THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY LEACH, M. WHITE, STACK, FONTANA, FERLO, WASHINGTON, BROWNE AND FARNESE, FEBRUARY 11, 2011

SENATOR GREENLEAF, JUDICIARY, AS AMENDED, OCTOBER 25, 2011   

AN ACT

Amending Title 15 (Corporations and Unincorporated Associations)

of the Pennsylvania Consolidated Statutes, authorizing

incorporation of benefit corporations; providing for rights,

duties and obligations of benefit corporations and their

shareholders, directors and officers; and imposing powers and

duties on the Department of State.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Title 15 of the Pennsylvania Consolidated

Statutes is amended by adding a chapter to read:

CHAPTER 33

BENEFIT CORPORATIONS

Subchapter

A.  Preliminary Provisions

B.  Corporate Purposes

C.  Accountability

D.  Transparency

SUBCHAPTER A

PRELIMINARY PROVISIONS

Sec.

3301.  Application and effect of chapter.

3302.  Definitions.

3303.  Formation of benefit corporations.

3304.  Election of status.

3305.  Termination of status.

§ 3301.  Application and effect of chapter.

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

benefit corporations.

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

existence of a provision of this chapter shall not of itself

create an implication that a contrary or different rule of law

is applicable to a business corporation which is not a benefit

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

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

benefit corporation.

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

chapter, this subpart shall be generally applicable to all

benefit corporations. The specific provisions of this chapter

shall control over the general provisions of this subpart. A

benefit corporation may be simultaneously subject to this

chapter and one or more other chapters of this article.

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

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

supersede a provision of this chapter.

§ 3302.  Definitions.

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

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

this section unless the context clearly indicates otherwise:

"Benefit corporation."  A business corporation:

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

and

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

been terminated under section 3305 (relating to termination

of status).

"Benefit director."  The director designated as the benefit

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director of a benefit corporation under section 3322 (relating

to benefit director).

"Benefit director."  Either:

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(1)  the director designated as the benefit director of a

benefit corporation under section 3322 (relating to benefit

director); or

(2)  a person with one or more of the powers, duties or

rights of a benefit director to the extent provided in the

bylaws under section 3322.

"Benefit enforcement proceeding."  Any claim or action

brought directly by a benefit corporation, or derivatively on

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behalf of a benefit corporation, against a director or officer 

for:

(1)  failure to pursue the general public benefit purpose

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of the benefit corporation or a specific public benefit

purpose set forth in its articles; or

(1)  failure of a benefit corporation to pursue or create

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general public benefit or a specific public benefit purpose

set forth in its articles; or

(2)  violation of a any obligation, duty or standard of

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conduct under this chapter.

"Benefit officer."  The individual designated as the benefit

officer of a benefit corporation under section 3324 (relating to

benefit officer).

"General public benefit."  A material positive impact on

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

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assessed against a third-party standard, from the business and

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operations of a benefit corporation.

"Independent."  Having no material relationship with a

benefit corporation or a subsidiary of the benefit corporation.

Serving as benefit director or benefit officer does not make a

person not independent. A material relationship between a person

and a benefit corporation or any of its subsidiaries will be

conclusively presumed to exist if any of the following apply:

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

years, an employee other than a benefit officer of the

benefit corporation or a subsidiary of the benefit

corporation.

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

been within the last three years, an executive officer other

than a benefit officer of the benefit corporation or its

subsidiary.

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

more of the outstanding shares of the benefit corporation by:

(i)  the person; or

(ii)  an association:

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

officer or a manager; or

(B)  in which the person owns beneficially or of

record 5% or more of the outstanding equity

interests.

This definition is subject to subsection (b).

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

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vote required by this subpart or a bylaw adopted by the

shareholders, the satisfaction of the following conditions:

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

entitled to vote on the corporate action regardless of a

limitation stated in the articles of incorporation or bylaws

on the voting rights of any class or series.

(2)  The corporate action must 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.

"Minimum status vote."

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(1)  In the case of a business corporation, in addition

to any other required approval or vote, the satisfaction of

the following conditions:

(i)  The shareholders of every class or series must

be entitled, as a class, to vote on the corporate action

regardless of a limitation stated in the articles of

incorporation or bylaws on the voting rights of any class

or series.

(ii)  The corporate action must be approved by a 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.

(2)  In the case of a domestic association other than a

business corporation, in addition to any other required

approval, vote or consent, the satisfaction of the following

conditions:

(i)  The holders of every class or series of equity

interest in the association that are entitled to receive

a distribution of any kind from the association must be

entitled as a class 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.

(ii)  The action must be approved by vote or consent

of the holders described in subparagraph (i) entitled to

cast at least two-thirds of the votes or consents that

all of those holders are entitled to cast on the action.

"Specific public benefit."  Includes:

(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 normal 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

public benefit purpose; and

(7)  conferring any other particular benefit on society

or the environment.

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

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

the outstanding equity interests. This definition is subject to

subsection (b).

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

and assessing overall corporate social and environmental

performance which is:

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

business and its operations upon the interests listed in

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

standard of conduct for directors).

(2)  Developed by an organization that is independent of

the benefit corporation and satisfies the following

requirements:

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

governing body of the organization are representatives of

either any of the following:

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(A)  An association of businesses operating in a

specific industry the performance of whose members is

measured by the standard.

(B)  Businesses whose performance is measured by

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the standard.

(B)  Businesses from a specific industry or an

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association of businesses in that industry.

(C)  Businesses whose performance is assessed

against the standard.

(ii)  The organization is not materially financed by

an association or business described in subparagraph (i).

(3)  Credible because the standard is developed by a

person who that both:

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(i)  Has access to necessary expertise to assess

overall corporate social and environmental performance.

(ii)  Uses a balanced multistakeholder approach,

including a public comment period of at least 30 days to

develop the standard.

(4)  Transparent because the following information is

publicly available:

(i)  About the standard:

(A)  The criteria considered when measuring the

overall social and environmental performance of a

business.

(B)  The relative weightings of those criteria.

(ii)  About the development and revision of the

standard:

(A)  The identity of the directors, officers,

material owners and the governing body of the

organization that developed and controls revisions to

the standard.

(B)  The process by which revisions to the

standard and changes to the membership of the

governing body are made.

(C)  An accounting of the sources of financial

support for the organization, with sufficient detail

to disclose any relationships that could reasonably

be considered to present a potential conflict of

interest.

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

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

a percentage of ownership in an association shall be calculated

as if all outstanding rights to acquire equity interests in the

association had been exercised.

§ 3303.  Formation of benefit corporations.

A benefit corporation must be formed in accordance with

Article B (relating to domestic business corporations

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

benefit corporation.

§ 3304.  Election of status.

(a)  Amendment.--A An existing business corporation may

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become a benefit corporation under this chapter by amending its

articles so that they contain, in addition to the requirements

of section 1911(b) (relating to amendment of articles

authorized), a statement that the corporation is a benefit

corporation. In order to be effective, the amendment must be

adopted by the minimum status vote.

(b)  Fundamental transactions.--

(1)  This subsection applies if all of the following

subparagraphs apply:

(i)  A corporation An association that is not a

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benefit corporation is:

(A)  a party to a merger, consolidation or

division; or

(B)  the exchanging corporation association in a

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share exchange.

(ii)  The surviving, new or any resulting corporation 

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association in the merger, consolidation, division or

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share exchange is to be a benefit corporation.

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

consolidation, division or share exchange subject to this

subsection must be adopted by the minimum status vote.

§ 3305.  Termination of status.

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

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

amending its articles to delete the provision required by

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

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

the amendment must be adopted by the minimum status vote.

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

effect of terminating the status of a business corporation as a

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

adopted by the minimum status vote.

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

benefit report). vote. Any sale, lease, exchange or other

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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, shall not be effective unless the

transaction is approved by at least the minimum status vote.

SUBCHAPTER B

CORPORATE PURPOSES

Sec.

3311.  Corporate purposes.

§ 3311.  Corporate purposes.

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

shall have the a purpose of creating general public benefit.

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This purpose is in addition to its purpose under section 1301

(relating to purposes).

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

of a benefit corporation may identify one or more specific

public benefits that it is the purpose of the benefit

corporation to create in addition to its purposes under section

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

benefit under this subsection does not limit the obligation of a

benefit corporation under subsection (a).

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

benefit and specific public benefit under subsections (a) and

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

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

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

benefit that it is the purpose of the benefit corporation to

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

by the minimum status vote.

(e)  Professional corporations.--A professional corporation

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that is a benefit corporation does not violate section 2922(a)

(relating to stated purposes) by having the purpose to create

general public benefit or a specific public benefit.

SUBCHAPTER C

ACCOUNTABILITY

Sec.

3321.  Standard of conduct for directors.

3322.  Benefit director.

3323.  Standard of conduct for officers.

3324.  Benefit officer.

3325.  Right of action.

§ 3321.  Standard of conduct for directors.

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

benefit corporation is subject to section 1715 (relating to

exercise of powers generally) or 1716 (relating to alternative

standard), in discharging the duties of their respective

positions and in considering the best interests of the benefit

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

individual directors of a benefit corporation:

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

(i)  the shareholders of the benefit corporation;

(ii)  the employees and work force of the benefit

corporation, its subsidiaries and its suppliers;

(iii)  the interests of customers as beneficiaries of

the general public benefit or specific public benefit

purposes of the benefit corporation;

(iv)  community and societal factors, including those

of each community in which offices or facilities of the

benefit corporation, its subsidiaries or its suppliers

are located;

(v)  the local and global environment;

(vi)  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 may be best served

by the continued independence of the benefit corporation;

and

(vii)  the ability of the benefit corporation to

accomplish its general public benefit purpose and any

specific public benefit purpose; and

(2)  may consider:

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

(ii)  other pertinent factors or the interests of any

other group which they deem appropriate; but

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

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

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

benefit corporation has stated in its articles its intention

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to give priority to certain interests related to its

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accomplishment of its general public benefit purpose or of a

specific public benefit purpose identified in its articles.

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

consideration of interests and factors in the manner required by

subsection (a):

(1)  does not constitute a violation of section 1712

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

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

consider interests and factors as provided in section 1715 or

1716.

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

director is not personally liable for monetary damages for:

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

the duties of office in compliance with section 1712 and this

section; or

(2)  failure of the benefit corporation to create general

public benefit or a specific public benefit.

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

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

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or specific public benefit purposes public benefit purpose or a

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specific public benefit purpose of a benefit corporation arising

from the status of the person as a beneficiary.

§ 3322.  Benefit director.

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

corporation shall include one director, who:

(1)  shall be designated the benefit director; and

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

rights and immunities of the other directors of the benefit

corporation, the powers, duties, rights and immunities

provided in this subchapter.

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

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

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

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

benefit director may serve as the benefit officer at the same

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

of a benefit corporation may prescribe additional qualifications

of the benefit director not inconsistent with this subsection.

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

prepare, and the benefit corporation shall include in the annual

benefit report to shareholders required by section 3331

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

director on all of the following:

(1)  Whether the benefit corporation acted in accordance

with its general public benefit purpose and any specific

public benefit purpose in all material respects during the

period covered by the report.

(2)  Whether the directors and officers complied with

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

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

officers), respectively.

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

benefit corporation or its directors or officers failed to

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

the benefit corporation or its directors or officers failed

to comply.

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

capacity of a benefit director shall constitute for all purposes

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

benefit corporation.

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

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(e)  Alternative governance arrangements.--

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(1)  The bylaws of a benefit corporation must provide

that the persons or share holders shareholders who perform

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the duties of the board of directors include a person with

the powers, duties, rights and immunities of a benefit

director if any of the following apply:

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

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(i)  The bylaws of a benefit corporation provide that

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the powers and duties conferred or imposed upon the board

of directors shall be exercised or performed by a person

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other than the directors under section 1721(a) (relating

to board of directors).

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

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(ii)  The bylaws of a statutory close corporation

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that is a benefit corporation provide that the business

and affairs of the corporation shall be managed by or

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under the direction of the shareholders.

(2)  A person that exercises one or more of the powers,

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duties or rights of a benefit director under this subsection:

(i)  does not need to be independent of the benefit

corporation;

(ii)  shall have the immunities of a benefit

director;

(iii)  may share the powers, duties and rights of a

benefit director with one or more other persons; and

(iv)  shall not be subject to the procedures for

election or removal of directors in Chapter 17 Subchapter

C (relating to directors and officers) unless:

(A)  the person is also a director of the benefit

corporation; or

(B)  the bylaws make those procedures applicable.

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

whether the bylaws of a benefit corporation include a provision

eliminating or limiting the personal liability of directors

authorized by section 1713 (relating to personal liability of

directors), a benefit director shall not be personally liable

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

unless the act or omission constitutes self-dealing, willful

misconduct or a knowing violation of law.

§ 3323.  Standard of conduct for officers.

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

shall consider the interests and factors described in section

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

manner provided in that subsection if:

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

matter; and

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

may have a material effect on the creation by the benefit

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corporation of general public benefit or a specific public

benefit by identified in the articles of the benefit

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corporation.

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

consideration of interests and factors in the manner described

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

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

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

personally liable for monetary damages for:

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

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

and this section; or

(2)  failure of the benefit corporation to pursue or

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create general public benefit or specific public benefit.

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

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

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or specific public benefit purposes public benefit purpose or a

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specific public benefit purpose of a benefit corporation arising

from the status of the person as a beneficiary.

§ 3324.  Benefit officer.

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

designated the benefit officer.

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

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

corporation to create general public benefit or specific

public benefit provided:

(i)  by the bylaws; or

(ii)  absent controlling provisions in the bylaws, by

resolutions or orders of the board of directors.

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

section 3331 (relating to annual benefit report).

§ 3325.  Right of action.

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

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officers under this chapter, 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 this

chapter and the general public benefit purpose and any specific

public benefit purpose of the benefit corporation except in a

benefit enforcement proceeding.

(a)  Limitations.--

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(1)  Except 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:

(i)  failure to pursue or create general public

benefit or a specific public benefit set forth in its

articles; or

(ii)  violation of a duty or standard of conduct

under this chapter.

(2)  A benefit corporation shall not be liable for

monetary damages under this chapter for any failure of the

benefit corporation to pursue or create general public

benefit or a specific public benefit.

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

commenced or maintained only:

(1)  directly by the benefit corporation; or

(2)  derivatively by:

(i)  a shareholder;

(ii)  a director;

(iii)  a person or group of persons that owns

beneficially or of record 5% or more of the equity

interests in an association of which the benefit

corporation is a subsidiary; or

(iv)  other persons as specified in the articles or

bylaws of the benefit corporation.

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

(relating to derivative actions).

SUBCHAPTER D

TRANSPARENCY

Sec.

3331.  Annual benefit report.

§ 3331.  Annual benefit report.

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

benefit report including all of the following:

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

(i)  The ways in which the benefit corporation

pursued general public benefit during the year and the

extent to which general public benefit was created.

(ii)  Both:

(A)  the ways in which the benefit corporation

pursued a specific public benefit which the articles

state it is the purpose of the benefit corporation to

create; and

(B)  the extent to which that specific public

benefit was created.

(iii)  Any circumstances that have hindered the

creation by the benefit corporation of general public

benefit or specific public benefit.

(2)  An assessment of the overall social and

environmental performance of the benefit corporation. The

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assessment shall be prepared in accordance with against a

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third-party standard:

(i)  applied consistently with any application of

that standard in prior benefit reports; or

(ii)  accompanied by an explanation of the reasons

for any inconsistent application.

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

officer, if any, and the address to which correspondence to

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each of them may be directed.

(4)  The compensation paid by the benefit corporation

during the year to each director in the capacity of a

director.

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

outstanding shares of the benefit corporation either:

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

corporation without independent investigation; or

(ii)  of record.

(6)  The statement of the benefit director described in

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

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

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annually to each shareholder:

(7)  A statement of any connection between the

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organization that established the third-party standard, or

its directors, officers or material owners, and the benefit

corporation or its directors, officers or material

shareholders, including any financial or governance

relationship which might materially affect the credibility of

the use of the third-party standard.

(8)  If the benefit corporation has dispensed with, or

restricted the discretion or powers of, the board of

directors, a description of:

(i)  the persons that exercise the powers, duties and

rights and who have the immunities of the board of

directors; and

(ii)  the benefit director, as required by section

3322(e).

(b)  Timing of report.--A benefit corporation shall annually

send a benefit report to each shareholder:

(1)  within 120 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)  Internet website posting.--A benefit corporation shall

post its most recent benefit report all of its benefit reports 

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on the public portion of its Internet website, if any,; but the

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compensation paid to directors and financial or proprietary

information included in the benefit report reports may be

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omitted from the benefit report reports as posted.

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(d)  Availability of copies.--If a benefit corporation does

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not have an Internet website, the benefit corporation shall

provide a copy of its most recent benefit report, without

charge, to any person that requests a copy.

(d) (e)  Filing of report.--

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(1)  Concurrently with the delivery of the benefit report

to shareholders under subsection (b), the benefit corporation

shall deliver a copy of the benefit report to the department

for filing, but 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 department.

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

a benefit report.

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