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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| HOUSE BILL |
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| INTRODUCED BY GERBER, BRIGGS, CALTAGIRONE, FABRIZIO, JOSEPHS, MURT, PAYTON, SANTARSIERO, STURLA AND WAGNER, MAY 23, 2011 |
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| REFERRED TO COMMITTEE ON COMMERCE, MAY 23, 2011 |
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| AN ACT |
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1 | Amending Title 15 (Corporations and Unincorporated Associations) |
2 | of the Pennsylvania Consolidated Statutes, authorizing |
3 | incorporation of benefit corporations; providing for rights, |
4 | duties and obligations of benefit corporations and their |
5 | shareholders, directors and officers; and imposing powers and |
6 | duties on the Department of State. |
7 | The General Assembly of the Commonwealth of Pennsylvania |
8 | hereby enacts as follows: |
9 | Section 1. Title 15 of the Pennsylvania Consolidated |
10 | Statutes is amended by adding a chapter to read: |
11 | CHAPTER 33 |
12 | BENEFIT CORPORATIONS |
13 | Subchapter |
14 | A. Preliminary Provisions |
15 | B. Corporate Purposes |
16 | C. Accountability |
17 | D. Transparency |
18 | SUBCHAPTER A |
19 | PRELIMINARY PROVISIONS |
20 | Sec. |
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1 | 3301. Application and effect of chapter. |
2 | 3302. Definitions. |
3 | 3303. Formation of benefit corporations. |
4 | 3304. Election of status. |
5 | 3305. Termination of status. |
6 | § 3301. Application and effect of chapter. |
7 | (a) General rule.--This chapter shall be applicable to all |
8 | benefit corporations. |
9 | (b) Application of business corporation law generally.--The |
10 | existence of a provision of this chapter shall not of itself |
11 | create an implication that a contrary or different rule of law |
12 | is applicable to a business corporation which is not a benefit |
13 | corporation. This chapter shall not affect a statute or rule of |
14 | law which is applicable to a business corporation that is not a |
15 | benefit corporation. |
16 | (c) Laws applicable.--Except as otherwise provided in this |
17 | chapter, this subpart shall be generally applicable to all |
18 | benefit corporations. The specific provisions of this chapter |
19 | shall control over the general provisions of this subpart. A |
20 | benefit corporation may be simultaneously subject to this |
21 | chapter and one or more other chapters of this article. |
22 | (d) Organic records.--A provision of the articles or bylaws |
23 | of a benefit corporation may not relax, be inconsistent with or |
24 | supersede a provision of this chapter. |
25 | § 3302. Definitions. |
26 | (a) Defined terms.--The following words and phrases when |
27 | used in this chapter shall have the meanings given to them in |
28 | this section unless the context clearly indicates otherwise: |
29 | "Benefit corporation." A business corporation: |
30 | (1) which has elected to become subject to this chapter; |
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1 | and |
2 | (2) the status of which as a benefit corporation has not |
3 | been terminated under section 3305 (relating to termination |
4 | of status). |
5 | "Benefit director." The director designated as the benefit |
6 | director of a benefit corporation under section 3322 (relating |
7 | to benefit director). |
8 | "Benefit enforcement proceeding." Any claim or action |
9 | brought directly by a benefit corporation, or derivatively on |
10 | behalf of a benefit corporation, against a director or officer |
11 | for: |
12 | (1) failure to pursue the general public benefit purpose |
13 | of the benefit corporation or a specific public benefit |
14 | purpose set forth in its articles; or |
15 | (2) violation of a duty or standard of conduct under |
16 | this chapter. |
17 | "Benefit officer." The individual designated as the benefit |
18 | officer of a benefit corporation under section 3324 (relating to |
19 | benefit officer). |
20 | "General public benefit." A material positive impact on |
21 | society and the environment, taken as a whole, as measured by a |
22 | third-party standard, from the business and operations of a |
23 | benefit corporation. |
24 | "Independent." Having no material relationship with a |
25 | benefit corporation or a subsidiary of the benefit corporation. |
26 | Serving as benefit director or benefit officer does not make a |
27 | person not independent. A material relationship between a person |
28 | and a benefit corporation or any of its subsidiaries will be |
29 | conclusively presumed to exist if any of the following apply: |
30 | (1) The person is, or has been within the last three |
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1 | years, an employee other than a benefit officer of the |
2 | benefit corporation or a subsidiary of the benefit |
3 | corporation. |
4 | (2) An immediate family member of the person is, or has |
5 | been within the last three years, an executive officer other |
6 | than a benefit officer of the benefit corporation or its |
7 | subsidiary. |
8 | (3) There is beneficial or record ownership of 5% or |
9 | more of the outstanding shares of the benefit corporation by: |
10 | (i) the person; or |
11 | (ii) an association: |
12 | (A) of which the person is a director, an |
13 | officer or a manager; or |
14 | (B) in which the person owns beneficially or of |
15 | record 5% or more of the outstanding equity |
16 | interests. |
17 | This definition is subject to subsection (b). |
18 | "Minimum status vote." In addition to any other approval or |
19 | vote required by this subpart or a bylaw adopted by the |
20 | shareholders, the satisfaction of the following conditions: |
21 | (1) The shareholders of every class or series must be |
22 | entitled to vote on the corporate action regardless of a |
23 | limitation stated in the articles of incorporation or bylaws |
24 | on the voting rights of any class or series. |
25 | (2) The corporate action must be approved by vote of the |
26 | shareholders of each class or series entitled to cast at |
27 | least two-thirds of the votes that all shareholders of the |
28 | class or series are entitled to cast on the action. |
29 | "Specific public benefit." Includes: |
30 | (1) providing low-income or underserved individuals or |
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1 | communities with beneficial products or services; |
2 | (2) promoting economic opportunity for individuals or |
3 | communities beyond the creation of jobs in the normal course |
4 | of business; |
5 | (3) preserving the environment; |
6 | (4) improving human health; |
7 | (5) promoting the arts, sciences or advancement of |
8 | knowledge; |
9 | (6) increasing the flow of capital to entities with a |
10 | public benefit purpose; and |
11 | (7) conferring any other particular benefit on society |
12 | or the environment. |
13 | "Subsidiary." In relation to a person, an association in |
14 | which the person owns beneficially or of record 50% or more of |
15 | the outstanding equity interests. This definition is subject to |
16 | subsection (b). |
17 | "Third-party standard." A standard for defining, reporting |
18 | and assessing overall corporate social and environmental |
19 | performance which is: |
20 | (1) Comprehensive in that it assesses the effect of the |
21 | business and its operations upon the interests listed in |
22 | section 3321(a)(1)(ii), (iii), (iv) and (v) (relating to |
23 | standard of conduct for directors). |
24 | (2) Developed by an organization that is independent of |
25 | the benefit corporation and satisfies the following |
26 | requirements: |
27 | (i) Not more than one-third of the members of the |
28 | governing body of the organization are representatives of |
29 | either: |
30 | (A) An association of businesses operating in a |
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1 | specific industry the performance of whose members is |
2 | measured by the standard. |
3 | (B) Businesses whose performance is measured by |
4 | the standard. |
5 | (ii) The organization is not materially financed by |
6 | an association or business described in subparagraph (i). |
7 | (3) Credible because the standard is developed by a |
8 | person who both: |
9 | (i) Has access to necessary expertise to assess |
10 | overall corporate social and environmental performance. |
11 | (ii) Uses a balanced multistakeholder approach, |
12 | including a public comment period of at least 30 days to |
13 | develop the standard. |
14 | (4) Transparent because the following information is |
15 | publicly available: |
16 | (i) About the standard: |
17 | (A) The criteria considered when measuring the |
18 | overall social and environmental performance of a |
19 | business. |
20 | (B) The relative weightings of those criteria. |
21 | (ii) About the development and revision of the |
22 | standard: |
23 | (A) The identity of the directors, officers, |
24 | material owners and the governing body of the |
25 | organization that developed and controls revisions to |
26 | the standard. |
27 | (B) The process by which revisions to the |
28 | standard and changes to the membership of the |
29 | governing body are made. |
30 | (C) An accounting of the sources of financial |
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1 | support for the organization, with sufficient detail |
2 | to disclose any relationships that could reasonably |
3 | be considered to present a potential conflict of |
4 | interest. |
5 | (b) Computation of ownership.-–For purposes of the |
6 | definitions of "independent" and "subsidiary" in subsection (a), |
7 | a percentage of ownership in an association shall be calculated |
8 | as if all outstanding rights to acquire equity interests in the |
9 | association had been exercised. |
10 | § 3303. Formation of benefit corporations. |
11 | A benefit corporation must be formed in accordance with |
12 | Article B (relating to domestic business corporations |
13 | generally), but its articles must also state that it is a |
14 | benefit corporation. |
15 | § 3304. Election of status. |
16 | (a) Amendment.--A business corporation may become a benefit |
17 | corporation under this chapter by amending its articles so that |
18 | they contain, in addition to the requirements of section 1911(b) |
19 | (relating to amendment of articles authorized), a statement that |
20 | the corporation is a benefit corporation. In order to be |
21 | effective, the amendment must be adopted by the minimum status |
22 | vote. |
23 | (b) Fundamental transactions.-- |
24 | (1) This subsection applies if all of the following |
25 | subparagraphs apply: |
26 | (i) A corporation that is not a benefit corporation |
27 | is: |
28 | (A) a party to a merger, consolidation or |
29 | division; or |
30 | (B) the exchanging corporation in a share |
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1 | exchange. |
2 | (ii) The surviving, new or any resulting corporation |
3 | in the merger, consolidation, division or share exchange |
4 | is to be a benefit corporation. |
5 | (2) In order to be effective, a plan of merger, |
6 | consolidation, division or share exchange subject to this |
7 | subsection must be adopted by the minimum status vote. |
8 | § 3305. Termination of status. |
9 | (a) Amendment.--A benefit corporation may terminate its |
10 | status as such and cease to be subject to this chapter by |
11 | amending its articles to delete the provision required by |
12 | section 3304 (relating to election of status) to be stated in |
13 | the articles of a benefit corporation. In order to be effective, |
14 | the amendment must be adopted by the minimum status vote. |
15 | (b) Fundamental transactions.--If a plan would have the |
16 | effect of terminating the status of a business corporation as a |
17 | benefit corporation, in order to be effective, the plan must be |
18 | adopted by the minimum status vote. |
19 | (c) Cross reference.--See section 3331 (relating to annual |
20 | benefit report). |
21 | SUBCHAPTER B |
22 | CORPORATE PURPOSES |
23 | Sec. |
24 | 3311. Corporate purposes. |
25 | § 3311. Corporate purposes. |
26 | (a) General public benefit purpose.--A benefit corporation |
27 | shall have the purpose of creating general public benefit. This |
28 | purpose is in addition to its purpose under section 1301 |
29 | (relating to purposes). |
30 | (b) Optional specific public benefit purpose.--The articles |
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1 | of a benefit corporation may identify one or more specific |
2 | public benefits that it is the purpose of the benefit |
3 | corporation to create in addition to its purposes under section |
4 | 1301 and subsection (a). The identification of a specific public |
5 | benefit under this subsection does not limit the obligation of a |
6 | benefit corporation under subsection (a). |
7 | (c) Effect of purposes.-–The creation of general public |
8 | benefit and specific public benefit under subsections (a) and |
9 | (b) is in the best interests of the benefit corporation. |
10 | (d) Amendment.--A benefit corporation may amend its articles |
11 | to add, amend or delete the identification of a specific public |
12 | benefit that it is the purpose of the benefit corporation to |
13 | create. In order to be effective, the amendment must be adopted |
14 | by the minimum status vote. |
15 | SUBCHAPTER C |
16 | ACCOUNTABILITY |
17 | Sec. |
18 | 3321. Standard of conduct for directors. |
19 | 3322. Benefit director. |
20 | 3323. Standard of conduct for officers. |
21 | 3324. Benefit officer. |
22 | 3325. Right of action. |
23 | § 3321. Standard of conduct for directors. |
24 | (a) Required considerations.--Without regard to whether the |
25 | benefit corporation is subject to section 1715 (relating to |
26 | exercise of powers generally) or 1716 (relating to alternative |
27 | standard), in discharging the duties of their respective |
28 | positions and in considering the best interests of the benefit |
29 | corporation, the board of directors, committees of the board and |
30 | individual directors of a benefit corporation: |
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1 | (1) shall consider the effects of any action upon: |
2 | (i) the shareholders of the benefit corporation; |
3 | (ii) the employees and work force of the benefit |
4 | corporation, its subsidiaries and its suppliers; |
5 | (iii) the interests of customers as beneficiaries of |
6 | the general public benefit or specific public benefit |
7 | purposes of the benefit corporation; |
8 | (iv) community and societal factors, including those |
9 | of each community in which offices or facilities of the |
10 | benefit corporation, its subsidiaries or its suppliers |
11 | are located; |
12 | (v) the local and global environment; |
13 | (vi) the short-term and long-term interests of the |
14 | benefit corporation, including benefits that may accrue |
15 | to the benefit corporation from its long-term plans and |
16 | the possibility that these interests may be best served |
17 | by the continued independence of the benefit corporation; |
18 | and |
19 | (vii) the ability of the benefit corporation to |
20 | accomplish its general public benefit purpose and any |
21 | specific public benefit purpose; and |
22 | (2) may consider: |
23 | (i) matters listed in section 1715(a)(3); and |
24 | (ii) other pertinent factors or the interests of any |
25 | other group which they deem appropriate; but |
26 | (3) need not give priority to the interests of a |
27 | particular person or group referred to in paragraph (1) or |
28 | (2) over the interests of another person or group unless the |
29 | benefit corporation has stated its intention to give priority |
30 | to interests related to a specific public benefit purpose |
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1 | identified in its articles. |
2 | (b) Coordination with other provisions of law.--The |
3 | consideration of interests and factors in the manner required by |
4 | subsection (a): |
5 | (1) does not constitute a violation of section 1712 |
6 | (relating to standard of care and justifiable reliance); and |
7 | (2) is in addition to the ability of directors to |
8 | consider interests and factors as provided in section 1715 or |
9 | 1716. |
10 | (c) Exoneration from personal liability generally.--A |
11 | director is not personally liable for monetary damages for: |
12 | (1) action taken as a director if the director performed |
13 | the duties of office in compliance with section 1712 and this |
14 | section; or |
15 | (2) failure of the benefit corporation to create general |
16 | public benefit or a specific public benefit. |
17 | (d) Limitation on standing.--A director does not have a |
18 | fiduciary duty to a person that is a beneficiary of the general |
19 | or specific public benefit purposes of a benefit corporation |
20 | arising from the status of the person as a beneficiary. |
21 | § 3322. Benefit director. |
22 | (a) General rule.--The board of directors of a benefit |
23 | corporation shall include one director, who: |
24 | (1) shall be designated the benefit director; and |
25 | (2) shall have, in addition to the powers, duties, |
26 | rights and immunities of the other directors of the benefit |
27 | corporation, the powers, duties, rights and immunities |
28 | provided in this subchapter. |
29 | (b) Election, removal and qualifications.--The benefit |
30 | director shall be elected, and may be removed, in the manner |
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1 | provided by Ch. 17 Subch. C (relating to directors and |
2 | officers), and shall be an individual who is independent. The |
3 | benefit director may serve as the benefit officer at the same |
4 | time as serving as the benefit director. The articles or bylaws |
5 | of a benefit corporation may prescribe additional qualifications |
6 | of the benefit director not inconsistent with this subsection. |
7 | (c) Annual compliance statement.--The benefit director shall |
8 | prepare, and the benefit corporation shall include in the annual |
9 | benefit report to shareholders required by section 3331 |
10 | (relating to annual benefit report), the opinion of the benefit |
11 | director on all of the following: |
12 | (1) Whether the benefit corporation acted in accordance |
13 | with its general public benefit purpose and any specific |
14 | public benefit purpose in all material respects during the |
15 | period covered by the report. |
16 | (2) Whether the directors and officers complied with |
17 | sections 3321(a) (relating to standard of conduct for |
18 | directors) and 3323(a) (relating to standard of conduct for |
19 | officers), respectively. |
20 | (3) If, in the opinion of the benefit director, the |
21 | benefit corporation or its directors or officers failed to |
22 | comply with paragraph (2), a description of the ways in which |
23 | the benefit corporation or its directors or officers failed |
24 | to comply. |
25 | (d) Status of actions.--The acts of an individual in the |
26 | capacity of a benefit director shall constitute for all purposes |
27 | acts of that individual in the capacity of a director of the |
28 | benefit corporation. |
29 | (e) Alternative governance arrangements.--The bylaws of a |
30 | benefit corporation must provide that the persons or share |
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1 | holders who perform the duties of the board of directors include |
2 | a person with the powers, duties, rights and immunities of a |
3 | benefit director if any of the following apply: |
4 | (1) The bylaws of a benefit corporation provide that the |
5 | powers and duties conferred or imposed upon the board of |
6 | directors be exercised or performed by a person other than |
7 | the directors under section 1721(a) (relating to board of |
8 | directors). |
9 | (2) The bylaws of a statutory close corporation that is |
10 | a benefit corporation provide that the business and affairs |
11 | of the corporation be managed by or under the direction of |
12 | the shareholders. |
13 | (f) Exoneration from personal liability.--Regardless of |
14 | whether the bylaws of a benefit corporation include a provision |
15 | eliminating or limiting the personal liability of directors |
16 | authorized by section 1713 (relating to personal liability of |
17 | directors), a benefit director shall not be personally liable |
18 | for an act or omission in the capacity of a benefit director |
19 | unless the act or omission constitutes self-dealing, willful |
20 | misconduct or a knowing violation of law. |
21 | § 3323. Standard of conduct for officers. |
22 | (a) General rule.-–Each officer of a benefit corporation |
23 | shall consider the interests and factors described in section |
24 | 3321(a) (relating to standard of conduct for directors) in the |
25 | manner provided in that subsection if: |
26 | (1) the officer has discretion to act with respect to a |
27 | matter; and |
28 | (2) it reasonably appears to the officer that the matter |
29 | may have a material effect on the creation of general public |
30 | benefit or a specific public benefit by the benefit |
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1 | corporation. |
2 | (b) Coordination with other provisions of law.--The |
3 | consideration of interests and factors in the manner described |
4 | in subsection (a) shall not constitute a violation of section |
5 | 1712(c) (relating to standard of care and justifiable reliance). |
6 | (c) Exoneration from personal liability.--An officer is not |
7 | personally liable for monetary damages for: |
8 | (1) action taken as an officer if the officer performed |
9 | the duties of the position in compliance with section 1712(c) |
10 | and this section; or |
11 | (2) failure of the benefit corporation to create general |
12 | public benefit or specific public benefit. |
13 | (d) Limitation on standing.--An officer does not have a |
14 | fiduciary duty to a person that is a beneficiary of the general |
15 | or specific public benefit purposes of a benefit corporation |
16 | arising from the status of the person as a beneficiary. |
17 | § 3324. Benefit officer. |
18 | (a) Designation.--A benefit corporation may have an officer |
19 | designated the benefit officer. |
20 | (b) Functions.--A benefit officer shall have: |
21 | (1) powers and duties relating to the purpose of the |
22 | corporation to create general public benefit or specific |
23 | public benefit provided: |
24 | (i) by the bylaws; or |
25 | (ii) absent controlling provisions in the bylaws, by |
26 | resolutions or orders of the board of directors. |
27 | (2) the duty to prepare the benefit report required by |
28 | section 3331 (relating to annual benefit report). |
29 | § 3325. Right of action. |
30 | (a) Type of proceeding.--The duties of directors and |
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1 | officers under this chapter, and the general public benefit |
2 | purpose and any specific public benefit purpose of a benefit |
3 | corporation, may be enforced only in a benefit enforcement |
4 | proceeding. No person may bring an action or assert a claim |
5 | against a benefit corporation or its directors or officers with |
6 | respect to the duties of directors and officers under this |
7 | chapter and the general public benefit purpose and any specific |
8 | public benefit purpose of the benefit corporation except in a |
9 | benefit enforcement proceeding. |
10 | (b) Standing.--A benefit enforcement proceeding may be |
11 | commenced or maintained only: |
12 | (1) directly by the benefit corporation; or |
13 | (2) derivatively by: |
14 | (i) a shareholder; |
15 | (ii) a director; |
16 | (iii) a person or group of persons that owns |
17 | beneficially or of record 5% or more of the equity |
18 | interests in an association of which the benefit |
19 | corporation is a subsidiary; or |
20 | (iv) other persons as specified in the articles or |
21 | bylaws of the benefit corporation. |
22 | (c) Cross reference.--See Subchapter F of Chapter 17 |
23 | (relating to derivative actions). |
24 | SUBCHAPTER D |
25 | TRANSPARENCY |
26 | Sec. |
27 | 3331. Annual benefit report. |
28 | § 3331. Annual benefit report. |
29 | (a) Contents.--A benefit corporation shall prepare an annual |
30 | benefit report including all of the following: |
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1 | (1) A narrative description of all of the following: |
2 | (i) The ways in which the benefit corporation |
3 | pursued general public benefit during the year and the |
4 | extent to which general public benefit was created. |
5 | (ii) Both: |
6 | (A) the ways in which the benefit corporation |
7 | pursued a specific public benefit which the articles |
8 | state it is the purpose of the benefit corporation to |
9 | create; and |
10 | (B) the extent to which that specific public |
11 | benefit was created. |
12 | (iii) Any circumstances that have hindered the |
13 | creation by the benefit corporation of general public |
14 | benefit or specific public benefit. |
15 | (2) An assessment of the overall social and |
16 | environmental performance of the benefit corporation. The |
17 | assessment shall be prepared in accordance with a third-party |
18 | standard: |
19 | (i) applied consistently with any application of |
20 | that standard in prior benefit reports; or |
21 | (ii) accompanied by an explanation of the reasons |
22 | for any inconsistent application. |
23 | (3) The name of the benefit director and the benefit |
24 | officer and the address to which correspondence to each of |
25 | them may be directed. |
26 | (4) The compensation paid by the benefit corporation |
27 | during the year to each director in the capacity of a |
28 | director. |
29 | (5) The name of each person that owns 5% or more of the |
30 | outstanding shares of the benefit corporation either: |
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1 | (i) beneficially, to the extent known to the benefit |
2 | corporation without independent investigation; or |
3 | (ii) of record. |
4 | (6) The statement of the benefit director described in |
5 | section 3322(c) (relating to benefit director). |
6 | (b) Timing of report.--The benefit report shall be sent |
7 | annually to each shareholder: |
8 | (1) within 120 days following the end of the fiscal year |
9 | of the benefit corporation; or |
10 | (2) at the same time that the benefit corporation |
11 | delivers any other annual report to its shareholders. |
12 | (c) Internet website posting.--A benefit corporation shall |
13 | post its most recent benefit report on the public portion of its |
14 | Internet website, if any, but the compensation paid to directors |
15 | and financial or proprietary information included in the benefit |
16 | report may be omitted from the benefit report as posted. |
17 | (d) Filing of report.-- |
18 | (1) Concurrently with the delivery of the benefit report |
19 | to shareholders under subsection (b), the benefit corporation |
20 | shall deliver a copy of the benefit report to the department |
21 | for filing, but the compensation paid to directors and |
22 | financial or proprietary information included in the benefit |
23 | report may be omitted from the benefit report as delivered to |
24 | the department. |
25 | (2) The department shall charge a fee of $70 for filing |
26 | a benefit report. |
27 | Section 2. This act shall take effect in 60 days. |
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