PRINTER'S NO.  1999

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

1616

Session of

2011

  

  

INTRODUCED BY DENLINGER, DePASQUALE, CUTLER, BLOOM, BOYD, BRIGGS, COHEN, CREIGHTON, DALEY, FLECK, GABLER, GEIST, GROVE, HICKERNELL, KILLION, LONGIETTI, MILNE, MURT, PYLE, RAPP, SWANGER AND WAGNER, JUNE 2, 2011

  

  

REFERRED TO COMMITTEE ON JUDICIARY, JUNE 2, 2011  

  

  

  

AN ACT

  

1

Amending Title 15 (Corporations and Unincorporated Associations)

2

of the Pennsylvania Consolidated Statutes, further providing

3

for benefit corporations.

4

The General Assembly of the Commonwealth of Pennsylvania

5

hereby enacts as follows:

6

Section 1.  Article C of Subpart B of Title 15 of the

7

Pennsylvania Consolidated Statutes is amended by adding a

8

chapter to read:

9

CHAPTER 33

10

BENEFIT CORPORATIONS

11

Subchapter

12

A.  Preliminary Provisions

13

B.  Corporate Purposes

14

C.  Accountability

15

D.  Transparency

16

SUBCHAPTER A

17

PRELIMINARY PROVISIONS

 


1

Sec.

2

3301.  Application and effect of chapter.

3

3302.  Definitions.

4

3303.  Formation of benefit corporations.

5

3304.  Election of an existing business corporation to become a

6

benefit corporation.

7

3305.  Termination of benefit corporation status.

8

§ 3301.  Application and effect of chapter.

9

(a)  General rule.--This chapter shall apply to all benefit

10

corporations.

11

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

12

existence of a provision of this chapter shall not of itself

13

create any implication that a contrary or different rule of law

14

is or would be applicable to a business corporation that is not

15

a benefit corporation. This chapter shall not affect any statute

16

or rule of law that is or would be applicable to a business

17

corporation that is not a benefit corporation.

18

(c)  Laws applicable to benefit corporations.--Except as

19

otherwise provided in this chapter, this subpart shall apply

20

generally to benefit corporations. The specific provisions of

21

this chapter shall control over the general provisions of this

22

subpart. A benefit corporation may be simultaneously subject to

23

this chapter and one or more other chapters of this article.

24

(d)  Organic records may not be inconsistent.--A provision of

25

the articles or bylaws of a benefit corporation may not relax,

26

be inconsistent with or supersede any provision of this chapter.

27

§ 3302.  Definitions.

28

The following words and phrases when used in this chapter

29

shall have the meanings given to them in this section unless the

30

context clearly indicates otherwise:

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1

"Benefit corporation."  A business corporation that has

2

elected to become subject to this chapter and whose status as a

3

benefit corporation has not been terminated as provided in this

4

chapter.

5

"Benefit director."  The director designated as the benefit

6

director of a benefit corporation as provided in section 3322

7

(relating to benefit director).

8

"Benefit enforcement proceeding."  A claim or action brought

9

directly by a benefit corporation, or derivatively on behalf of

10

a benefit corporation, against a director or officer for:

11

(1)  failure to pursue the general public benefit purpose

12

of the benefit corporation or any specific public benefit

13

purpose set forth in its articles; or

14

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

15

this chapter.

16

"Benefit officer."  The officer of a benefit corporation, if

17

any, designated as the benefit officer as provided in section

18

3324 (relating to benefit officer).

19

"General public benefit."  A material positive impact on

20

society and the environment by the operations of a benefit

21

corporation taken as a whole, as measured by a third-party

22

standard, through activities that promote some combination of

23

specific public benefits.

24

"Independent."  When a person has no material relationship

25

with a benefit corporation or any of its subsidiaries, other

26

than the relationship of serving as the benefit director or

27

benefit officer, either directly or as a shareholder, partner,

28

member or other owner or a director, officer or other manager of

29

an association that has a material relationship with the benefit

30

corporation or any of its subsidiaries. A material relationship

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1

between an individual and a benefit corporation or any of its

2

subsidiaries will be conclusively presumed to exist if:

3

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

4

years, an employee of the benefit corporation or any of its

5

subsidiaries, other than as a benefit officer;

6

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

7

been within the last three years, an executive officer, other

8

than a benefit officer, of the benefit corporation or any of

9

its subsidiaries; or

10

(3)  the person, or an association of which the person is

11

a director, officer or other manager or in which the person

12

owns beneficially or of record 5% or more of the outstanding

13

equity interests, owns beneficially or of record 5% or more

14

of the outstanding shares of the benefit corporation. The

15

percentage of ownership in an association shall be calculated

16

as if all outstanding rights to acquire equity interests in

17

the association had been exercised.

18

"Minimum status vote."  When in addition to any other

19

approval or vote required by this subpart or a bylaw adopted by

20

the shareholders:

21

(1)  The holders of shares of every class or series shall

22

be entitled to vote on the corporate action regardless of any

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 corporate action.

29

"Specific public benefit."  Includes the following:

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)  the accomplishment of any other particular benefit

12

for society or the environment.

13

"Subsidiary."  An association in which a person owns

14

beneficially or of record 50% or more of the outstanding equity

15

interests. The percentage of ownership in an association shall

16

be calculated as if all outstanding rights to acquire equity

17

interests in the association had been exercised.

18

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

19

reporting and assessing corporate social and environmental

20

performance that is:

21

(1)  developed by a person that is independent of the

22

benefit corporation; and

23

(2)  transparent because the following information about

24

the standard is publicly available:

25

(i)  the factors considered when measuring the

26

performance of a business;

27

(ii)  the relative weightings of those factors; and

28

(iii)  the identity of the persons who developed and

29

control changes to the standard and the process by which

30

those changes are made.

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1

§ 3303.  Formation of benefit corporations.

2

A benefit corporation shall be formed in accordance with

3

Article B (relating to domestic business corporations generally)

4

except that its articles shall also state that it is a benefit

5

corporation.

6

§ 3304.  Election of an existing business corporation to become

7

a benefit corporation.

8

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

9

corporation by amending its articles so that they contain, in

10

addition to the requirements of section 1911(b) (relating to

11

amendment of articles authorized), a statement that the

12

corporation is a benefit corporation. The amendment shall not be

13

effective unless it is adopted by at least the minimum status

14

vote.

15

(b)  Fundamental transactions.--If a corporation that is not

16

a benefit corporation is a party to a merger, consolidation or

17

division or is the exchanging corporation in a share exchange,

18

and the surviving, new or any resulting corporation in the

19

merger, consolidation, division or share exchange is to be a

20

benefit corporation, then the plan of merger, consolidation,

21

division or share exchange shall not be effective unless it is

22

adopted by the corporation by at least the minimum status vote.

23

§ 3305.  Termination of benefit corporation status.

24

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

25

status as a benefit corporation and cease to be subject to this

26

chapter by amending its articles to delete the provision

27

required under section 3304 (relating to election of an existing

28

business corporation to become a benefit corporation) to be

29

stated in the articles of a benefit corporation. The amendment

30

shall not be effective unless it is adopted by at least the

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1

minimum status vote.

2

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

3

effect of terminating the status of a business corporation as a

4

benefit corporation, the plan shall not be effective unless it

5

is adopted by at least the minimum status vote.

6

(c)  Involuntary termination.--The status of a corporation as

7

a benefit corporation may be terminated involuntarily under

8

section 3331(e) (relating to annual benefit report) if it fails

9

to file an annual benefit report.

10

SUBCHAPTER B

11

CORPORATE PURPOSES

12

Sec.

13

3311.  Corporate purposes.

14

§ 3311.  Corporate purposes.

15

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

16

shall have the purpose of creating general public benefit. This

17

purpose is in addition to, and may be a limitation on, its

18

purpose under section 1301 (relating to purposes) and any

19

specific purpose set forth in its articles under subsection (b).

20

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

21

of a benefit corporation may identify one or more specific

22

public benefits that it is the purpose of the benefit

23

corporation to create in addition to its purposes under section

24

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

25

benefit does not limit the obligation of a benefit corporation

26

to create general public benefit.

27

(c)  Effect of purposes.--The creation of general and

28

specific public benefit as provided in subsections (a) and (b)

29

is in the best interests of the benefit corporation.

30

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

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1

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

2

benefit that it is the purpose of the benefit corporation to

3

create. The amendment shall not be effective unless it is

4

adopted by at least the minimum status vote.

5

SUBCHAPTER C

6

ACCOUNTABILITY

7

Sec.

8

3321.  Standard of conduct for directors.

9

3322.  Benefit director.

10

3323.  Standard of conduct for officers.

11

3324.  Benefit officer.

12

3325.  Right of action.

13

§ 3321.  Standard of conduct for directors.

14

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

15

benefit corporation is subject to section 1715 (relating to

16

exercise of powers generally) or 1716 (relating to alternative

17

standard), in discharging the duties of their respective

18

positions, the board of directors, committees of the board and

19

individual directors of a benefit corporation, in considering

20

the best interest of the benefit corporation:

21

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

22

(i)  the shareholders of the benefit corporation;

23

(ii)  the employees and work force of the benefit

24

corporation and its subsidiaries and suppliers;

25

(iii)  the interests of customers as beneficiaries of

26

the general or specific public benefit purposes of the

27

benefit corporation;

28

(iv)  community and societal considerations,

29

including those of any community in which offices or

30

facilities of the benefit corporation or its subsidiaries

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1

or suppliers are located;

2

(v)  the local and global environment; and

3

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

4

benefit corporation, including benefits that may accrue

5

to the benefit corporation from its long-term plans and

6

the possibility that these interests may be best served

7

by the continued independence of the benefit corporation.

8

(2)  may consider:

9

(i)  the resources, intent and conduct, whether past,

10

stated or potential, of any person seeking to acquire

11

control of the corporation; and

12

(ii)  any other pertinent factors or the interests of

13

any other group that they deem appropriate; and

14

(3)  shall not be required to give priority to the

15

interests of any person or group referred to in paragraphs

16

(1) and (2) over the interests of any other person or group

17

unless the benefit corporation has stated its intention to

18

give priority to interests related to a specific public

19

benefit purpose identified in its articles.

20

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

21

consideration of interests and factors in the manner required

22

under subsection (a):

23

(1)  shall not constitute a violation of section 1712

24

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

25

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

26

consider interests and factors as provided in section 1715 or

27

1716.

28

(c)  Personal liability of directors.--A director shall not

29

be personally liable, as such, for monetary damages for any

30

action taken as a director if the director performed the duties

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1

of his or her office in compliance with section 1712 and this

2

section.

3

§ 3322.  Benefit director.

4

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

5

corporation shall include one director who shall be designated

6

as the benefit director and shall have, in addition to all of

7

the powers, duties, rights and immunities of the other directors

8

of the benefit corporation, the powers, duties, rights and

9

immunities provided in this subchapter.

10

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

11

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

12

provided under Subchapter C of Chapter 17 (relating to directors

13

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

14

The benefit director may serve as the benefit officer at the

15

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

16

bylaws of a benefit corporation may prescribe additional

17

qualifications of the benefit director not inconsistent with

18

this subsection.

19

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

20

prepare, and the benefit corporation shall include in the annual

21

benefit report to shareholders required under section 3331

22

(relating to annual benefit report), a statement whether, in the

23

opinion of the benefit director, the benefit corporation acted

24

in accordance with its general and any specific public benefit

25

purpose in all material respects during the period covered by

26

the report and whether the directors and officers complied with

27

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

28

and 3323(a) (relating to standard of conduct for officers),

29

respectively. If, in the opinion of the benefit director, the

30

benefit corporation or its directors or officers failed so to

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1

act, then the statement of the benefit director shall include a

2

description of the ways in which the benefit corporation or its

3

directors or officers failed so to act.

4

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

5

capacity of a benefit director shall constitute for all purposes

6

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

7

benefit corporation.

8

(e)  Alternative governance arrangements.--If the bylaws of a

9

benefit corporation provide that the powers and duties conferred

10

or imposed upon the board of directors shall be exercised or

11

performed by a person or persons other than the directors

12

pursuant to section 1721(a) (relating to board of directors) or

13

the bylaws of a statutory close corporation that is a benefit

14

corporation provide that the business and affairs of the

15

corporation shall be managed by or under the direction of the

16

shareholders, then the bylaws of the benefit corporation must

17

provide that the person or persons or shareholders who perform

18

the duties of a board of directors shall include a person with

19

the powers, duties, rights and immunities of a benefit director.

20

(f)  Personal liability of directors.--Regardless of whether

21

the bylaws of a benefit corporation include a provision

22

eliminating or limiting the personal liability of directors

23

authorized under section 1713 (relating to personal liability of

24

directors), a benefit director shall not be personally liable

25

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

26

unless the act or omission constitutes self-dealing, willful

27

misconduct or a knowing violation of law.

28

§ 3323.  Standard of conduct for officers.

29

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

30

shall consider the interests and factors described in section

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1

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

2

manner provided in that subsection when:

3

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

4

matter; and

5

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

6

may have a material effect on:

7

(i)  the creation of general or specific public

8

benefit by the benefit corporation; or

9

(ii)  any of the interests or factors referred to in

10

section 3321(a).

11

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

12

consideration of interests and factors in the manner described

13

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

14

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

15

(c)  Personal liability of officers.--An officer shall not be

16

personally liable, as such, for monetary damages for any action

17

taken as an officer if the officer performed the duties of the

18

position in compliance with section 1712(c) and this section.

19

§ 3324.  Benefit officer.

20

A benefit corporation may have an officer designated as the

21

benefits officer who shall have such authority and shall perform

22

such duties in the management of the benefit corporation

23

relating to the purpose of the corporation to create general or

24

specific public benefit as may be provided by or pursuant to the

25

bylaws or, in the absence of controlling provisions in the

26

bylaws, as may be determined by or pursuant to resolutions or

27

orders of the board of directors. If a benefit corporation has a

28

benefit officer, the duties of the benefit officer shall include

29

preparing the benefit report required under section 3331

30

(relating to annual benefit report).

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1

§ 3325.  Right of action.

2

(a)  General rule.--The duties of directors and officers

3

under this chapter, and the general and any specific public

4

benefit purpose of a benefit corporation, may be enforced only

5

in a benefit enforcement proceeding. No person may bring an

6

action or assert a claim against a benefit corporation or its

7

directors or officers with respect to the duties of directors

8

and officers under this chapter, and the general and any

9

specific public benefit purpose of the benefit corporation,

10

except in a benefit enforcement proceeding.

11

(b)  Parties with standing.--A benefit enforcement proceeding

12

may be commenced or maintained only:

13

(1)  directly by the benefit corporation; or

14

(2)  derivatively by:

15

(i)  a shareholder;

16

(ii)  a director;

17

(iii)  a person or group of persons that owns

18

beneficially or of record 10% or more of the equity

19

interests in an association of which the benefit

20

corporation is a subsidiary; or

21

(iv)  such other persons as may be specified in the

22

articles or bylaws of the benefit corporation.

23

(c)  Cross reference.--The provisions of Subchapter F of

24

Chapter 17 (relating to derivative actions) shall apply to

25

derivative actions under this section.

26

SUBCHAPTER D

27

TRANSPARENCY

28

Sec.

29

3331.  Annual benefit report.

30

§ 3331.  Annual benefit report.

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1

(a)  General rule.--A benefit corporation must deliver to

2

each shareholder an annual benefit report including:

3

(1)  a narrative description of:

4

(i)  the ways in which the benefit corporation

5

pursued general public benefit during the year and the

6

extent to which general public benefit was created;

7

(ii)  the ways in which the benefit corporation

8

pursued any specific public benefit that the articles

9

state is the purpose of the benefit corporation to create

10

and the extent to which that specific public benefit was

11

created; and

12

(iii)  any circumstances that have hindered the

13

creation by the benefit corporation of general or

14

specific public benefit.

15

(2)  an assessment of the social and environmental

16

performance of the benefit corporation, prepared in

17

accordance with a third-party standard applied consistently

18

with any application of that standard in prior benefit

19

reports or accompanied by an explanation of the reasons for

20

any inconsistent application;

21

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

22

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

23

each of them may be directed;

24

(4)  the compensation paid by the benefit corporation

25

during the year to each director in that capacity;

26

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

27

outstanding shares of the benefit corporation either

28

beneficially, to the extent known to the benefit corporation

29

without independent investigation, or of record; and

30

(6)  the statement of the benefit director described in

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1

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

2

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

3

annually to each shareholder within 120 days following the end

4

of the fiscal year of the benefit corporation or at the same

5

time that the benefit corporation delivers any other annual

6

report to its shareholders.

7

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

8

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

9

Internet website, if any, except that the compensation paid to

10

directors and any financial or proprietary information included

11

in the benefit report may be omitted from the benefit report as

12

posted.

13

(d)  Filing of report.--Concurrently with the delivery of the

14

benefit report to shareholders pursuant to subsection (b), the

15

benefit corporation must deliver a copy of the benefit report to

16

the Department of State for filing, except that the compensation

17

paid to directors and any financial or proprietary information

18

included in the benefit report may be omitted from the benefit

19

report as filed under this section. The department shall charge

20

a fee of $70 for filing a benefit report.

21

(e)  Failure to file report.--If a benefit corporation has

22

not delivered a benefit report to the department for a period of

23

two years, the department may prepare and file a statement that

24

the corporation has forfeited its status as a benefit

25

corporation and is no longer subject to this chapter. If the

26

corporation subsequently delivers a benefit report to the

27

department for filing, the status of the corporation as a

28

benefit corporation shall be automatically reinstated upon the

29

filing of the benefit report by the department, and the

30

corporation shall again be subject to this chapter.

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1

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

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