Bill Text: IL SB2358 | 2013-2014 | 98th General Assembly | Introduced

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Bill Title: Creates the Benefit Limited Liability Company Act. Provides that a limited liability company may become a benefit limited liability company for public benefit and other purposes. Defines key terms and contains accountability and transparency provisions.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2015-01-13 - Session Sine Die [SB2358 Detail]

Download: Illinois-2013-SB2358-Introduced.html

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98TH GENERAL ASSEMBLY State of Illinois 2013 and 2014 SB2358 Introduced 2/15/2013, by Sen. Heather A. Steans SYNOPSIS AS INTRODUCED:
New Act
Creates the Benefit Limited Liability Company Act. Provides that a limited liability company may become a benefit limited liability company for public benefit and other purposes. Defines key terms and contains accountability and transparency provisions.
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FISCAL NOTE ACT MAY APPLY
A BILL FOR
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AN ACT concerning business.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Article 1.
General Provisions
Section 1-1. Short title. This Act may be cited as the
Benefit Limited Liability Company Act.
Section 1-5. Application and effect of the Act.
(a) This Act applies to all benefit liability companies.
(b) The existence of a provision of this Act shall not of
itself create an implication that a contrary or different rule
of law is applicable to a limited liability company that is not
a benefit limited liability company. This Act shall not affect
a statute or rule of law that is applicable to a limited
liability company that is not a benefit limited liability
company.
(c) The Limited Liability Company Act applies to benefit
limited liability companies, including their organization, and
they shall enjoy the powers and privileges and be subject to
the duties, restrictions, and liabilities of other limited
liability companies, except so far as provided by this Act. If
any provision of this Act conflicts with the Limited Liability

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Company Act, this Act takes precedence.
(d) A provision of the articles of organization or
operating agreement of a benefit limited liability company may
not relax, be inconsistent with, or supersede a provision of
this Act.
Section 1-10. Definitions. As used in this Act, unless the
context otherwise requires, the words and phrases defined in
this Section shall have the meanings set forth herein.
"Benefit limited liability company" means a limited
liability company organized under the Limited Liability
Company Act:
(1) that has elected to become subject to this Act; and
(2) whose status as a benefit limited liability company
has not been terminated under Section 2-10.
"Benefit enforcement proceeding" means a claim or action
for:
(1) the failure of a benefit limited liability company
to pursue or create general public benefit or a specific
public benefit set forth in its articles of organization;
or
(2) a violation of an obligation, duty, or standard of
conduct under this Act.
"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

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operations of a benefit limited liability company.
"Minimum status vote" means that, in addition to any (i)
other approval, vote, or consent required by the statutory law
that principally governs the internal affairs of the limited
liability company, (ii) provision of the publicly filed record
or document required to form the limited liability company, or
(iii) agreement binding on some or all of the holders of equity
interests in the limited liability company, the holders of
every class or series of equity interest in the limited
liability company that are entitled to receive a distribution
of any kind from the limited liability company 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 the action must be approved by a
vote or consent of at least two-thirds of those holders.
"Specific public benefit" means:
(1) providing low-income or underserved individuals or
communities with beneficial products or services;
(2) promoting economic opportunity for individuals or
communities beyond the creation of jobs in the ordinary
course of business;
(3) preserving the environment;
(4) improving human health;
(5) promoting the arts, sciences, or advancement of
knowledge;
(6) increasing the flow of capital to entities with a

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public benefit purpose; or
(7) the accomplishment of any other particular benefit
for society or the environment.
"Subsidiary" of a person means an entity in which the
person owns beneficially or of record 50% or more of the
outstanding equity interests. For the purposes of this
definition, a percentage of ownership in an entity shall be
calculated as if all outstanding rights to acquire equity
interests in the entity have been exercised.
"Third-party standard" means a standard for defining,
reporting, and assessing overall corporate, social, and
environmental performance that:
(1) is a comprehensive assessment of the impact of the
business and the business' operations upon the
considerations listed in subdivisions (a)(1)(B) through
(a)(1)(E) of Section 4-1;
(2) is developed by an entity that has no material
financial relationship with the benefit corporation or any
of its subsidiaries;
(3) is 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:
(A) associations of businesses operating in a
specific industry, the performance of whose members is
measured by the standard;

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(B) businesses from a specific industry or an
association of businesses in that industry; or
(C) businesses whose performance is assessed
against the standard;
(4) is developed by an entity that:
(A) accesses necessary and appropriate expertise
to assess overall corporate social and environmental
performance; and
(B) uses a balanced multi-stakeholder approach,
including a public comment period of at least 30 days
to develop the standard; and
(5) makes the following information regarding the
standard publicly available:
(A) the factors considered when measuring the
overall social and environmental performance of a
business and the relative weight, if any, given to each
of those factors;
(B) the identity of the directors, officers, any
material owners, and the governing body of the entity
that developed, and controls revisions to, the
standard, and the process by which revisions to the
standard and changes to the membership of the governing
body are made; and
(C) an accounting of the sources of financial
support for the entity, with sufficient detail to
disclose any relationships that could reasonably be

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considered to present a potential conflict of
interest.
Section 1-15. Application to low-profit limited liability
companies. Nothing contained in this Act prohibits a benefit
limited liability company from also being or becoming a
low-profit limited liability company while remaining a benefit
limited liability company if the benefit limited liability
company satisfies the requirements for low-profit limited
liability companies under the Limited Liability Company Act.
Article 2.
Formation of Benefit Limited Liability Companies
Section 2-1. Formation of benefit limited liability
companies. A benefit limited liability company must be formed
in accordance with Article 5 of the Limited Liability Company
Act. In addition to the formation requirements of that Act, the
articles of organization of a benefit limited liability company
must state that it is a benefit limited liability company in
accordance with the provisions of this Article.
Section 2-5. Election of status.
(a) A limited liability company may become a benefit
limited liability company under this Act by amending its
articles of organization so that they contain a statement that

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the limited liability company is a benefit limited liability
company. In order to be effective, the amendment must be
adopted by at least the minimum status vote.
(b) For any entity that is a party to a merger or
consolidation or is the exchanging entity in a share exchange,
where the surviving, new, or resulting entity in the merger,
consolidation, or share exchange is intended to be a benefit
limited liability company, the plan of merger, consolidation,
or share exchange must be adopted by at least the minimum
status vote in order to be effective.
Section 2-10. Termination of status.
(a) A benefit limited liability company may terminate its
status as such and cease to be subject to this Act by amending
its articles of organization to remove the statement that the
limited liability company is a benefit limited liability
company. In order to be effective, the amendment must be
adopted by at least the minimum status vote.
(b) If a plan of merger, conversion, or share exchange
would have the effect of terminating the status of a limited
liability company as a benefit limited liability company, in
order to be effective, the plan must be adopted by at least the
minimum status vote.
(c) A sale, lease, exchange, or other disposition of all or
substantially all of the assets of a benefit limited liability
company, unless the transaction is in the usual and ordinary

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course of business, shall not be effective unless the
transaction is adopted by at least the minimum status vote.
Article 3.
Benefit Limited Liability Company Purposes
Section 3-1. Benefit limited liability company purposes.
(a) A benefit limited liability company shall have a
purpose of creating general public benefit. This purpose is in
addition to its purposes under Section 1-25 of the Limited
Liability Company Act and any specific purpose set forth in its
articles of organization in accordance with subsection (b).
(b) The articles of organization of a benefit limited
liability company may identify one or more specific public
benefits the creation of which is a purpose of the benefit
corporation in addition to its purposes under Section 1-25 of
the limited Liability Company and subsection (a). The
identification of a specific public benefit under this
subsection does not limit the obligation of a benefit limited
liability company under subsection (a).
(c) The creation of general public benefit and specific
public benefit under subsections (a) and (b) is in the best
interests of the benefit limited liability company.
(d) A benefit limited liability company may amend its
articles of organization to add, change, or remove a specific
public benefit. In order to be effective, the amendment must be

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adopted by at least the minimum status vote.
Article 4.
Accountability
Section 4-1. Standard of conduct for members and managers.
(a) Without regard to whether the benefit limited liability
company is subject to Section 15-15 of the Limited Liability
Company Act, in discharging the duties of their respective
positions, the members and managers of a benefit limited
liability company in considering the best interests of the
benefit limited liability company:
(1) shall consider the effects of any action upon:
(A) the members of the benefit limited liability
company;
(B) the employees and work force of the benefit
limited liability company, its subsidiaries, and its
suppliers;
(C) the interests of customers as beneficiaries of
the general public benefit or specific public benefit
purposes of the benefit limited liability company;
(D) community and societal considerations,
including those of each community in which offices or
facilities of the benefit limited liability company,
its subsidiaries or its suppliers are located;
(E) the local and global environment;

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(F) the short-term and long-term interests of the
benefit limited liability company, including benefits
that may accrue to the benefit limited liability
company from its long-term plans and the possibility
that these interests may be best served by the
continued independence of the benefit limited
liability company; and
(G) the ability of the benefit limited liability
company to accomplish its general public benefit
purpose and any specific public benefit purpose; and
(2) may consider:
(A) considerations listed in Section 15-5 of the
Limited Liability Company Act; and
(B) any other pertinent factors or the interests of
any other group that they deem appropriate; but
(3) need not give priority to the interests of a
particular person or group referred to in paragraphs (1) or
(2) over the interests of another person or group unless
the benefit limited liability company has stated in its
articles of organization its intention to give priority to
certain interests related to its accomplishment of its
general public benefit purpose or a specific public benefit
purpose identified in its articles of organization.
(b) The consideration of interests and factors in the
manner required by subsection (a) is in addition to the ability
of members and managers to consider interests and factors as

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provided in Section 15-15 of the Limited Liability Company Act.
(c) A member or manager is not personally liable for
monetary damages for:
(1) any action taken as a member or manager if the
member or manager performed the duties of office in
compliance with Article 15 of the Limited Liability Company
Act and this Section; or
(2) a failure of the benefit limited liability company
to pursue or create general public benefit or a specific
public benefit.
(d) A member or manager 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 limited
liability company arising from the status of the person as a
beneficiary.
Section 4-5. Right of action; benefit enforcement
proceeding.
(a) No person may bring an action or assert a claim against
a benefit limited liability company or its members or managers
with respect to failure to pursue or create general public
benefit or a specific public benefit set forth in its articles
of organization or violation of a duty or standard of conduct
under this Act except in a benefit enforcement proceeding.
(b) A benefit enforcement proceeding may be commenced or
maintained only:

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(1) directly by the benefit limited liability company;
or
(2) derivatively by:
(A) a member;
(B) a manager;
(C) a person or group of persons that owns
beneficially or of record 5% or more of the equity
interests in an entity of which the benefit limited
liability company is a subsidiary; or
(D) other persons as specified in the articles of
organization or management agreement of the benefit
limited liability company.
(c) A benefit limited liability company shall not be liable
for monetary damages under this Act for any failure of the
benefit limited liability company to pursue or create general
public benefit or a specific public benefit.
Article 5.
Transparency
Section 5-1. Annual benefit report.
(a) A benefit limited liability company shall prepare an
annual benefit report including all of the following:
(1) A narrative description of:
(A) the process and rationale for selecting the
third party standard used to prepare the benefit

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report;
(B) the ways in which the benefit limited liability
company pursued general public benefit during the year
and the extent to which general public benefit was
created;
(C) the ways in which the benefit limited liability
company pursued a specific public benefit that the
articles of organization state it is the purpose of the
benefit limited liability company to create and the
extent to which that specific public benefit was
created; and
(D) any circumstances that have hindered the
pursuit by the benefit limited liability company of its
general public benefit purpose and any specific public
benefit purpose or the creation by the benefit limited
liability company of general public benefit and any
specific public benefit.
(2) An assessment of the overall social and
environmental performance of the benefit limited liability
company against a third-party standard:
(A) applied consistently with any application of
that standard in prior benefit reports; or
(B) accompanied by an explanation of the reasons
for any inconsistent application.
(3) The compensation paid by the benefit limited
liability company during the year to each manager in the

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capacity of a manager.
(4) The name of each person that owns 5% or more of the
outstanding shares of the benefit limited liability
company either:
(A) beneficially, to the extent known to the
benefit limited liability company without independent
investigation; or
(B) of record.
(5) A statement of any connection between the
organization that established the third-party standard, or
its directors, officers, or material owners, and the
benefit limited liability company or its members or
managers, including any financial or governance
relationship that might materially affect the credibility
of the use of the third-party standard.
(b) The benefit limited liability company shall send a
benefit report annually to each member:
(1) within 120 days following the end of the fiscal
year of the benefit limited liability company; or
(2) at the same time that the benefit limited liability
company delivers any other annual report to its members.
(c) A benefit limited liability company shall post all of
its benefit reports on the public portion of its Internet
website, if any, but the compensation paid to managers and
financial or proprietary information included in the benefit
reports may be omitted from the benefit reports as posted.

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(d) If a benefit limited liability company does not have an
Internet website, the benefit limited liability company shall
provide a copy of its most recent benefit report, without
charge, to any person that requests a copy.