
(2)(a) The articles of incorporation for a benefit corporation
may identify a specific purpose for the benefit corporation in
addition to the purposes described in subsection (1) of this
section. A benefit corporation's identification of a specific
purpose does not limit the benefit corporation's obligation to
fulfill the purposes described in subsection (1) of this section.
(b) The benefit corporation also may amend the articles of
incorporation to add, amend or remove a specific public benefit.
The amendment to the articles of incorporation must be approved
as provided in section 5 of this 2013 Act.
(3) Notwithstanding the requirement in ORS 58.076 that a
professional corporation have rendering professional service as
the professional corporation's sole purpose, a professional
corporation that is a benefit corporation shall have the purposes
set forth in ORS 58.076 and the purpose of providing a general
public benefit and may in addition have the purpose of providing
a specific public benefit.
(4) Providing a general public benefit and a specific public
benefit is in the best interest of a benefit corporation. + }
SECTION 7. { + (1) A director of a benefit corporation shall
act in the best interests of the benefit corporation and shall
discharge the director's duties as provided in ORS 60.357. In
addition, the director shall consider how an action of the
director or of the benefit corporation or a decision not to act
will affect:
(a) The shareholders of the benefit corporation;
(b) The employees of the benefit corporation;
(c) Subsidiaries and suppliers of the benefit corporation;
(d) The interest of customers of the benefit corporation in
receiving a portion of the general public benefit or specific
public benefit that the benefit corporation provides;
(e) The community in which the benefit corporation is located,
operates or has offices or other facilities and in which the
benefit corporation's subsidiaries and suppliers are located,
operate or have offices or other facilities;
(f) The local natural environment and the natural environment
worldwide;
(g) The short-term and long-term interests of the benefit
corporation, including an interest in benefits that might accrue
from the benefit corporation's long-term plans and the
possibility that the interests of the benefit corporation are
best served by keeping the benefit corporation independent; and
(h) The benefit corporation's ability to fulfill the benefit
corporation's general public benefit purpose and any specific
public benefit purpose set forth in the benefit corporation's
articles of incorporation.
(2) A director of a benefit corporation may consider how an
action of the director or of the benefit corporation or decision
not to act will affect other interests the director deems
pertinent.
(3) A director of a benefit corporation need not give a
particular interest identified in subsection (1) or (2) of this
section priority over another interest identified in subsection
(1) or (2) of this section unless the benefit corporation's
articles of incorporation identify an interest to which the
director must give priority and the interest is related to the
benefit corporation's provision of a general public benefit or a
specific public benefit.
(4) A director's consideration of the effects of an action or a
decision not to act under subsection (1) or (2) of this section
is in accordance with the provisions of ORS 60.357 as the
provisions apply to a director of a benefit corporation.
(5)(a) A director of a benefit corporation is not personally
liable for money damages as a consequence of taking an action or
deciding not to act if the director discharged the director's
duties in accordance with ORS 60.357 and the provisions of this
section.
(b) A director of a benefit corporation is not personally
liable for money damages for the benefit corporation's failure to
provide a general public benefit or a specific public benefit.
(c) A director of a benefit corporation does not have a duty to
a person as a consequence of the person's status as a beneficiary
of the general public benefit or specific public benefit that the
benefit corporation provides. + }
SECTION 8. { + (1)(a) A benefit corporation must have a board
of directors constituted as required under this chapter, one
director of which is the benefit director. The benefit director,
in addition to the powers, duties, rights, privileges and
immunities that other directors of the benefit corporation have,
has the powers, duties, rights, privileges and immunities set
forth in this section.
(b) The benefit director may not have a material relationship
with a benefit corporation or a subsidiary of a benefit
corporation. For the purposes of this paragraph, a material
relationship exists between the benefit director and the benefit
corporation or a subsidiary of the benefit corporation if:
(A) The benefit director is, or within the three years before
becoming the benefit director was, an employee of the benefit
corporation or a subsidiary of the benefit corporation, unless
the benefit corporation or a subsidiary of the benefit
corporation employs or employed the benefit director as the
benefit officer of the benefit corporation or the subsidiary of
the benefit corporation;
(B) An immediate family member of the director is, or within
the three years before the benefit director became the benefit
director was, an executive officer of the benefit corporation or
a subsidiary of the benefit corporation, unless the immediate
family member is or was the benefit officer of the benefit
corporation or a subsidiary of the benefit corporation;
(C) The director owns five percent or more of the outstanding
shares of the benefit corporation; or
(D) The director is also a director, officer or manager of, or
owns five percent or more of the equity interests of, an entity
that owns five percent or more of the outstanding equity
interests of the benefit corporation.
(c) For the purposes of paragraph (b) of this subsection, a
determination of the percentage of ownership of a benefit
corporation, a subsidiary or another entity shall presume for the
purposes of the determination that all rights to acquire equity
interests in the benefit corporation, the subsidiary or the
entity have been exercised.
(d) A benefit director may also serve as the benefit officer of
a benefit corporation.
(e) The articles of incorporation or bylaws of the benefit
corporation may set forth additional qualifications for a benefit
director that are consistent with the provisions of this section.
(2) The shareholders of the benefit corporation shall elect a
benefit director in accordance with the provisions of ORS 60.251,
60.307 and 60.311. The shareholders of the benefit corporation
may remove a benefit director in accordance with the provisions
of ORS 60.324.
(3)(a) Each year the benefit director shall prepare for
inclusion in the benefit corporation's annual benefit report to
shareholders required under section 12 of this 2013 Act a written
opinion as to whether:
(A) The benefit corporation acted in material compliance with
the general public benefit and any specific public benefit
purposes set forth for the benefit corporation in the articles of
incorporation;
(B) The directors of the benefit corporation acted in
accordance with section 7 of this 2013 Act; and
(C) The officers of the benefit corporation acted in accordance
with section 9 of this 2013 Act.
(b) If the benefit director determines that the benefit
corporation failed to act in material compliance with, or that
the directors or officers of the benefit corporation failed to
act in accordance with, the standards described in paragraph (a)
of this subsection, the benefit director shall describe in the
written opinion the nature and scope of the failure.
(4) An individual's action or decision not to act made in the
capacity of a benefit director is for all purposes the
individual's action or decision not to act in the individual's
capacity as a director of the benefit corporation.
(5) A benefit director is not personally liable for an action
or omission the benefit director made in the benefit director's
capacity as a benefit director unless the action or omission
constituted self-dealing, willful misconduct or a knowing
violation of law. + }
SECTION 9. { + (1) An officer of a benefit corporation shall
act in the best interests of the benefit corporation and shall
discharge the officer's duties as provided in ORS 60.374 and
60.377. In addition, the officer shall consider the effects of an
action of the officer or of the benefit corporation or of a
decision not to act:
(a) To the extent the officer has the discretion to take the
action or to decide not to act;
(b) If, in the officer's reasonable judgment, the action or
decision not to act may have a material effect on the general
public benefit or a specific public benefit the benefit
corporation provides; and
(c) In accordance with the provisions set forth under section 7
(1) to (3) of this 2013 Act for a director's consideration of the
effects of the action or the decision not to act.
(2) An officer's consideration of the effects of an action or a
decision not to act under subsection (1) of this section is in
accordance with the provisions of ORS 60.374 and 60.377 as the
provisions apply to an officer of a benefit corporation.
(3)(a) An officer of a benefit corporation is not personally
liable for money damages as a consequence of taking an action or
deciding not to act if the officer discharged the officer's
duties in accordance with ORS 60.374 and 60.377 and the
provisions of this section.
(b) An officer of a benefit corporation is not personally
liable for money damages for the benefit corporation's failure to
provide a general public benefit or a specific public benefit.
(c) An officer of a benefit corporation does not have a duty to
a person as a consequence of the person's status as a beneficiary
of the general public benefit or specific public benefit that the
benefit corporation provides. + }
SECTION 10. { + (1) A benefit corporation may designate an
officer of the benefit corporation as the benefit corporation's
benefit officer.
(2) A benefit officer has the duty to oversee and the powers
necessary to fulfill the benefit corporation's purpose of
providing a general public benefit and any specific public
benefit set forth in the benefit corporation's articles of
incorporation. The benefit officer shall act in accordance with
the duties and powers specified in the benefit corporation's
bylaws or, in the absence of controlling provisions in the
bylaws, in accordance with resolutions or orders from the benefit
corporation's board of directors.
(3) The duties and powers described in subsection (2) of this
section must include the duty and power to prepare the annual
benefit report required under section 12 of this 2013 Act. + }
SECTION 11. { + (1) Except as provided in subsection (2) of
this section, a person may not commence a proceeding against a
benefit corporation or the directors or officers of a benefit
corporation to assert a claim that the benefit corporation,
directors or officers:
(a) Failed to provide a general public benefit or a specific
public benefit set forth in the benefit corporation's articles of
incorporation; or
(b) Violated a duty or a standard of conduct prescribed under
sections 2 to 13 of this 2013 Act.
(2) A person may commence a direct or derivative proceeding, as
appropriate, to compel a benefit corporation to provide a general
public benefit or a specific public benefit or to require a
director or officer to act in accordance with a duty or a
standard of conduct set forth in the benefit corporation's
articles of incorporation or under sections 2 to 13 of this 2013
Act only if the person is:
(a) The benefit corporation;
(b) A shareholder;
(c) A director;
(d) A beneficial owner or an owner of record of five percent or
more of the equity interests of an entity of which the benefit
corporation is a subsidiary; or
(e) Another person identified in the benefit corporation's
bylaws or articles of incorporation as having a right to commence
a proceeding under this section.
(3) A benefit corporation is not liable for money damages as a
consequence of failing to provide a general public benefit or a
specific public benefit. + }
SECTION 12. { + (1) A benefit corporation each year shall
prepare and deliver a benefit report.
(2)(a) The benefit report shall give a narrative description
of:
(A) The extent to which the benefit corporation provided a
general public benefit and the actions and methods the benefit
corporation used to provide the general public benefit.
(B) The extent to which the benefit corporation provided a
specific public benefit that the benefit corporation's articles
of incorporation require the benefit corporation to provide and
the actions and methods the benefit corporation used to provide
the specific public benefit.
(C) Any circumstances that hindered or prevented the benefit
corporation from providing a general public benefit or a specific
public benefit.
(b) In addition to the descriptions required under paragraph
(a) of this subsection, the benefit report shall:
(A) Assess the extent to which the benefit corporation met or
exceeded an objective standard of the type described in section
13 of this 2013 Act. The benefit corporation shall conduct the
assessment and evaluate the benefit corporation's performance
with respect to the objective standard in a manner that is
consistent with assessments and evaluations done in previous
benefit reports or shall explain the reasons for an inconsistent
assessment or evaluation.
(B) Describe the process and rationale the benefit corporation
used to select or to change the objective standard described in
subparagraph (A) of this paragraph.
(C) Disclose:
(i) The names of the benefit director and the benefit officer,
if any, and the address or other contact information for the
director and officer;
(ii) The compensation the benefit corporation paid during the
previous year to each director of the benefit corporation for
services as a director; and
(iii) The name of each person that owns five percent or more of
the shares of the benefit corporation, whether the ownership is
of record or is beneficial, to the extent that the benefit
corporation knows the identity of a beneficial owner without
independent investigation.
(D) Include:
(i) The opinion the benefit director prepared under section 8
(3) of this 2013 Act; and
(ii) A statement that describes any connection between the
benefit corporation and the benefit corporation's directors,
officers or material owners and the organization that established
the objective standard described in section 13 of this 2013 Act
and the organization's directors, officers or material owners.
The statement must disclose any financial or governance
relationship that might materially affect the objectivity of the
standard or the credibility of the benefit corporation's use of
the standard.
(3)(a) The benefit corporation each year shall deliver a copy
of the benefit report to each shareholder within 120 days after
the end of the benefit corporation's fiscal year and at the same
time the benefit corporation delivers any other annual report to
shareholders.
(b) The benefit corporation shall deliver a copy of the benefit
report to the Secretary of State for filing at the same time the
benefit corporation delivers the benefit report to shareholders.
(4) A benefit corporation shall post on the publicly accessible
pages of the benefit corporation's website all of the benefit
corporation's benefit reports or shall provide a copy of the most
recent benefit report without charge to a person that requests a
copy.
(5) The benefit corporation may omit the disclosures described
in subsection (2)(b)(C)(ii) of this section and any financial or
proprietary information included in the benefit report from
copies of the benefit report that the benefit corporation posts,
delivers or provides under subsections (3)(b) and (4) of this
section. + }
SECTION 13. { + (1) The benefit corporation shall measure the
extent to which the benefit corporation provides a general public
benefit and any specific public benefit set forth in the benefit
corporation's articles of incorporation against an objective
standard that meets the criteria set forth in subsection (2) of
this section.
(2) For purposes of this section, an objective standard is a
standard that:
(a) Was developed by an organization that has no material
relationship with the benefit corporation. For the purposes of
this paragraph, the organization may not:
(A) Have as more than one-third of the membership of the
organization's governing body representatives from:
(i) An association of businesses that operate in a specific
industry for which the standard is a measurement of the
performance of the businesses;
(ii) A business from a specific industry or an association of
businesses in the specific industry; or
(iii) A business for which the standard is a measurement of
performance.
(B) Have received material financing from an association or
business described in subparagraph (A) of this paragraph.
(C) Have as an executive officer or an officer with
responsibility for developing or applying the standard an
individual who is, or within the three years before the benefit
corporation began to use the standard was, an employee of the
benefit corporation or a subsidiary of the benefit corporation.
(D) Have as an executive officer or an officer with
responsibility for developing or applying the standard an
individual who is an immediate family member of an executive
officer of the benefit corporation or of a subsidiary of the
benefit corporation.
(E) Own, directly or indirectly, or have as a director or
officer of the organization an individual who owns, directly or
indirectly, five percent or more of the outstanding shares of the
benefit corporation. Determining ownership of the benefit
corporation under this subparagraph entails the presumption that
all rights to acquire shares in the benefit corporation have been
exercised.
(b) Was developed by an organization that:
(A) Has or has access to the expertise necessary to assess
existing social and environmental conditions in the communities
in which the benefit corporation operates and to assess
improvements in the social and environmental conditions; and
(B) Consults with a range of stakeholder groups and individuals
and allows the groups and individuals to comment on a proposed
standard or an amendment to a proposed standard for a period of
at least 30 days.
(c) Is open and publicly available. For the purposes of this
paragraph, the standard is open and publicly available if:
(A) The criteria used to develop the standard and to evaluate
performance relative to the standard, along with the relative
weight given to the criteria in evaluating performance, are
published and accessible to the public;
(B) The identities of the directors, officers, material owners
and members of the governing body of the organization that
develops and revises the standard are published and accessible to
the public;
(C) A description of the process the organization uses to
develop and revise the standard and the process by which the
membership of the governing body of the organization is
constituted and changed is published and accessible to the
public; and
(D) The sources of financial support for the organization are
published and accessible to the public in enough detail to
disclose any relationships between the sources and the
organization that could reasonably be considered to present a
conflict of interest. + }
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