Benefit Corporation Legislative Status Map

Transcription

1 Benefit Corporation Legislative Map Version of Model Benefit Corporation Legislation Passed Colorado/Delaware Variation of Model Benefit Corporation Legislation Passed Legislation introduced in the past No legislation to date

2 Benefit Corporation Legislative Chart No Legislation to Alabama Referred to Senate Judiciary 5/7/2013 The bill as drafted was very similar to the B-Lab Model Act (hereafter Model Act) Alaska Arizona Passed 1/1/2015 A.R.S et seq. (01/01/2015) Very similar to the Model Act. A few notable exceptions: For an existing business corporation to become a benefit corporation, the articles of incorporation must be amended by a supermajority (i.e. ¾ or 75%) vote, as opposed to the minimum status (i.e. 2/3) vote required under the Model Act. The Model Act incorporates the business judgment rule in the Standard of Conduct for Directors (Model Act, Section 301(e)) and Officers (Model Act, Section 303(e)). While Arizona s Act includes the business judgment rule in its section addressing the standard of conduct for officers (Arizona Act, Section (E)), Arizona s Act does not include the business judgment rule in its section addressing the standard of conduct for directors (Arizona Act, Section ). Does not include Section 302 or Section 304 of the Model Act ( Benefit Director and Benefit Officer, respectively). Arkansas Passed 4/19/2013 7/27/2013 A.C.A et seq. Largely adopts the Model Act, with a few important differences: Slightly differs in the definition of specific public benefit. Instead of including protecting or restoring the environment as a benefit provided for in the Model Act, the Arkansas Act provides for simply preserving the environment. (continued next page...)

3 Benefit Corporation Legislative Chart No Legislation to The definition of Third Party Standard has more specific criteria for the organization that develops the Standard. Rather than adopting the Model Act s requirement that the Standard must be developed by an entity that is not controlled by the benefit corporation, the Arkansas Act requires that the Standard be developed by an organization that is independent of the benefit corporation and that satisfies the following criteria: (a) not more than 1/3 of the members of the governing body of the organization may be representatives of businesses operating in a specific industry, the performance of whose members is measured by the Standard, businesses from a specific industry or an association of businesses in that industry, or a business whose performance is assessed against the Standard, AND (b) the organization is not materially financed by such an association or business. Does not include the business judgment rule in its Standard of Conduct for Directors (Ark. Stat. Ann ) or its Standard of Conduct for Officers (Ark. Stat. Ann ). The Model Act mandates that a publicly traded benefit corporation designate a Benefit Director (privately held benefit corporations may designate such a director). Arkansas does not have such a requirement; it allows Benefit Directors for any benefit corporation. Any shareholder has standing to commence and maintain a benefit enforcement proceeding (the Model Act has a 2% ownership requirement). The contents of the Annual Report are narrowed a bit. Rather than adopting the Model Act s suggestion that the Annual Report contain a narrative of the extent to which a specific public benefit was created, Arkansas requires that the narrative describe the extent to which the specific public benefit was pursued.

4 Benefit Corporation Legislative Chart No Legislation to California Passed 1/1/2012 West s Ann.Cal. Corp.Code et seq. (benefit corps) and West s Ann. Cal.Corp.Code (flexible purpose corps) California has created both benefit corporations and flexible purpose corporations. California law regarding benefit corps largely adopts the Model Act, with a few important differences: In California s Benefit Enforcement Proceedings, the definition does not include a failure to create a public benefit, and it adds as an additional basis for a lawsuit the failure of the benefit corporation to deliver or post an annual benefit report as required under California s Act. The definition of specific public benefit is slightly different in California. Instead of including protecting or restoring the environment as a special public benefit as provided for in the Model Act, the California Act provides for simply preserving the environment. The definition of Third Party Standard is different. California s definition has more specific criteria for the organization that develops the Standard. Rather than adopting the Model Act s requirement that the Standard must be developed by an entity that is not controlled by the benefit corporation, the California Act requires that the Standard be developed by an entity that has no material financial relationship with the benefit corporation or any of its subsidiaries and that satisfies the following criteria: (i) not more than 1/3 of the members of the governing body of the organization may be representatives of associations of businesses operating in a specific industry, the performance of whose members is measured by the Standard, businesses from a specific industry or an association of businesses in that industry, or a business whose performance is assessed against the Standard, AND (ii) the organization is not materially financed by such an association or business. The entity that develops the third party standard must affirmatively access not merely have access to necessary and appropriate expertise to assess overall corporate social and environmental performance. (continued next page...)

5 Benefit Corporation Legislative Chart No Legislation to Dissenter s rights upon electing benefit corporation status as part of an amendment to an existing corporation s governing/establishment documents AND as part of termination of status. Does not include a benefit director or benefit officer so the Model Act s annual benefit report provisions do not appear. Includes several provisions not found in the Model Act, including provisions in the Standard of Conduct for Directors (Section 14620(j)), the Annual ment of Board (Section 14621(a), (b)), Right of Action (Section 14623(d)), and Share Certificates (Section 14631). Closer to the Delaware approach (see preliminary-observations-concerning-delawares-new-benefit-corporation-act/ for a good analysis of differences and similarities between the Model Act, the Delaware Act, and Colorado s Act). Some of the more important differences are: Mandates that each benefit corporation identify within its statement of business or purpose one or more specific public benefits to be promoted by the corporation (emphasis added). The Model Act, on the other hand, mandates a purpose of creating general public benefit, and makes permissive the designation of one or more specific public benefits the corporation intends to create. Requires directors of benefit corporations to balance the shareholders pecuniary interests, the best interest of those materially affected by the corporation s conduct, and the public benefit identified in its articles of incorporation (emphasis added), whereas the Model Act simply requires that the directors consider the effects of the benefit corporation s actions/inactions. The definition of Third Party Standard is much more concise. The third party entity must not be controlled by the benefit corporation or any of its affiliates, and it must make publicly available the following information: (a) the criteria considered when measuring the social and environmental performance of a business (including the weighting of those criteria) and the process for developing and revising the (continued next page...) Colorado Passed 5/15/ /31/2014 Colo. Rev. Stat (April 1, 2014)

6 Benefit Corporation Legislative Chart No Legislation to standard, and (b) any material owners of the organization that developed the third party standard, the members of its governing body and how they were selected, and the sources of financial support for the organization. All of this must be disclosed in sufficient detail to disclose any relationships that could reasonably be considered to compromise its independence. Dissenter s rights upon electing benefit corporation status as part of an amendment to an existing corporation s governing/establishment documents. Does not address officers and their duties, standards, etc. In fact, the bill signed by the governor did not contain the word officer. Similar to the Model Act, but with one major difference and a few relatively minor differences: Conneticut Passed 10/1/2014 Major difference: A benefit corporation that has been in existence for at least two years may amend its certificate of incorporation to include a legacy preservation provision. Under this provision, a dissolved benefit corporation may distribute its remaining property only to a charitable organization or another benefit corporation that has enacted a legacy preservation provision. Deletes provisions relating to professional corporations. Deletes provisions explaining how business judgment protects directors and officers. Increases ownership requirements for bringing a benefit enforcement proceeding from 2% of shares or 5% of equity interests to 5% and 10%, respectively. Requires that the annual benefit report be (1) sent to shareholders and (2) posted on the corporation s website or be sent free of charge to any person who requests a report. The legislation does not require the corporation to file a copy of the benefit report with the Secretary of.

7 Benefit Corporation Legislative Chart No Legislation to Delaware s law differs from B Lab s Model Act in significant respects. In fact, most other states benefit corporation acts are often referred to as either adopting the Model approach or the Colorado/Delaware approach. Delaware s legislature originally passed the law in 2013, but amended it significantly in As originally passed, the key differences between Delaware s legislation and the Model Act included the following: Delaware Passed 8/1/2013 Amended effective 8/1/2015 Delaware requires that the public benefit corporation ( PBC ) identify within its certificate of incorporation one or more specific (as opposed to general) public benefits it will promote. The idea of a public benefit embodies either a positive effect (or reduction of negative effects) on one or more categories of persons, entities, communities or interests (other than stockholders in their capacities as stockholders) including, but not limited to, effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature. Whereas the Model Act requires directors of benefit corporations to consider the effects of its action or inaction on certain constituencies, Delaware PBCs shall be managed in a manner that balances the stockholders pecuniary interests, the best interests of those materially affected by the corporation s conduct, and the public benefit or public benefits identified in its certificate of incorporation. Existing non-pbcs in Delaware that wish to become a PBC may only do so upon the vote of ninety percent (90%) of the outstanding shares of each class of stock outstanding, as opposed to the fifty percent (50%) required under the Model Act (this provision was amended in 2015 see below). Dissenters to such a vote are entitled to an appraisal by the Court of Chancery of the fair value of the stockholder s shares of stock. Delaware s Act contains more detailed provisions relating to directors duties. Directors of PBCs do not have any duty to any person on account of any interest of such person in the public benefit or public benefits identified in the certificate of incorporation or on account of any interest materially affected (continued next page...)

8 Benefit Corporation Legislative Chart No Legislation to by the corporation s conduct and will be deemed to satisfy such director s fiduciary duties to stockholders and the corporation if such director s decision is both informed and disinterested and not such that no person of ordinary, sound judgment would approve, which differs from the Model Act s language: A director does not have a duty to a person that is a beneficiary of the general public benefit purpose or a specific public benefit purpose of a benefit corporation arising from the status of the person as a beneficiary. Delaware s Act is notable for those sections of the Model Act that Delaware omits, including mandatory annual reports (reports are only required every other year), third-party standards for defining, reporting, and assessing the PBC, independent benefit directors, and benefit officers. The 2015 amendments include three significant changes to the law: Removes the requirement that a PBC include the words public benefit corporation in its name. If, however, a PBC elects to omit public benefit corporation from its name, it must, prior to issuing shares, inform any person to whom shares are issued that the company is, in fact, a PBC. In the original law, 90% of all outstanding shares had to approve when a company wished to change its corporate status to (or from) PBC. Under the amended law, only two-thirds of outstanding shares entitled to vote on the issue need approve. Although the original law provided appraisal rights for all shareholders of companies changing their status to PBC, the amended law does not provide appraisal rights to such shareholders when their shares are listed on a national securities exchange or held by more than 2000 shareholders.

9 Benefit Corporation Legislative Chart No Legislation to Florida has created two new types of entities: social purpose corporations and benefit corporations. Florida Passed 7/1/2014 Social Purpose Corporation Differences from Model Act The law does not define general public benefit. Instead, it offers a thorough definition of public benefit that incorporates elements of the Model Act s definition of specific public benefit. The law then defines specific public benefit as a benefit that is expressly set forth in the articles of incorporation and is consistent with the law s definition of public benefit. If an existing entity elects to become a social purpose corporation, the entity s shareholders are entitled to appraisal rights. Shareholders are also entitled to appraisal rights when a social purpose corporation terminates its special status. Instead of laying out a long list of things that directors must consider in carrying out their duties, the law says directors must consider (1) the shareholders and (2) the company s ability to accomplish its public benefit. Directors may then consider a number of other things, such as employees, the environment, and so on. The law omits the Model Act s provisions relating to business judgment. The law permits the articles of incorporation or bylaws to relieve the benefit director of the duty to provide a benefit compliance report. The law includes no minimum ownership requirement for shareholders to bring a benefit enforcement proceeding. For the purposes of the annual benefit report, the law makes an assessment against a third-party standard optional. Benefit Corporation Differences from Model Act This portion of Florida s legislation is nearly identical to the Model Act, except for a few small differences. As with Florida s social purpose corporations, shareholders are entitled to appraisal rights. The law omits business judgment provisions. The law permits the articles of incorporation or bylaws to relieve the benefit director of the duty to provide a benefit compliance report. The law includes no minimum ownership requirement for shareholders to bring a benefit enforcement proceeding.

10 Benefit Corporation Legislative Chart No Legislation to Georgia Hawaii Idaho Illinois Legislation drafted in late 2012 but not voted on in Passed 7/8/2011 Passed 7/1/2015 Passed 1/1/2013 Haw. Rev. Stat. 420d- 1 et seq. 805 ILCS 40/1 et seq. The bill appeared very similar to the Model Act. Largely adopts the Model Act, with a few important exceptions: Uses the term sustainable business corporation instead of benefitcorporation. Replaces the list of interests that the directors MUST consider under Section 301(a) of the Model Act with two requirements under Hawaii s Act: directors must consider effects of an action on the shareholders AND the accomplishment of the general and specific purposes of the sustainable business corporation. The other interests listed as mandatory in the Model Act are permissible in Hawaii. Does not include a definition of Benefit Enforcement Proceeding, Specific Public Benefit, or Third Party Standard. Does not expressly exclude a director from personal liability for monetary damages for failure to pursue or create a general or specific public benefit. Standing for a right of action is limited to directors and shareholders. The law omits the Model Act s provisions relating to business judgment. The law adds an additional element to the annual benefit report: If the benefit corporation has dispensed with or restricted the discretion or powers of the board of directors, a description of the persons who exercise the powers, duties, and rights and who have the immunities of the board of directors, and the benefit director. Idaho Code (g). Largely adopts the Model Act, with a few important differences: Instead of including protecting or restoring the environment as a special public benefit as provided for in the Model Act, the Illinois Act provides for simply preserving the environment. The Third Party Standard in Illinois must be developed by an entity that has no material financial relationship with the benefit corporation or any of its subsidiaries. (The Model s Act language states that the entity developing the Third Party Standard must not be controlled by the benefit corporation. ) (continued next page...)

11 Benefit Corporation Legislative Chart No Legislation to Requires that the Standard be developed by an entity that is not materially financed by any of the following organizations and not more than one-third of the members of the governing body of the entity are representatives of: (i) associations of businesses operating in a specific industry, the performance of whose members is measured by the standard, (ii) businesses from a specific industry or an association of businesses in that industry, or (iii) a business whose performance is assessed against the standard. The entity that develops the third party standard must affirmatively access not merely have access to necessary and appropriate expertise to assess overall corporate social and environmental performance. The Standard of Conduct for Directors requires that the directors consider the effects of any action upon the constituencies listed in that section this differs from the Model Act, which suggests that directors consider the effects of any action or inaction upon those constituencies (emphases added). Does not include the business judgment rule in its Standard of Conduct for Directors (805 Ill. Comp. Stat. 40/4.01) or its Standard of Conduct for Officers (805 Ill. Comp. Stat. 40/4.05). An officer is not personally liable for monetary damages for action taken as an officer if the officer performed the duties of the position in compliance with that section, whereas the Model Act exonerates the officer for an action or inaction (emphases added). Indiana

12 Benefit Corporation Legislative Chart No Legislation to Iowa Referred to House Judiciary 2/21/2013 The bill was based largely on the Model Act. Kansas Kentucky

13 Benefit Corporation Legislative Chart No Legislation to Louisiana Passed 8/1/2012 La. Rev. Stat. Ann. 12:1801 ets eq. Differs from the Model Act in several ways: The definition of independent is more concise: Independent means having no material relationship with a benefit corporation or a subsidiary of the benefit corporation. Louisiana provides a separate definition for the term material relationship, which incorporates much of the remainder of the Model Act s definition of Independent. In Louisiana s definition of Specific Public Benefit, the language of item 7 of the definition in the Model Act concerning conferring any other particular benefit on society or the environment is replaced with two separate benefits: Historic preservation and Urban beautification. The definition (and scope) of Third Party Standard is different: (a) there is no requirement that the third-party standard be developed by an entity that is not controlled by the benefit corporation; (b) there is no credibility requirement in Louisiana; and (c) Louisiana adopts a more ambitious and expansive view of the term comprehensive contained in the thirdparty standard. The Model Act states that the third-party standard must assess the effect of the business and its operations upon the interests of particular constituencies identified elsewhere in the Act. Louisiana provides that the third-party standard must be comprehensive in that it assesses the effect of the corporation and its operations in producing general public benefit and any specific public benefit specified in the articles. (continued next page...)

14 Benefit Corporation Legislative Chart No Legislation to If an existing business corporation elects to become a benefit corporation by amending its existing articles of incorporation, the notice that is sent regarding the meeting at which a vote is to be taken in furtherance of such amendment must state the specific public benefits, if any, to be included in the purposes of the benefit corporation and must explain the anticipated impact on shareholders of becoming a benefit corporation. The corporate name of a benefit corporation must end with the phrase A Benefit Corporation, which may be in parentheses. All benefit corporation stock certificates must contain the following phrase on the face of the certificate, in conspicuous language : This corporation is a benefit corporation subject to the Benefit Corporations Law, R.S. 12:1801 et seq. Adds the following to the list of items for which a director shall not be personally liable: Any act or omission covered by a provision in the articles of incorporation that eliminates or limits the liability of the director as authorized in R.S. 12:24(C)(4). Does not include the business judgment rule in its Standard of Conduct for Directors (La. R.S. 1821) or its Standard of Conduct for Officers (La. R.S. 1823). Maine

15 Benefit Corporation Legislative Chart No Legislation to Maryland Passed 10/1/2010 MD Code, Corporations and Associations, 5-6C-01 et seq. Largely based on the Model Act, with a few differences: Defines General public benefit as a combination of specific public benefits. Defines third party standard much more simply: Is developed by a person or entity that is independent of the benefit corporation; and is transparent because the following information about the standard is publicly available or accessible: (i) the factors considered when measuring the performance of a business; (ii) the relative weightings of those factors; and (iii) the identity of the persons who developed and control changes to the standard and the process by which those changes were made. Does not have a definition of benefit enforcement proceeding. Does not define a minimum status vote. The requisite percentage of votes necessary to amend an existing corporation s charter to become a benefit corporation is two-thirds (2/3), pursuant to MD. CODE ANN., CORPS. & ASSNS. 5-6C-03 and Clear reference to the fact that a corporation is a benefit corporation shall appear prominently at the head of the charter document in which the election to become a benefit corporation is made, at the head of each subsequent charter document, and on each stock certificate of the benefit corporation. Omits the following items directors must consider as part of their standard of conduct: (i) short and long term interest of the benefit corporation, (ii) the ability of the benefit corporation to accomplish its general and specific public benefit purpose. Replaces the Exoneration from personal liability section (directors) with, in essence, the business judgment rule as set forth under Maryland law. Does not require a benefit director or a benefit officer. Does not require that the annual benefit report contain any of the following (which are included in the Model Act): (i) the process and rationale for selecting or changing the third-party standard used to prepare the benefit report, (ii) compensation paid to each director; (iii) name of each person who owns 5% or more of the benefit corporation s stock; and (iv) material connections between the benefit corporation and the third party standard provider.

16 Benefit Corporation Legislative Chart No Legislation to Massachusetts Passed 12/1/2012 Mass. Gen. Laws ch. 156E, 1 et seq. Largely based on the Model Act, with some exceptions: When an existing corporation converts to a benefit corporation (through amendment or merger, share exchange, or conversion), existing shareholders have appraisal rights. The Third-party standard in Massachusetts means a standard that is developed or performed by an independent person or organization. This implies that the entity developing the standard does not have to be independent as long as the entity performing (i.e. monitoring) the standards is independent. Adds the following provision: A business corporation organized under the laws of the commonwealth shall not hold itself out as, advertise itself as, or indicate in any way that it is a benefit corporation unless it was organized under and in full compliance with this chapter. Mass. Gen. Laws Ann. ch. 156E, 7. Does not adopt the entirety of the business judgment rule language found in the Model Act, but does provide that directors shall use sound and reasonable judgment in determining corporate actions and the best interests of the benefit corporation. Requires all benefit corporations to have a benefit director. Under the Model Act, only publicly-traded benefit corporations must have a benefit director. The annual compliance statement must address the impact the corporation s status as a benefit corporation is having on its business, including client or consumer opinion, return on investment, impact on shareholders and impact on employees. The business judgment rule for officer conduct is excluded. Any shareholder (as opposed to those holding at least 2%) of the benefit corporation may bring a benefit enforcement proceeding, and there is no restriction that such shareholder must have been a shareholder at the time of the act or omission complained of. Michigan Referred to House Subcommittee 4/11/2013

17 Benefit Corporation Legislative Chart No Legislation to Minnesota Signed by Governor 1/1/2015 Minnesota s law is similar to the Model Act, but does include a number of significant changes. The law creates both general benefit corporations and specific benefit corporations. A general benefit corporation is a benefit corporation that elects to pursue a general public benefit. A specific benefit corporation is a benefit corporation with a specifically articulated public benefit. The name of a general benefit corporation must contain the words general benefit corporation or the abbreviation GBC. Specific benefit corporations must follow a similar convention. The law does not include provisions related to benefit officers or benefit directors. Delaware s benefit corporation act is similar. The law gives appraisal rights to shareholders who dissent from a vote to elect or terminate benefit-corporation status. A similar provision is found in Delaware s act. In defining the duties of directors of general benefit corporations, the law requires the director to consider the interests of the constituencies defined in a section of Minnesota s Business Corporation Act. Interestingly, that section of the MBCA says that directors of ordinary corporations may consider the best interests of employees, customers, suppliers, the economy, and society. Although the Model Act says that a shareholder, a director, or the corporation itself can bring a benefit-enforcement proceeding when a benefit corporation fails to pursue a public benefit, the Minnesota law only permits shareholders to bring suit. The law imposes no minimum stock ownership requirement for bringing suit (the Model Act requires a minimum of 2% ownership). Before a shareholder can bring suit, the benefit corporation must have failed to pursue the benefit for an unreasonably long time. (continued next page...)

18 Benefit Corporation Legislative Chart No Legislation to The law gives courts broad powers to grant relief in benefit-enforcement proceedings, including the removal of directors and the liquidation of the corporation. The law permits the Secretary of to revoke a business s benefitcorporation status if it fails to file an annual benefit report. Although the Minnesota law retains the same conceptual foundation and basic structure of the Model Act, the Minnesota law is reorganized and uses some of its own terminology. Depending on how the Minnesota courts interpret these provisions, the changes might ultimately result in unforeseen differences between the Minnesota law and the Model Act. Mississippi Missouri Montana Failed Died in Senate Committee 4/24/2013 Bill appears to be dead at this time; the draft of the bill that died was based largely on the Model Act. Passed 7/18/2014 Nebraska s law is nearly identical to the Model Act. Nebraska

19 Benefit Corporation Legislative Chart No Legislation to Nevada Passed 5/24/2013 1/1/2014 N.R.S. 78B.010 et seq. (01/01/2014) (statute not live as of 1/10/2014) Largely based on the Model Act, with some exceptions: Does not include the concept of a benefit director or benefit officer. A benefit enforcement proceeding includes a claim that the benefit corporation failed to deliver or post on its Internet website the required annual benefit report. Independent is not defined. The definition of minimum status vote includes the optional language provided under the Model Act definition. Nevada s definition of third party standard is more rigorous than the definition under the Model Act. New Hampshire Passed 1/1/2015 Nearly identical to the Model Act, with three notable exceptions: If, during a benefit enforcement proceeding, it is determined that the corporation failed to pursue a public benefit, the Secretary of may revoke the corporation s status as a benefit corporation. While the Model Act says that the benefit corporation s benefit report and performance assessment do not need[] to be audited or certified by a third party, New Hampshire s legislation says that [n]either the benefit report nor the assessment of the performance of the benefit corporation shall be audited or certified by a third party. If the secretary of state determines that a benefit corporation has failed to make available its annual benefit report (as the corporation is required to do under the statute) then the secretary of state shall administratively dissolve the corporation.

20 Benefit Corporation Legislative Chart No Legislation to New Jersey Passed 3/1/2011 N.J. Rev. Stat. 14a:18-1 et seq. Largely based on the Model Act, with some differences: The definition of general public benefit requires that the benefit corporation must promote some combination of specific public benefits. Eliminates the ability of the benefit corporation to accomplish its general public benefit purpose and any specific public benefit purpose from the list of mandatory directors considerations under the standard of conduct for directors section. Limits the exoneration from personal liability section applicable to directors to the following: A director is not personally liable for monetary damages for failure of the benefit corporation to create general or specific public benefits. Omits Sections 301(d) and (e) from the Model Act (addressing limitation on standing and business judgment rule with regard to directors, respectively). All benefit corporations (not just publicly traded ones) must have a benefit director. Omits Section 302(d) of the Model Act (status of actions). Omits Sections 303(d) and (e) from the Model Act (addressing limitation on standing and business judgment rule with regard to officers, respectively) and redefines standing as follows: (i) directly by the benefit corporation; or (ii) derivatively by: (a) a shareholder; (b) a director; (c) a person or group of persons that owns beneficially or of record 10% or more of the equity interests in an entity of which the benefit corporation is a subsidiary; or (d) such other persons as may be specified in the certificate of incorporation or by-laws of the benefit corporation. The annual report need not include the process and rationale for selecting or changing the third-party standard used to prepare the report. If the benefit corporation does not file a benefit report for two years, the New Jersey treasury department may prepare and file a statement that the corporation has forfeited its status as a benefit corporation and is no longer subject to the benefit corporation act. New Mexico Failed Pocket Veto by Governor 3/16/2013

21 Benefit Corporation Legislative Chart No Legislation to New York Passed 2/10/2012 McKinney s Business Corporation Law 1701 et seq. Largely based on the Model Act, with a couple of differences: Does not include the Benefit Enforcement Proceeding section, which includes language on monetary damage limitations; instead, BCL 720(a) (1)(C) provides a right of action In the case of directors or officers of a benefit corporation organized under article seventeen of this chapter: (i) the failure to pursue the general public benefit purpose of a benefit corporation or any specific public benefit set forth in its certificate of incorporation; (ii) the failure by a benefit corporation to deliver or post an annual report as required by section seventeen hundred eight of article seventeen of this chapter; or (iii) the neglect of, or failure to perform, or other violation of his or her duties or standard of conduct under article seventeen of this chapter. The definition of third-party standards does not require comprehensive or credibility provisions. A minimum status vote requires a ¾ vote (as opposed to the 2/3 vote required by the Model Act). All stock certificates must contain the following conspicuous language on the face of the certificate: This entity is a benefit corporation organized under article seventeen of the New York business corporation law. Adding, amending, or deleting a specific public benefit from the certificate of incorporation requires a ¾ vote (versus the 2/3 vote required by the Model Act). In discharging their duties, directors may (but are not required to) consider the resources, intent, and conduct (past, stated, and potential) of any person seeking to acquire control of the corporation. (continued next page...)

22 Benefit Corporation Legislative Chart No Legislation to There is no requirement to appoint a benefit director or benefit officer. Addresses standard of conduct of officers and directors in same provision and applies same standard to both. Omits the phrase and in considering the best interests of the benefit corporation from the standard of conduct for officers and directors. Omits Section 301(c) of the Model Act ( Exoneration from personal liability ) with regard to directors. Does not apply business judgment rule to officers or directors. The annual report must contain, if applicable, assessment of the performance of the benefit corporation, relative to its specific public benefit purpose or purposes. Does not require that the annual report contain a statement of any connection between the organization that established the third-party standard, or its directors, officers or any holder of 5 percent or more of the governance interests in the organization (Model Act 401(a)(6)). North Carolina Referred to House Subcommittee North Dakota Ohio

23 Benefit Corporation Legislative Chart No Legislation to Oklahoma Passed 1/1/2014 Oregon s law tracks the Model Act, but includes some important differences. Oregon Pennsylvania Passed 1/22/ Pa.C.S.A et seq. Largely based on the Model Act, with exceptions: Includes the following language in the definition of specific public benefit : promoting economic development through support of initiatives that increase access to capital for emerging and growing technology enterprises, facilitating the transfer and commercial adoption of new technologies, providing technical and business support to emerging and growing technology enterprises, or forming support partnerships that support those objectives. Does not exonerate directors from personal liability for the failure of the benefit corporation to pursue general or specific public benefits, but does include provision exonerating directors for the failure to create a general or specific public benefit. The annual benefit report must address whether the corporation has dispensed with or restricted the discretionary power of the board. Does not include business judgment rule for officers or directors. Rhode Island Passed 6/14/2012 R.I. Gen. Laws et seq. Follows the Model Act almost verbatim, with one exception: Rhode Island s Act does not address professional corporations under the Corporate purposes section.

24 Benefit Corporation Legislative Chart No Legislation to South Carolina Passed 6/14/2012 S.C. Code Ann et seq. Largely based on the Model Act, with exceptions: Does not include concept of minimum status vote; instead, S.C. Code Ann requires the following votes for approval of corporate matters: (i) for corporations (including benefit corporations), all matters must be approved by sixty-six and two-thirds percent of the outstanding shares of each class and series of stock of the corporation, voting as separate voting groups, regardless of any limitation in the corporation s articles of incorporation or bylaws of the voting rights of such class or series. Does not include a definition of a publicly traded company. The definition of specific public benefit includes a benefit that serves one or more public welfare, religious, charitable, scientific, literary, or educational purposes, or other purposes or benefits beyond the strict interest of the shareholders of the benefit corporation. Examples of a specific public benefit include (a) providing low-income or underserved individuals, families, or communities with beneficial products, services, or educational opportunities; (b) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; (c) preserving or improving the environment; (d) improving human health; (e) promoting the arts, sciences, or advancement of knowledge; (f) increasing the flow of capital to entities with a public benefit purpose; or (g) conferring any other particular benefit on society and the environment. A benefit corporation is not entitled to claim an exemption from any property tax imposed by law. Includes a separate provision setting forth that a shareholder is entitled to dissent from and obtain payment of the fair value of his shares in the event of the consummation of a designation of a corporation as a benefit corporation. Requires statement of specific benefit public purpose in the articles of incorporation. (continued next page...)

25 Benefit Corporation Legislative Chart No Legislation to Adds the following as a possible consideration of directors when discharging their duties: the resources, intent, and past, stated, and potential conduct of any person seeking to acquire control of the benefit corporation. Does not include the business judgment rule for directors or officers. Requires that all benefit corporations (not just publicly traded ones) have a benefit director. Requires that the benefit director include in the annual benefit report a statement addressing whether the benefit corporation conferred a general public benefit and any specific public benefit during the period covered by the report. If the benefit corporation dispenses with the board of directors, the articles of incorporation must provide that a person who exercises one or more of the powers, duties, rights, or obligations of a benefit director under this subsection shall have the powers, duties, rights, and obligations of a benefit director (emphasis added); that person does not have to be independent of the benefit corporation, does have the immunities of a benefit director, and is not subject to the procedures for election or removal of directors unless the bylaws make those procedures available. South Carolina changes the concept of standing in the following ways: (i) any shareholder may bring a benefit enforcement proceeding (not limited to shareholders holding at least 2% of the total number of shares outstanding as set forth in the Model Act), and (ii) those who bring an action as an owner of 5% or more of the benefit corporation s parent company are not limited to those who owned that position at the time of the act or omission complained of. South Dakota

26 Benefit Corporation Legislative Chart No Legislation to Tennessee Texas Passed 1/1/2016 Referred to House Subcommittee 3/18/2013 Withdrawn from schedule 5/7/2013 Tennessee s law is almost identical to the Model Act. Perhaps the most significant change is that Tennessee s law calls the new entities For-Profit Benefit Corporations. Utah Vermont Passed 5/13/2014 Passed 5/19/2010 7/1/ A V.S.A et seq. Utah s law is almost identical to the Model Act, except that it omits the Model Act s provisions relating to business judgment and its effect on directors and officers. Largely based on the Model Act, with some differences: Does not include minimum status vote. Instead, actions that require such a vote under the Model Act must be approved by the higher of (i) the vote of 2/3 of the shareholders, OR (ii) the vote set forth in the articles of incorporation. Third-party standard is defined much more concisely: a recognized standard for defining, reporting, and assessing corporate social and environmental performance that: (A) is developed by a person that is independent of the benefit corporation; and (B) is transparent because the following information about the standard is publicly available: (i) the factors considered when measuring the performance of a business; (ii) the relative weightings of those factors; and (iii) the identity of the persons who developed and control changes to the standard and the process by which those changes are made. (continued next page...)

27 Benefit Corporation Legislative Chart No Legislation to The general public benefit must promote some combination of specific public benefits. The notice of the meeting of shareholders that will approve the amendment must include a statement from the board of directors setting forth the reasons the board is proposing the amendment and the anticipated effect on shareholders of becoming a benefit corporation. The election to become a benefit corporation (or to terminate that status) must be approved by the higher of (i) the vote required by the articles of incorporation, or (ii) 2/3 of the shareholders. Removes the following from the list of items the board and individual directors must consider when performing their duties: the ability of the benefit corporation to accomplish its general public benefit purpose and any specific public benefit purpose. s that directors shall not be subject to a different or higher standard of care when an action or inaction might affect control of the benefit corporation. Does not include business judgment rule for directors or officers. Limits standing to bring a benefit enforcement proceeding to the following: (i) a shareholder that would otherwise be entitled to commence or maintain a proceeding in the right of the benefit corporation on any basis; (ii) a director of the corporation; (iii) a person or group of persons that owns beneficially or of record 10 percent or more of the equity interests in an entity of which the benefit corporation is a subsidiary (the Model Act has a requirement of 5%); or (iv) such other persons as may be specified in the articles of incorporation of the benefit corporation.

28 Benefit Corporation Legislative Chart No Legislation to Virginia Passed 1/1/2012 Va. Code Ann et seq. Largely based on the Model Act, with some differences: For an existing corporation to amend its articles of incorporation to become a benefit corporation, the amendment must be approved by all shareholders entitled to vote on the amendment. Terminating benefit corporation status requires a vote of more than 2/3 of all the votes entitled to be cast. When discharging their duties, directors may consider the resources, intent, and past, stated, and potential conduct of any person seeking to acquire control of the benefit corporation. Omits the limitation on standing in the Model Act, which states that a director does not have a duty to a person that is a beneficiary of the general public benefit purpose or a specific public benefit purpose. Does not include the business judgment rule for directors. Does not include standard of conduct for officers (but does state that an officer of a benefit corporation shall have no liability for actions taken that the officer believes, in his good faith business judgment, are consistent with (i) the general public benefit or specific public benefit specified in the articles of incorporation or bylaws or otherwise adopted by the board of directors and (ii) the requirements of any third-party standard then in effect for the corporation. No requirement to designate a benefit director or benefit officer. Benefit enforcement proceedings are limited to the following parties: (i) directly by the benefit corporation; or (ii) derivatively by: (a) a shareholder of the benefit corporation; (b) a director of the benefit corporation; or (c) other persons as specified in the articles of incorporation or bylaws of the benefit corporation. Does not require the annual benefit report to include the compensation paid to each director, and does not require the inclusion of each person owning 5% or more of the outstanding shares of the benefit corporation.

29 Benefit Corporation Legislative Chart No Legislation to Washington Passed (Social Purpose Corporation) 6/7/2012 RCWA 23B et seq. Some of the important differences in the of Washington s Social Purpose Corporations code are as follows: To become a social purpose corporation ( SPC ), the board of directors of the electing corporation must recommend the election to the shareholders, unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the proposed election; and the election must be approved by an affirmative vote of at least 2/3 of the electing corporation s shareholders entitled to be cast, and by 2/3 of the holders of the outstanding shares of each class or series, voting as separate voting groups, and each other voting group entitled under the articles of incorporation to vote. The rules for ceasing to be a SPC are basically the same. General social purposes is defined as carry[ing] out its business purpose under RCW 23B in a manner intended to promote positive short-term or long-term effects of, or minimize adverse short-term or long-term effects of, the corporation s activities upon any or all of (i) the corporation s employees, suppliers, or customers; (ii) the local, state, national, or world community; or (iii) the environment. SPCs are allowed to pursue specific social purposes, which are not defined. The corporate name of each SPC must contain the phrase social purpose corporation or the initials SPC. Each SPC s articles of incorporation must contain a statement that the corporation is organized as a social purpose corporation governed by Washington s Social Purpose Corporation chapter. The articles of incorporation must set forth the general social purpose(s) for which the SPC is organized and, if the SPC has identified specific social purposes, the articles must include a statement setting forth those specific purposes. (continued next page...)

30 Benefit Corporation Legislative Chart No Legislation to The articles of incorporation must state: The mission of this social purpose corporation is not necessarily compatible with and may be contrary to maximizing profits and earnings for shareholders, or maximizing shareholder value in any sale, merger, acquisition, or other similar actions of the corporation. Prior to the transfer of shares in a SPC, the transferor shareholder shall give notice of the transfer to the corporation, and within a reasonable time after receiving notice, the corporation shall provide the prospective transferee with a copy of the articles of incorporation in the form of a record. The duties, standards, and liabilities of directors include (i) discharging the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner the director reasonably believes to be in the best interests of the corporation in accordance with RCW 23B ; (ii) [u]nless the articles of incorporation provide otherwise, in discharging his or her duties as a director, the director of a social purpose corporation may consider and give weight to one or more of the social purposes of the corporation as the director deems relevant; (iii) [a]ny action taken as a director of a social purpose corporation, or any failure to take any action, that the director reasonably believes is intended to promote one or more of the social purposes of the corporation shall be deemed to be in the best interests of the corporation; (iv) [a] director of a social purpose corporation is not liable for any action taken as a director, or any failure to take any action, if the director performed the duties of the director s office in compliance with this section; (v) [n]othing in this chapter creates any liability or grants any right in or for any person or any cause of action by or for any person, and a director shall not be responsible to any party other than the corporation and its shareholders. (continued next page...)