Bill Text: TX HB3488 | 2017-2018 | 85th Legislature | Engrossed
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to authorizing public benefit corporations.
Spectrum: Slight Partisan Bill (Republican 4-2)
Status: (Passed) 2017-06-14 - Effective on 9/1/17 [HB3488 Detail]
Download: Texas-2017-HB3488-Engrossed.html
Bill Title: Relating to authorizing public benefit corporations.
Spectrum: Slight Partisan Bill (Republican 4-2)
Status: (Passed) 2017-06-14 - Effective on 9/1/17 [HB3488 Detail]
Download: Texas-2017-HB3488-Engrossed.html
85R22634 CLG-D | ||
By: Hinojosa, Oliveira, Meyer, Parker | H.B. No. 3488 |
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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; [ |
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(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; [ |
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(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. |