Bill Text: CT HB05490 | 2012 | General Assembly | Introduced

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Bill Title: An Act Concerning The Establishment Of Benefit Corporations.

Spectrum: Committee Bill

Status: (Introduced - Dead) 2012-03-15 - Public Hearing 03/19 [HB05490 Detail]

Download: Connecticut-2012-HB05490-Introduced.html

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General Assembly		Raised Bill No. 5490
February Session, 2012		LCO No. 2132
		*02132_______JUD*
Referred to Committee on Judiciary
Introduced by:
(JUD)

AN ACT CONCERNING THE ESTABLISHMENT OF BENEFIT CORPORATIONS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective October 1, 2012) Sections 1 to 11, inclusive, of this act shall be known and may be cited as the "Connecticut Benefit Corporation Act".

Sec. 2. (NEW) (Effective October 1, 2012) (a) Sections 1 to 11, inclusive, of this act shall be applicable to all benefit corporations.

(b) The existence of a provision of sections 1 to 11, inclusive, of this act shall not of itself create an implication that a contrary or different rule of law is applicable to a business corporation that is not a benefit corporation. The provisions of sections 1 to 11, inclusive, of this act shall not affect a statute or rule of law that is applicable to a business corporation that is not a benefit corporation.

(c) Except as otherwise provided in sections 1 to 11, inclusive, of this act, the provisions of chapter 601 of the general statutes shall be generally applicable to all benefit corporations. The specific provisions of sections 1 to 11, inclusive, of this act shall control over the general provisions of chapter 601 of the general statutes. A benefit corporation may be simultaneously subject to the provisions of sections 1 to 11, inclusive, of this act and the provisions of chapters 598 to 602, inclusive, of the general statutes.

Sec. 3. (NEW) (Effective October 1, 2012) As used in sections 1 to 11, inclusive, of this act:

(1) "Benefit corporation" means a business corporation that has elected to become subject to the provisions of sections 1 to 11, inclusive, of this act, and whose status as a benefit corporation has not been terminated pursuant to section 6 of this act.

(2) "Benefit enforcement proceeding" means any claim or action for: (A) Failure of a benefit corporation to pursue or create a general public benefit or a specific public benefit purpose set forth in its certificate of incorporation, bylaws or otherwise adopted by its board of directors; or (B) violation of any obligation, duty or standard of conduct under sections 4 to 11, inclusive, of this act.

(3) "General public benefit" means a material positive impact on society and the environment, taken as a whole, assessed against a third-party standard, from the business and operations of a benefit corporation.

(4) "Independent" means having no material relationship with a benefit corporation or a subsidiary of the benefit corporation, either directly as a shareholder of the benefit corporation or as a partner, a member or an owner of a subsidiary of the benefit corporation or indirectly as director, an officer, an owner or a manager of an entity that has a material relationship with the benefit corporation or a subsidiary of the benefit corporation.

(5) "Material relationship" means a relationship between a person and a benefit corporation or any of its subsidiaries in which (A) a person is, or has been within the last three years, an employee of the benefit corporation or a subsidiary of the benefit corporation; (B) an immediate family member of a person is, or has been within the last three years, an executive officer of the benefit corporation or a subsidiary of the benefit corporation; and (C) there is beneficial or record ownership of five per cent or more of the outstanding shares of the benefit corporation by (i) the person; or (ii) an entity (I) of which the person is a director, an officer or a manager; or (II) in which the person owns beneficially or of record five per cent or more of the outstanding equity interests, which percentage shall be calculated as if all outstanding rights to acquire equity interests in the entity had been exercised.

(6) "Minimum status vote" means (A) in the case of a business corporation, that in addition to any other required approval or vote, the following conditions shall be met: (i) The shareholders of every class or series shall be entitled to vote on the corporate action irrespective of a limitation stated in the certificate of incorporation or bylaws on the voting rights of any class or series; and (ii) the corporate action shall be approved by vote of the shareholders of each class or series entitled to cast at least two-thirds of the votes that all shareholders of the class or series are entitled to cast on the action; and (B) in the case of a domestic entity other than a business corporation, that in addition to any other required approval, vote or consent, the following conditions shall be met: (i) The holders of every class or series of equity interest in the entity that are entitled to receive a distribution of any kind from the entity shall be entitled to vote on or consent to the action regardless of any otherwise applicable limitation on the voting or consent rights of any class or series; and (ii) the action shall be approved by vote or consent of the holders described in subparagraph (B)(i) of this subdivision entitled to cast at least two-thirds of the votes or consents that all of those holders are entitled to cast on the action.

(7) "Specific public benefit" means a benefit that serves one or more public welfare, religious, charitable, scientific, literary or educational purposes, or other purpose or benefit beyond the strict interest of the shareholders of the benefit corporation, and includes:

(A) Providing low-income or underserved individuals or communities with beneficial products or services;

(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; and

(G) Conferring any other particular benefit on society or the environment.

(8) "Subsidiary" means in relation to an individual, an entity in which the individual either (A) owns directly or indirectly equity interests entitled to cast a majority of the votes entitled to be cast generally in an election of directors or members of the governing body of the entity; or (B) otherwise owns or controls voting or contractual power to exercise effective governing control of the entity. The percentage of ownership of equity interests or ownership or control of power to exercise control shall be calculated as if all outstanding rights to acquire equity interests in the entity had been exercised.

(9) "Third-party standard" means a recognized standard for defining, reporting and assessing corporate social and environmental performance that is: (A) Developed by an organization that is independent of the benefit corporation; and (B) easily understood because the following information concerning 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 that develop and control changes to the standard and the process by which those changes are made.

Sec. 4. (NEW) (Effective October 1, 2012) A benefit corporation shall be formed in accordance with the provisions of chapter 601 of the general statutes, and its certificate of incorporation, as initially filed with the office of the Secretary of the State or as amended, shall state that such corporation is a benefit corporation.

Sec. 5. (NEW) (Effective October 1, 2012) (a) A corporation that was not formed as a benefit corporation may become a benefit corporation by amending its certificate of incorporation so that such certificate contains, in addition to matters required by section 33-636 of the general statutes, a statement that the corporation is a benefit corporation. Any such amendment to the certificate of incorporation shall be adopted in accordance with the procedures set forth in section 33-796 of the general statutes. Any such amendment shall be approved by a minimum status vote.

(b) Any corporation that is not a benefit corporation that is a party to a merger or consolidation in which the surviving or consolidated corporation will be a benefit corporation shall approve the plan of merger or consolidation by a minimum status vote in addition to any other vote required by sections 33-814 to 33-821a, inclusive, of the general statutes, the certificate of incorporation or the bylaws.

(c) Any corporation that is not a benefit corporation that is party to a merger or consolidation in which shares of stock of such corporation will be converted into a right to receive shares of stock of a benefit corporation must approve the plan of merger or consolidation by a minimum status vote in addition to any other vote required by sections 33-840 to 33-845, inclusive, of the general statutes, the certificate of incorporation or the bylaws.

Sec. 6. (NEW) (Effective October 1, 2012) (a) A benefit corporation may terminate its status as such and cease to be subject to the provisions of sections 1 to 11, inclusive, of this act, by amending its certificate of incorporation to delete any provision stating that such corporation is a benefit corporation. Any such amendment to the certificate of incorporation shall be adopted in accordance with the procedures set forth in section 33-796 of the general statutes. Any such amendment shall be approved by a minimum status vote.

(b) If a benefit corporation is a party to a merger or consolidation in which the surviving or new corporation will not be a benefit corporation, the plan of merger or consolidation shall not be effective unless such plan is adopted by a minimum status vote in addition to any other vote required by sections 33-814 to 33-821a, inclusive, of the general statutes, the certificate of incorporation or the bylaws.

(c) Any benefit corporation that is party to a merger or consolidation in which shares of stock of such benefit corporation will be converted into a right to receive shares of stock of a corporation that is not a benefit corporation shall approve the plan of merger or consolidation by a minimum status vote in addition to any other vote required by sections 33-840 to 33-845, inclusive, of the general statutes, the certificate of incorporation or the bylaws.

(d) A sale, lease, conveyance, exchange, transfer or other disposition of all, or substantially all, of the assets of a benefit corporation, unless the transaction is in the usual and regular course of business of the benefit corporation, shall not be effective unless the transaction is approved by a minimum status vote in addition to any other vote required by section 33-830 or 33-831 of the general statutes, the certificate of incorporation or the bylaws.

Sec. 7. (NEW) (Effective October 1, 2012) (a) A benefit corporation shall have as one of its purposes the purpose of creating a general public benefit. The certificate of incorporation of a benefit corporation may identify one or more specific public benefits that it is the purpose of the benefit corporation to create. A specific public benefit may also be specified in the bylaws or otherwise adopted by the board of directors. This purpose is in addition to its purpose under section 33-645 of the general statutes.

(b) The creation of a general public benefit and one or more specific public benefits, if any, under subsection (a) of this section is in the best interests of the benefit corporation.

(c) A benefit corporation may amend its certificate of incorporation to add, amend or delete the identification of a specific public benefit that it is the purpose of the benefit corporation to create.

Sec. 8. (NEW) (Effective October 1, 2012) (a) The board of directors, committees of the board and individual directors of a benefit corporation when discharging the duties of their respective positions and considering the best interests of the benefit corporation:

(1) Shall consider the effects of any corporate action upon:

(A) The shareholders of the benefit corporation;

(B) The employees and workforce of the benefit corporation, and its subsidiaries and suppliers;

(C) The interests of customers as beneficiaries of the general or specific public benefit purposes of the benefit corporation;

(D) Community and societal factors, including those of each community in which offices or facilities of the benefit corporation, or its subsidiaries or suppliers are located;

(E) The local and global environment;

(F) The short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests and the general public benefit purposes and any specific public benefit purposes of the benefit corporation may be best served by the continued independence of the benefit corporation; and

(G) The ability of the benefit corporation to accomplish its general public benefit purpose and any specific public benefit purpose;

(2) May consider the effects of any corporate action upon:

(A) The resources; intent; and past, stated, and potential conduct of any person seeking to acquire control of the benefit corporation; and

(B) Other pertinent factors or the interests of any other person that they deem appropriate;

(3) Need not give priority to the interests of a particular person referred to in subdivisions (1) and (2) of this subsection, over the interests of any other person unless the benefit corporation has stated its intention to give priority to interests related to a specific public benefit purpose identified in its certification of incorporation.

(b) The consideration of interests and factors in the manner required by subsection (a) of this section, shall not constitute a violation of section 33-756 or 33-783 of the general statutes.

(c) In any proceeding brought by or in the right of a benefit corporation or brought by or on behalf of the shareholders of a benefit corporation, a director is not personally liable for monetary damages for: (1) Any action taken as a director if the director performed the duties of office in compliance with section 33-756 of the general statutes and this section; or (2) failure of the benefit corporation to create a general public benefit or any specific public benefit specified in its certificate of incorporation, bylaws or otherwise adopted by the board of directors.

(d) 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.

Sec. 9. (NEW) (Effective October 1, 2012) An officer of a benefit corporation shall have no liability for actions taken that the officer believes, in his or her good faith business judgment, are consistent with (1) the general public benefit or any specific public benefit specified in the certificate of incorporation or bylaws or otherwise adopted by the board of directors, and (2) the requirements of any third-party standard in effect for the corporation.

Sec. 10. (NEW) (Effective October 1, 2012) (a) The duties of directors under section 8 of this act, the obligation of a benefit corporation to prepare and make available the annual benefit report required under section 11 of this act, and the general public benefit purpose and any specific public benefit purpose of a benefit corporation may be enforced only in a benefit enforcement proceeding. No person may bring an action or assert a claim against a benefit corporation or its directors or officers with respect to the duties of directors and officers under the provisions of sections 8 and 9 of this act, and the general public benefit purpose and any specific public benefit purpose of the benefit corporation except in a benefit enforcement proceeding.

(b) A benefit enforcement proceeding may be commenced or maintained: (1) Directly by the benefit corporation; or (2) derivatively by a shareholder of the benefit corporation or a director of the benefit corporation; or (3) other persons as specified in the certificate of incorporation or bylaws of the benefit corporation.

Sec. 11. (NEW) (Effective October 1, 2012) (a) A benefit corporation shall prepare an annual benefit report that includes:

(1) A narrative description of the ways in which the benefit corporation pursued the general public benefit during the year and the extent to which the general public benefit was created;

(2) The ways in which the benefit corporation pursued any specific public benefit and the extent to which such specific public benefit was created when the certificate of incorporation, bylaws or other action taken by the board of directors, state that it is the purpose of the benefit corporation to create such specific public benefit;

(3) Any circumstances that have hindered the creation by the benefit corporation of the general or any specific public benefit;

(4) An assessment of the social and environmental performance of the benefit corporation. The assessment shall (A) be prepared in accordance with a third-party standard specified in the certificate of incorporation, bylaws or otherwise adopted by the board of directors and applied consistently with any application of that standard in prior benefit reports; (B) be accompanied by an explanation of the reasons for any inconsistent application; and (C) contain other information or disclosures that may be required under any third-party standard adopted by the directors of the benefit corporation;

(5) The name of each benefit director and the address to which correspondence to such director may be directed;

(6) The compensation paid by the benefit corporation during the fiscal year to each director in his or her capacity as a director; and

(7) The name of each person that owns five per cent or more of the outstanding shares of the benefit corporation either (A) beneficially, to the extent known to the benefit corporation without the need for independent investigation; or (B) of record.

(b) The benefit report shall be made available annually to each shareholder of the benefit corporation (1) not later than one hundred twenty days following the end of the fiscal year of the benefit corporation; or (2) at the same time that the benefit corporation delivers any other annual report to its shareholders.

(c) A benefit corporation shall post the most recent benefit report on a publicly accessible portion of such corporation's Internet web site, if any. If a benefit corporation does not have an Internet web site, such corporation shall make a written or electronic copy of the most recent benefit report available upon written request from any person. A benefit corporation shall not be required to publicly disclose to persons other than such corporation's shareholders any proprietary, confidential or individual compensation information contained in the benefit report to the extent that any third-party standard adopted by the directors of the benefit corporation permits the omission of such information from public disclosure.

(d) Concurrently with the delivery of the benefit report to shareholders as provided in subsection (b) of this section, the benefit corporation shall deliver a copy of the benefit report to the office of the Secretary of the State for filing, provided the compensation paid to directors and financial or proprietary information included in the benefit report may be omitted from the benefit report as delivered to the office of the Secretary of the State.

This act shall take effect as follows and shall amend the following sections:
Section 1	October 1, 2012	New section
Sec. 2	October 1, 2012	New section
Sec. 3	October 1, 2012	New section
Sec. 4	October 1, 2012	New section
Sec. 5	October 1, 2012	New section
Sec. 6	October 1, 2012	New section
Sec. 7	October 1, 2012	New section
Sec. 8	October 1, 2012	New section
Sec. 9	October 1, 2012	New section
Sec. 10	October 1, 2012	New section
Sec. 11	October 1, 2012	New section

Statement of Purpose:

To provide for the establishment of benefit corporations in the state.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]