PRINTER'S NO.  1939

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

1578

Session of

2011

  

  

INTRODUCED BY GERBER, BRIGGS, CALTAGIRONE, FABRIZIO, JOSEPHS, MURT, PAYTON, SANTARSIERO, STURLA AND WAGNER, MAY 23, 2011

  

  

REFERRED TO COMMITTEE ON COMMERCE, MAY 23, 2011  

  

  

  

AN ACT

  

1

Amending Title 15 (Corporations and Unincorporated Associations)

2

of the Pennsylvania Consolidated Statutes, authorizing

3

incorporation of benefit corporations; providing for rights,

4

duties and obligations of benefit corporations and their

5

shareholders, directors and officers; and imposing powers and

6

duties on the Department of State.

7

The General Assembly of the Commonwealth of Pennsylvania

8

hereby enacts as follows:

9

Section 1.  Title 15 of the Pennsylvania Consolidated

10

Statutes is amended by adding a chapter to read:

11

CHAPTER 33

12

BENEFIT CORPORATIONS

13

Subchapter

14

A.  Preliminary Provisions

15

B.  Corporate Purposes

16

C.  Accountability

17

D.  Transparency

18

SUBCHAPTER A

19

PRELIMINARY PROVISIONS

20

Sec.

 


1

3301.  Application and effect of chapter.

2

3302.  Definitions.

3

3303.  Formation of benefit corporations.

4

3304.  Election of status.

5

3305.  Termination of status.

6

§ 3301.  Application and effect of chapter.

7

(a)  General rule.--This chapter shall be applicable to all

8

benefit corporations.

9

(b)  Application of business corporation law generally.--The

10

existence of a provision of this chapter shall not of itself

11

create an implication that a contrary or different rule of law

12

is applicable to a business corporation which is not a benefit

13

corporation. This chapter shall not affect a statute or rule of

14

law which is applicable to a business corporation that is not a

15

benefit corporation.

16

(c)  Laws applicable.--Except as otherwise provided in this

17

chapter, this subpart shall be generally applicable to all

18

benefit corporations. The specific provisions of this chapter

19

shall control over the general provisions of this subpart. A

20

benefit corporation may be simultaneously subject to this

21

chapter and one or more other chapters of this article.

22

(d)  Organic records.--A provision of the articles or bylaws

23

of a benefit corporation may not relax, be inconsistent with or

24

supersede a provision of this chapter.

25

§ 3302.  Definitions.

26

(a)  Defined terms.--The following words and phrases when

27

used in this chapter shall have the meanings given to them in

28

this section unless the context clearly indicates otherwise:

29

"Benefit corporation."  A business corporation:

30

(1)  which has elected to become subject to this chapter;

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1

and

2

(2)  the status of which as a benefit corporation has not

3

been terminated under section 3305 (relating to termination

4

of status).

5

"Benefit director."  The director designated as the benefit

6

director of a benefit corporation under section 3322 (relating

7

to benefit director).

8

"Benefit enforcement proceeding."  Any claim or action

9

brought directly by a benefit corporation, or derivatively on

10

behalf of a benefit corporation, against a director or officer

11

for:

12

(1)  failure to pursue the general public benefit purpose

13

of the benefit corporation or a specific public benefit

14

purpose set forth in its articles; or

15

(2)  violation of a duty or standard of conduct under

16

this chapter.

17

"Benefit officer."  The individual designated as the benefit

18

officer of a benefit corporation under section 3324 (relating to

19

benefit officer).

20

"General public benefit."  A material positive impact on

21

society and the environment, taken as a whole, as measured by a

22

third-party standard, from the business and operations of a

23

benefit corporation.

24

"Independent."  Having no material relationship with a

25

benefit corporation or a subsidiary of the benefit corporation.

26

Serving as benefit director or benefit officer does not make a

27

person not independent. A material relationship between a person

28

and a benefit corporation or any of its subsidiaries will be

29

conclusively presumed to exist if any of the following apply:

30

(1)  The person is, or has been within the last three

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1

years, an employee other than a benefit officer of the

2

benefit corporation or a subsidiary of the benefit

3

corporation.

4

(2)  An immediate family member of the person is, or has

5

been within the last three years, an executive officer other

6

than a benefit officer of the benefit corporation or its

7

subsidiary.

8

(3)  There is beneficial or record ownership of 5% or

9

more of the outstanding shares of the benefit corporation by:

10

(i)  the person; or

11

(ii)  an association:

12

(A)  of which the person is a director, an

13

officer or a manager; or

14

(B)  in which the person owns beneficially or of

15

record 5% or more of the outstanding equity

16

interests.

17

This definition is subject to subsection (b).

18

"Minimum status vote."  In addition to any other approval or

19

vote required by this subpart or a bylaw adopted by the

20

shareholders, the satisfaction of the following conditions:

21

(1)  The shareholders of every class or series must be

22

entitled to vote on the corporate action regardless of a

23

limitation stated in the articles of incorporation or bylaws

24

on the voting rights of any class or series.

25

(2)  The corporate action must be approved by vote of the

26

shareholders of each class or series entitled to cast at

27

least two-thirds of the votes that all shareholders of the

28

class or series are entitled to cast on the action.

29

"Specific public benefit."  Includes:

30

(1)  providing low-income or underserved individuals or

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1

communities with beneficial products or services;

2

(2)  promoting economic opportunity for individuals or

3

communities beyond the creation of jobs in the normal course

4

of business;

5

(3)    preserving the environment;

6

(4)    improving human health;

7

(5)  promoting the arts, sciences or advancement of

8

knowledge;

9

(6)  increasing the flow of capital to entities with a

10

public benefit purpose; and

11

(7)  conferring any other particular benefit on society

12

or the environment.

13

"Subsidiary."  In relation to a person, an association in

14

which the person owns beneficially or of record 50% or more of

15

the outstanding equity interests. This definition is subject to

16

subsection (b).

17

"Third-party standard."  A standard for defining, reporting

18

and assessing overall corporate social and environmental

19

performance which is:

20

(1)  Comprehensive in that it assesses the effect of the

21

business and its operations upon the interests listed in

22

section 3321(a)(1)(ii), (iii), (iv) and (v) (relating to

23

standard of conduct for directors).

24

(2)  Developed by an organization that is independent of

25

the benefit corporation and satisfies the following

26

requirements:

27

(i)  Not more than one-third of the members of the

28

governing body of the organization are representatives of

29

either:

30

(A)  An association of businesses operating in a

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1

specific industry the performance of whose members is

2

measured by the standard.

3

(B)  Businesses whose performance is measured by

4

the standard.

5

(ii)  The organization is not materially financed by

6

an association or business described in subparagraph (i).

7

(3)  Credible because the standard is developed by a

8

person who both:

9

(i)  Has access to necessary expertise to assess

10

overall corporate social and environmental performance.

11

(ii)  Uses a balanced multistakeholder approach,

12

including a public comment period of at least 30 days to

13

develop the standard.

14

(4)  Transparent because the following information is

15

publicly available:

16

(i)  About the standard:

17

(A)  The criteria considered when measuring the

18

overall social and environmental performance of a

19

business.

20

(B)  The relative weightings of those criteria.

21

(ii)  About the development and revision of the

22

standard:

23

(A)  The identity of the directors, officers,

24

material owners and the governing body of the

25

organization that developed and controls revisions to

26

the standard.

27

(B)  The process by which revisions to the

28

standard and changes to the membership of the

29

governing body are made.

30

(C)  An accounting of the sources of financial

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1

support for the organization, with sufficient detail

2

to disclose any relationships that could reasonably

3

be considered to present a potential conflict of

4

interest.

5

(b)  Computation of ownership.-–For purposes of the

6

definitions of "independent" and "subsidiary" in subsection (a),

7

a percentage of ownership in an association shall be calculated

8

as if all outstanding rights to acquire equity interests in the

9

association had been exercised.

10

§ 3303.  Formation of benefit corporations.

11

A benefit corporation must be formed in accordance with

12

Article B (relating to domestic business corporations

13

generally), but its articles must also state that it is a

14

benefit corporation.

15

§ 3304.  Election of status.

16

(a)  Amendment.--A business corporation may become a benefit

17

corporation under this chapter by amending its articles so that

18

they contain, in addition to the requirements of section 1911(b)

19

(relating to amendment of articles authorized), a statement that

20

the corporation is a benefit corporation. In order to be

21

effective, the amendment must be adopted by the minimum status

22

vote.

23

(b)  Fundamental transactions.--

24

(1)  This subsection applies if all of the following

25

subparagraphs apply:

26

(i)  A corporation that is not a benefit corporation

27

is:

28

(A)  a party to a merger, consolidation or

29

division; or

30

(B)  the exchanging corporation in a share

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1

exchange.

2

(ii)  The surviving, new or any resulting corporation

3

in the merger, consolidation, division or share exchange

4

is to be a benefit corporation.

5

(2)  In order to be effective, a plan of merger,

6

consolidation, division or share exchange subject to this

7

subsection must be adopted by the minimum status vote.

8

§ 3305.  Termination of status.

9

(a)  Amendment.--A benefit corporation may terminate its

10

status as such and cease to be subject to this chapter by

11

amending its articles to delete the provision required by

12

section 3304 (relating to election of status) to be stated in

13

the articles of a benefit corporation. In order to be effective,

14

the amendment must be adopted by the minimum status vote.

15

(b)  Fundamental transactions.--If a plan would have the

16

effect of terminating the status of a business corporation as a

17

benefit corporation, in order to be effective, the plan must be

18

adopted by the minimum status vote.

19

(c)  Cross reference.--See section 3331 (relating to annual

20

benefit report).

21

SUBCHAPTER B

22

CORPORATE PURPOSES

23

Sec.

24

3311.  Corporate purposes.

25

§ 3311.  Corporate purposes.

26

(a)  General public benefit purpose.--A benefit corporation

27

shall have the purpose of creating general public benefit. This

28

purpose is in addition to its purpose under section 1301

29

(relating to purposes).

30

(b)  Optional specific public benefit purpose.--The articles

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1

of a benefit corporation may identify one or more specific

2

public benefits that it is the purpose of the benefit

3

corporation to create in addition to its purposes under section

4

1301 and subsection (a). The identification of a specific public

5

benefit under this subsection does not limit the obligation of a

6

benefit corporation under subsection (a).

7

(c)  Effect of purposes.-–The creation of general public

8

benefit and specific public benefit under subsections (a) and

9

(b) is in the best interests of the benefit corporation.

10

(d)  Amendment.--A benefit corporation may amend its articles

11

to add, amend or delete the identification of a specific public

12

benefit that it is the purpose of the benefit corporation to

13

create. In order to be effective, the amendment must be adopted

14

by the minimum status vote.

15

SUBCHAPTER C

16

ACCOUNTABILITY

17

Sec.

18

3321.  Standard of conduct for directors.

19

3322.  Benefit director.

20

3323.  Standard of conduct for officers.

21

3324.  Benefit officer.

22

3325.  Right of action.

23

§ 3321.  Standard of conduct for directors.

24

(a)  Required considerations.--Without regard to whether the

25

benefit corporation is subject to section 1715 (relating to

26

exercise of powers generally) or 1716 (relating to alternative

27

standard), in discharging the duties of their respective

28

positions and in considering the best interests of the benefit

29

corporation, the board of directors, committees of the board and

30

individual directors of a benefit corporation:

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1

(1)  shall consider the effects of any action upon:

2

(i)  the shareholders of the benefit corporation;

3

(ii)  the employees and work force of the benefit

4

corporation, its subsidiaries and its suppliers;

5

(iii)  the interests of customers as beneficiaries of

6

the general public benefit or specific public benefit

7

purposes of the benefit corporation;

8

(iv)  community and societal factors, including those

9

of each community in which offices or facilities of the

10

benefit corporation, its subsidiaries or its suppliers

11

are located;

12

(v)  the local and global environment;

13

(vi)  the short-term and long-term interests of the

14

benefit corporation, including benefits that may accrue

15

to the benefit corporation from its long-term plans and

16

the possibility that these interests may be best served

17

by the continued independence of the benefit corporation;

18

and

19

(vii)  the ability of the benefit corporation to

20

accomplish its general public benefit purpose and any

21

specific public benefit purpose; and

22

(2)  may consider:

23

(i)  matters listed in section 1715(a)(3); and

24

(ii)  other pertinent factors or the interests of any

25

other group which they deem appropriate; but

26

(3)  need not give priority to the interests of a

27

particular person or group referred to in paragraph (1) or

28

(2) over the interests of another person or group unless the

29

benefit corporation has stated its intention to give priority

30

to interests related to a specific public benefit purpose

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1

identified in its articles.

2

(b)  Coordination with other provisions of law.--The

3

consideration of interests and factors in the manner required by

4

subsection (a):

5

(1)  does not constitute a violation of section 1712

6

(relating to standard of care and justifiable reliance); and

7

(2)  is in addition to the ability of directors to

8

consider interests and factors as provided in section 1715 or

9

1716.

10

(c)  Exoneration from personal liability generally.--A

11

director is not personally liable for monetary damages for:

12

(1)  action taken as a director if the director performed

13

the duties of office in compliance with section 1712 and this

14

section; or

15

(2)  failure of the benefit corporation to create general

16

public benefit or a specific public benefit.

17

(d)  Limitation on standing.--A director does not have a

18

fiduciary duty to a person that is a beneficiary of the general

19

or specific public benefit purposes of a benefit corporation

20

arising from the status of the person as a beneficiary.

21

§ 3322.  Benefit director.

22

(a)  General rule.--The board of directors of a benefit

23

corporation shall include one director, who:

24

(1)  shall be designated the benefit director; and

25

(2)  shall have, in addition to the powers, duties,

26

rights and immunities of the other directors of the benefit

27

corporation, the powers, duties, rights and immunities

28

provided in this subchapter.

29

(b)  Election, removal and qualifications.--The benefit

30

director shall be elected, and may be removed, in the manner

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1

provided by Ch. 17 Subch. C (relating to directors and

2

officers), and shall be an individual who is independent. The

3

benefit director may serve as the benefit officer at the same

4

time as serving as the benefit director. The articles or bylaws

5

of a benefit corporation may prescribe additional qualifications

6

of the benefit director not inconsistent with this subsection.

7

(c)  Annual compliance statement.--The benefit director shall

8

prepare, and the benefit corporation shall include in the annual

9

benefit report to shareholders required by section 3331

10

(relating to annual benefit report), the opinion of the benefit

11

director on all of the following:

12

(1)  Whether the benefit corporation acted in accordance

13

with its general public benefit purpose and any specific

14

public benefit purpose in all material respects during the

15

period covered by the report.

16

(2)  Whether the directors and officers complied with

17

sections 3321(a) (relating to standard of conduct for

18

directors) and 3323(a) (relating to standard of conduct for

19

officers), respectively.

20

(3)  If, in the opinion of the benefit director, the

21

benefit corporation or its directors or officers failed to

22

comply with paragraph (2), a description of the ways in which

23

the benefit corporation or its directors or officers failed

24

to comply.

25

(d)  Status of actions.--The acts of an individual in the

26

capacity of a benefit director shall constitute for all purposes

27

acts of that individual in the capacity of a director of the

28

benefit corporation.

29

(e)  Alternative governance arrangements.--The bylaws of a

30

benefit corporation must provide that the persons or share

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1

holders who perform the duties of the board of directors include

2

a person with the powers, duties, rights and immunities of a

3

benefit director if any of the following apply:

4

(1)  The bylaws of a benefit corporation provide that the

5

powers and duties conferred or imposed upon the board of

6

directors be exercised or performed by a person other than

7

the directors under section 1721(a) (relating to board of

8

directors).

9

(2)  The bylaws of a statutory close corporation that is

10

a benefit corporation provide that the business and affairs

11

of the corporation be managed by or under the direction of

12

the shareholders.

13

(f)  Exoneration from personal liability.--Regardless of

14

whether the bylaws of a benefit corporation include a provision

15

eliminating or limiting the personal liability of directors

16

authorized by section 1713 (relating to personal liability of

17

directors), a benefit director shall not be personally liable

18

for an act or omission in the capacity of a benefit director

19

unless the act or omission constitutes self-dealing, willful

20

misconduct or a knowing violation of law.

21

§ 3323.  Standard of conduct for officers.

22

(a)  General rule.-–Each officer of a benefit corporation

23

shall consider the interests and factors described in section

24

3321(a) (relating to standard of conduct for directors) in the

25

manner provided in that subsection if:

26

(1)  the officer has discretion to act with respect to a

27

matter; and

28

(2)  it reasonably appears to the officer that the matter

29

may have a material effect on the creation of general public

30

benefit or a specific public benefit by the benefit

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1

corporation.

2

(b)  Coordination with other provisions of law.--The

3

consideration of interests and factors in the manner described

4

in subsection (a) shall not constitute a violation of section

5

1712(c) (relating to standard of care and justifiable reliance).

6

(c)  Exoneration from personal liability.--An officer is not

7

personally liable for monetary damages for:

8

(1)  action taken as an officer if the officer performed

9

the duties of the position in compliance with section 1712(c)

10

and this section; or

11

(2)  failure of the benefit corporation to create general

12

public benefit or specific public benefit.

13

(d)  Limitation on standing.--An officer does not have a

14

fiduciary duty to a person that is a beneficiary of the general

15

or specific public benefit purposes of a benefit corporation

16

arising from the status of the person as a beneficiary.

17

§ 3324.  Benefit officer.

18

(a)  Designation.--A benefit corporation may have an officer

19

designated the benefit officer.

20

(b)  Functions.--A benefit officer shall have:

21

(1)  powers and duties relating to the purpose of the

22

corporation to create general public benefit or specific

23

public benefit provided:

24

(i)  by the bylaws; or

25

(ii)  absent controlling provisions in the bylaws, by

26

resolutions or orders of the board of directors.

27

(2)  the duty to prepare the benefit report required by

28

section 3331 (relating to annual benefit report).

29

§ 3325.  Right of action.

30

(a)  Type of proceeding.--The duties of directors and

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1

officers under this chapter, and the general public benefit

2

purpose and any specific public benefit purpose of a benefit

3

corporation, may be enforced only in a benefit enforcement

4

proceeding. No person may bring an action or assert a claim

5

against a benefit corporation or its directors or officers with

6

respect to the duties of directors and officers under this

7

chapter and the general public benefit purpose and any specific

8

public benefit purpose of the benefit corporation except in a

9

benefit enforcement proceeding.

10

(b)  Standing.--A benefit enforcement proceeding may be

11

commenced or maintained only:

12

(1)  directly by the benefit corporation; or

13

(2)  derivatively by:

14

(i)  a shareholder;

15

(ii)  a director;

16

(iii)  a person or group of persons that owns

17

beneficially or of record 5% or more of the equity

18

interests in an association of which the benefit

19

corporation is a subsidiary; or

20

(iv)  other persons as specified in the articles or

21

bylaws of the benefit corporation.

22

(c)  Cross reference.--See Subchapter F of Chapter 17

23

(relating to derivative actions).

24

SUBCHAPTER D

25

TRANSPARENCY

26

Sec.

27

3331.  Annual benefit report.

28

§ 3331.  Annual benefit report.

29

(a)  Contents.--A benefit corporation shall prepare an annual

30

benefit report including all of the following:

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1

(1)  A narrative description of all of the following:

2

(i)  The ways in which the benefit corporation

3

pursued general public benefit during the year and the

4

extent to which general public benefit was created.

5

(ii)  Both:

6

(A)  the ways in which the benefit corporation

7

pursued a specific public benefit which the articles

8

state it is the purpose of the benefit corporation to

9

create; and

10

(B)  the extent to which that specific public

11

benefit was created.

12

(iii)  Any circumstances that have hindered the

13

creation by the benefit corporation of general public

14

benefit or specific public benefit.

15

(2)  An assessment of the overall social and

16

environmental performance of the benefit corporation. The

17

assessment shall be prepared in accordance with a third-party

18

standard:

19

(i)  applied consistently with any application of

20

that standard in prior benefit reports; or

21

(ii)  accompanied by an explanation of the reasons

22

for any inconsistent application.

23

(3)  The name of the benefit director and the benefit

24

officer and the address to which correspondence to each of

25

them may be directed.

26

(4)  The compensation paid by the benefit corporation

27

during the year to each director in the capacity of a

28

director.

29

(5)  The name of each person that owns 5% or more of the

30

outstanding shares of the benefit corporation either:

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1

(i)  beneficially, to the extent known to the benefit

2

corporation without independent investigation; or

3

(ii)  of record.

4

(6)  The statement of the benefit director described in

5

section 3322(c) (relating to benefit director).

6

(b)  Timing of report.--The benefit report shall be sent

7

annually to each shareholder:

8

(1)  within 120 days following the end of the fiscal year

9

of the benefit corporation; or

10

(2)  at the same time that the benefit corporation

11

delivers any other annual report to its shareholders.

12

(c)  Internet website posting.--A benefit corporation shall

13

post its most recent benefit report on the public portion of its

14

Internet website, if any, but the compensation paid to directors

15

and financial or proprietary information included in the benefit

16

report may be omitted from the benefit report as posted.

17

(d)  Filing of report.--

18

(1)  Concurrently with the delivery of the benefit report

19

to shareholders under subsection (b), the benefit corporation

20

shall deliver a copy of the benefit report to the department

21

for filing, but the compensation paid to directors and

22

financial or proprietary information included in the benefit

23

report may be omitted from the benefit report as delivered to

24

the department.

25

(2)  The department shall charge a fee of $70 for filing

26

a benefit report.

27

Section 2.  This act shall take effect in 60 days.

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