Bill Text: TX HB3488 | 2017-2018 | 85th Legislature | Enrolled

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Bill Title: Relating to authorizing public benefit corporations.

Sponsorship: Slight Partisan Bill (Republican 4-2)

Status: (Passed) 2017-06-14 - Effective on 9/1/17 [HB3488 Detail]

Download: Texas-2017-HB3488-Enrolled.html

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H.B. No. 3488

AN ACT
relating to authorizing public benefit corporations.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 3.007, Business Organizations Code, is
amended by adding Subsection (e) to read as follows:
(e) Notwithstanding Section 2.008, instead of including in
its certificate of formation or amending its certificate of
formation to include one or more social purposes as provided by
Subsection (d), a for-profit corporation may elect to be a public
benefit corporation governed by Subchapter S, Chapter 21, by
including in its initially filed certificate of formation, or,
subject to Section 21.954, by amending its certificate of formation
to include:
(1) one or more specific public benefits, as defined
by Section 21.952, to be promoted by the corporation; and
(2) instead of the statement required by Section
3.005(a)(2), a statement that the filing entity is a for-profit
corporation electing to be a public benefit corporation.
SECTION 2. Section 10.352(2), Business Organizations Code,
is amended to read as follows:
(2) "Responsible organization" means:
(A) the organization responsible for:
(i) the provision of notices under this
subchapter; and
(ii) the primary obligation of paying the
fair value for an ownership interest held by a dissenting owner;
(B) with respect to a merger or conversion:
(i) for matters occurring before the merger
or conversion, the organization that is merging or converting; and
(ii) for matters occurring after the merger
or conversion, the surviving or new organization that is primarily
obligated for the payment of the fair value of the dissenting
owner's ownership interest in the merger or conversion;
(C) with respect to an interest exchange, the
organization the ownership interests of which are being acquired in
the interest exchange; [and]
(D) with respect to the sale of all or
substantially all of the assets of an organization, the
organization the assets of which are to be transferred by sale or in
another manner; and
(E) with respect to an amendment to a domestic
for-profit corporation's certificate of formation described by
Section 10.354(a)(1)(G), the corporation.
SECTION 3. Section 10.354, Business Organizations Code, is
amended by amending Subsection (a) and adding Subsection (d) to
read as follows:
(a) Subject to Subsection (b), an owner of an ownership
interest in a domestic entity subject to dissenters' rights is
entitled to:
(1) dissent from:
(A) a plan of merger to which the domestic entity
is a party if owner approval is required by this code and the owner
owns in the domestic entity an ownership interest that was entitled
to vote on the plan of merger;
(B) a sale of all or substantially all of the
assets of the domestic entity if owner approval is required by this
code and the owner owns in the domestic entity an ownership interest
that was entitled to vote on the sale;
(C) a plan of exchange in which the ownership
interest of the owner is to be acquired;
(D) a plan of conversion in which the domestic
entity is the converting entity if owner approval is required by
this code and the owner owns in the domestic entity an ownership
interest that was entitled to vote on the plan of conversion;
(E) a merger effected under Section 10.006 in
which:
(i) the owner is entitled to vote on the
merger; or
(ii) the ownership interest of the owner is
converted or exchanged; [or]
(F) a merger effected under Section 21.459(c) in
which the shares of the shareholders are converted or exchanged; or
(G) if the owner owns shares that were entitled
to vote on the amendment, an amendment to a domestic for-profit
corporation's certificate of formation to:
(i) add the provisions required by Section
3.007(e) to elect to be a public benefit corporation; or
(ii) delete the provisions required by
Section 3.007(e), which in effect cancels the corporation's
election to be a public benefit corporation; and
(2) subject to compliance with the procedures set
forth in this subchapter, obtain the fair value of that ownership
interest through an appraisal.
(d) Notwithstanding Subsection (a), an owner of an
ownership interest in a domestic for-profit corporation subject to
dissenters' rights may not dissent from an amendment to the
corporation's certificate of formation described by Subsection
(a)(1)(G) if the shares held by the owner are part of a class or
series of shares, on the record date set for purposes of determining
which owners are entitled to vote on the amendment:
(1) listed on a national securities exchange; or
(2) held of record by at least 2,000 owners.
SECTION 4. Chapter 21, Business Organizations Code, is
amended by adding Subchapter S to read as follows:
SUBCHAPTER S. PUBLIC BENEFIT CORPORATIONS
Sec. 21.951. LAW APPLICABLE TO PUBLIC BENEFIT CORPORATIONS;
FORMATION. (a) A for-profit corporation may elect under Section
3.007(e) to be a public benefit corporation that is governed by this
subchapter.
(b) If a corporation elects to be a public benefit
corporation, the corporation is subject to the other provisions of
this chapter and other provisions of this code applicable to
for-profit corporations.
(c) To the extent of a conflict between this subchapter and
another provision of this chapter or another provision of this code
applicable to for-profit corporations, this subchapter controls.
Sec. 21.952. DEFINITIONS. In this subchapter:
(1) "Public benefit" means a positive effect, or a
reduction of a negative effect, on one or more categories of
persons, entities, communities, or interests, other than
shareholders in their capacities as shareholders of the
corporation, including effects of an artistic, charitable,
cultural, economic, educational, environmental, literary, medical,
religious, scientific, or technological nature.
(2) "Public benefit corporation" means a domestic
for-profit corporation that elects under Section 3.007(e) to be a
public benefit corporation governed by this subchapter.
(3) "Public benefit provisions" means the provisions
of a certificate of formation that are required by Section 3.007(e)
and this subchapter.
Sec. 21.953. PURPOSE OF PUBLIC BENEFIT CORPORATION; NAME OF
CORPORATION. (a) A public benefit corporation is a domestic
for-profit corporation that is intended to produce a public benefit
or benefits and to operate in a responsible and sustainable manner.
(b) To accomplish the purpose of the corporation described
by Subsection (a), a public benefit corporation shall be managed in
a manner that balances:
(1) the shareholders' pecuniary interests;
(2) the best interests of those persons materially
affected by the corporation's conduct; and
(3) the public benefit or benefits specified in the
corporation's certificate of formation.
(c) The name of the public benefit corporation specified in
its certificate of formation may contain the words "public benefit
corporation," the abbreviation "P.B.C.," or the designation "PBC."
If the name does not contain those words or that abbreviation or
designation, the corporation must, before issuing unissued shares
or disposing of treasury shares and except as provided by
Subsection (d), provide notice that the corporation is a public
benefit corporation to any person:
(1) to whom the unissued shares are issued; or
(2) who acquires the treasury shares.
(d) Notice is not required to be provided under Subsection
(c) if:
(1) the issuance or disposal of shares described by
that subsection is under an offering registered under the
Securities Act of 1933 (15 U.S.C. Section 77a et seq.); or
(2) at the time of the issuance or disposal of shares
described by that subsection, the corporation has a class of
securities registered under the Securities Exchange Act of 1934 (15
U.S.C. Section 78a et seq.).
(e) Section 5.054(a) does not apply to a public benefit
corporation that includes in its name the words, abbreviation, or
designation permitted by Subsection (c).
Sec. 21.954. CERTAIN AMENDMENTS, MERGERS, EXCHANGES, AND
CONVERSIONS; VOTER APPROVAL REQUIRED. (a) Notwithstanding any
other provision of this chapter, a domestic for-profit corporation
that is not a public benefit corporation may not, without the
approval of the owners of two-thirds of the outstanding shares of
the corporation entitled to vote on the matter, which must be a vote
by class or series of shares if otherwise required by Section
21.364, 21.457, or 21.458:
(1) amend the corporation's certificate of formation
to comply with the requirements of Section 3.007(e) to elect for the
corporation to be governed as a public benefit corporation;
(2) merge or effect an interest exchange with another
entity if, as a result of the merger or exchange, the shares in the
corporation would become, or be converted into or exchanged for the
right to receive, shares or other equity interests in a domestic or
foreign public benefit corporation or similar entity; or
(3) convert into a foreign public benefit corporation
or similar entity.
(b) Subsection (a) does not apply until the corporation has
issued and outstanding shares of the corporation's capital stock.
(c) A domestic entity that is not a domestic for-profit
corporation may not, without the approval of the owners of
two-thirds of the outstanding ownership interests of the entity
entitled to vote on the matter:
(1) merge or effect an interest exchange with another
entity if, as a result of the merger or exchange, the ownership
interests in the entity would become, or be converted into or
exchanged for the right to receive, shares or other equity
interests in a domestic or foreign public benefit corporation or
similar entity; or
(2) convert into a domestic or foreign public benefit
corporation or similar entity.
(d) Notwithstanding any other provision of this chapter, a
public benefit corporation may not, without the approval of
two-thirds of the outstanding shares of the corporation entitled to
vote on the matter, which must be a vote by class or series of shares
if otherwise required by Section 21.364, 21.457, or 21.458:
(1) amend the corporation's certificate of formation
to delete or amend a provision required by Section 3.007(e) or
described by Section 21.957(c);
(2) convert into a domestic or foreign entity:
(A) that is not a public benefit corporation or
similar entity; and
(B) that does not contain in its certificate of
formation or similar governing document provisions identical to the
provisions in the certificate of formation of the public benefit
corporation containing the public benefit or benefits specified
under Section 3.007(e) or imposing requirements under
Section 21.957(c); or
(3) merge or effect an interest exchange with another
entity if, as a result of the merger or exchange, the shares in the
corporation would become, or be converted into or exchanged for the
right to receive, shares or other equity interests in a domestic or
foreign entity:
(A) that is not a public benefit corporation or
similar entity; and
(B) that does not contain in its certificate of
formation or similar governing document provisions identical to the
provisions in the certificate of formation of the public benefit
corporation containing the public benefit or benefits specified
under Section 3.007(e) or imposing requirements under
Section 21.957(c).
(e) Notwithstanding any other provision of this section, a
nonprofit corporation or nonprofit association may not:
(1) with respect to a merger governed by this section,
be a party to the merger; or
(2) convert into a public benefit corporation.
(f) An owner of a domestic entity affected by an action
described by this section has the rights of dissent and appraisal as
an owner described by Section 10.354 and to the extent provided by
Subchapter H, Chapter 10.
Sec. 21.955. STOCK CERTIFICATES; NOTICES REGARDING
UNCERTIFICATED STOCK. (a) A stock certificate issued by a public
benefit corporation must note conspicuously that the corporation is
a public benefit corporation governed by this subchapter.
(b) A notice sent by a public benefit corporation under
Section 3.205 must state conspicuously that the corporation is a
public benefit corporation governed by this subchapter.
Sec. 21.956. DUTIES OF DIRECTORS. (a) The board of
directors of a public benefit corporation shall manage or direct
the business and affairs of the corporation in a manner that
balances:
(1) the pecuniary interests of the shareholders;
(2) the best interests of those persons materially
affected by the corporation's conduct; and
(3) the specific public benefit or benefits specified
in the corporation's certificate of formation.
(b) A director of a public benefit corporation does not, by
virtue of the public benefit provisions included in the certificate
of formation or by virtue of the purpose and requirements of
Sections 21.953(a) and (b), owe any duty to any person because of:
(1) any interest the person has in the public benefit
or benefits specified in the certificate of formation; or
(2) any interest materially affected by the
corporation's conduct.
(c) With respect to a decision implicating the balance
requirement of Subsection (a), a director of a public benefit
corporation is considered to have satisfied the director's duties
to shareholders and the corporation if the director's decision is
both informed and disinterested and is not a decision that no person
of ordinary, sound judgment would approve.
(d) The certificate of formation of a public benefit
corporation may include a provision that any disinterested failure
of a director to satisfy the requirements of this section does not,
for the purposes of the applicable provisions of this code,
constitute an act or omission not in good faith or a breach of the
duty of loyalty.
Sec. 21.957. PERIODIC STATEMENTS. (a) A public benefit
corporation shall include in each notice of a meeting of
shareholders a statement to the effect that the corporation is a
public benefit corporation governed by this subchapter.
(b) A public benefit corporation, at least biennially,
shall provide to the corporation's shareholders a statement
pertaining to the corporation's promotion of the public benefit or
benefits specified in the corporation's certificate of formation
and promotion of the best interests of those materially affected by
the corporation's conduct. The statement must include:
(1) the objectives the board of directors has
established to promote the public benefit or benefits and
interests;
(2) the standards the board of directors has adopted
to measure the corporation's progress in promoting the public
benefit or benefits and interests;
(3) objective factual information based on those
standards regarding the corporation's success in meeting the
objectives for promoting the public benefit or benefits and
interests; and
(4) an assessment of the corporation's success in
meeting the objectives and promoting the public benefit or benefits
and interests.
(c) The certificate of formation or bylaws of a public
benefit corporation may require that the corporation:
(1) provide the statement required by Subsection (b)
more frequently than biennially; or
(2) make the statement required by Subsection (b)
available to the public.
Sec. 21.958. DERIVATIVE SUITS. (a) In this section,
"shareholder" means:
(1) shareholders of a public benefit corporation that
own, individually or collectively, at least two percent of the
corporation's outstanding shares; or
(2) shareholders of a public benefit corporation the
shares of which are listed on a national securities exchange that
own at least the lesser of:
(A) the percentage of shares described by
Subdivision (1); or
(B) shares whose market value is at least $2
million.
(b) A shareholder of a public benefit corporation may
maintain a derivative action on behalf of the corporation to
enforce compliance with the requirements of Section 21.956(a).
Sec. 21.959. NO EFFECT ON OTHER CORPORATIONS. Except as
provided by Section 21.954, this subchapter does not apply to a
corporation that is not a public benefit corporation.
SECTION 5. This Act takes effect September 1, 2017.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 3488 was passed by the House on May 6,
2017, by the following vote: Yeas 135, Nays 7, 1 present, not
voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 3488 was passed by the Senate on May
19, 2017, by the following vote: Yeas 26, Nays 5.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor