Benefit Corporation Legislative Status Map

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Benefit Corporation Legislative Status Map

Color Key:

Colorado/Delaware Variation of “Model Benefit Corporation Legislation” Passed Legislation introduced in the past

No legislation to date

Version of “Model Benefit Corporation Legislation” Passed

WA

AL

AK

AZ

_AR

CA

CO

CT

DE

FL

GA

HI

ID

IL

IN

IA

KS

_KY

LA

ME

MD

MA

MI

MN

MS

MO

MT

NE

NV

NH

NJ

NM

NY

NC

ND

OH

OK

OR

PA

RI

SC

SD

TN

TX

UT

VT

VA

D.C.

WV

WI

WY

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Benefit Corporation Legislative Status Chart

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State Status Enacted _Date Effective _Date _StatuteBill or Type of Law

Alabama

Referred to Senate Judiciary 5/7/2013

The bill as drafted was very similar to the B-Lab Model Act (hereafter “Model Act)” Alaska Arizona Passed 1/1/2015 A.R.S. § 10-2401 et seq. (01/01/2015)

Very similar to the Model Act. A few notable exceptions:

• For an existing business corporation to become a benefit corporation, the articles of incorporation must be amended by a “supermajority” (i.e. ¾ or 75%) vote, as opposed to the “minimum status” (i.e. 2/3) vote required under the Model Act.

• The Model Act incorporates the business judgment rule in the Standard of Conduct for Directors (Model Act, Section 301(e)) and Officers (Model Act, Section 303(e)). While Arizona’s Act includes the business judgment rule in its section addressing the standard of conduct for officers (Arizona Act, Section 10-2432(E)), Arizona’s Act does not include the business judgment rule in its section addressing the standard of conduct for directors (Arizona Act, Section 10-2431).

• Does not include Section 302 or Section 304 of the Model Act (“Benefit Director” and “Benefit Officer,” respectively).

Arkansas

Passed 4/19/2013 7/27/2013

A.C.A. §

4-36-101 et seq. Largely adopts the Model Act, with a few important differences:_• _{Slightly differs in the definition of “specific public benefit.” Instead of}

including “protecting or restoring the environment” as a benefit provided for in the Model Act, the Arkansas Act provides for simply “preserving the environment.” (continued next page...)

AL SB14

SB 1238

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• The definition of “Third Party Standard” has more specific criteria for the organization that develops the Standard. Rather than adopting the Model Act’s requirement that the Standard must be developed by an “entity that is not controlled by the benefit corporation,” the Arkansas Act requires that the Standard be developed by an “organization that is independent of the benefit corporation” and that satisfies the following criteria: (a) not more than 1/3 of the members of the governing body of the organization may be representatives of “businesses operating in a specific industry, the performance of whose members is measured by the Standard,” businesses from a specific industry or an association of businesses in that industry, or a business whose performance is assessed against the Standard, AND (b) the organization is not materially financed by such an association or business.

• Does not include the business judgment rule in its Standard of Conduct for Directors (Ark. Stat. Ann. § 4-36-301) or its Standard of Conduct for Officers (Ark. Stat. Ann. § 4-36-303).

• The Model Act mandates that a publicly traded benefit corporation designate a Benefit Director (privately held benefit corporations “may” designate such a director). Arkansas does not have such a requirement; it allows Benefit Directors for any benefit corporation.

• Any shareholder has standing to commence and maintain a benefit enforcement proceeding (the Model Act has a 2% ownership requirement).

• The contents of the Annual Report are narrowed a bit. Rather than adopting the Model Act’s suggestion that the Annual Report contain a narrative of the extent to which a specific public benefit was “created,” Arkansas requires that the narrative describe the extent to which the specific public benefit was “pursued.”

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Benefit Corporation Legislative Status Chart

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California Passed 1/1/2012 West’s Ann.Cal. Corp.Code § 14600 et seq. (benefit corps) and West’s Ann. Cal.Corp.Code

§ 2500 - 3503 (flexible purpose corps)

California has created both “benefit corporations” and “flexible purpose corporations.” California law regarding benefit corps largely adopts the Model Act, with a few important differences:

• In California’s Benefit Enforcement Proceedings, the definition does not include a failure to “create” a public benefit, and it adds as an additional basis for a lawsuit the failure of the benefit corporation “to deliver or post an annual benefit report” as required under California’s Act.

• The definition of “specific public benefit” is slightly different in California. Instead of including “protecting or restoring the environment” as a special public benefit as provided for in the Model Act, the California Act provides for simply “preserving the environment.”

• The definition of “Third Party Standard” is different. California’s definition has more specific criteria for the organization that develops the Standard. Rather than adopting the Model Act’s requirement that the Standard must be developed by an “entity that is not controlled by the benefit corporation,” the California Act requires that the Standard be developed by an “entity that has no material financial relationship with the benefit corporation or any of its subsidiaries” and that satisfies the following criteria: (i) not more than 1/3 of the members of the governing body of the organization may be representatives of “associations of businesses operating in a specific industry, the performance of whose members is measured by the Standard,” businesses from a specific industry or an association of businesses in that industry, or a business whose performance is assessed against the Standard, AND (ii) the organization is not materially financed by such an association or business.

• The entity that develops the third party standard must affirmatively “access” – not merely “have access to” – necessary and appropriate expertise to assess overall corporate social and environmental performance. (continued next page...)

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• Dissenter’s rights upon electing benefit corporation status as part of an amendment to an existing corporation’s governing/establishment documents AND as part of termination of status.

• Does not include a benefit director or benefit officer – so the Model Act’s annual benefit report provisions do not appear.

• Includes several provisions not found in the Model Act, including provisions in the Standard of Conduct for Directors (Section 14620(j)), the Annual Statement of Board (Section 14621(a), (b)), Right of Action (Section 14623(d)), and Share Certificates (Section 14631).

Colorado

Passed 5/15/2013 12/31/2014

Colo. Rev. Stat. § 7-101-501 (April 1, 2014)

Closer to the Delaware approach (see http://socentlaw.com/2013/07/ preliminary-observations-concerning-delawares-new-benefit-corporation-act/ for a good analysis of differences and similarities between the Model Act, the Delaware Act, and Colorado’s Act). Some of the more important differences are:

• Mandates that each benefit corporation “identify within its statement of business or purpose … one or more specific public benefits to be promoted by the corporation” (emphasis added). The Model Act, on the other hand, mandates a “purpose of creating general public benefit,” and makes permissive the designation of “one or more specific public benefits” the corporation intends to create.

• Requires directors of benefit corporations to “balance the shareholders’ pecuniary interests, the best interest of those materially affected by the corporation’s conduct, and the public benefit identified in its articles of incorporation” (emphasis added), whereas the Model Act simply requires that the directors “consider” the effects of the benefit corporation’s actions/inactions.

• The definition of Third Party Standard is much more concise. The third party entity must not be controlled by the benefit corporation or any of its affiliates, and it must make publicly available the following information: (a) the criteria considered when measuring the social and environmental performance of a business (including the weighting of those criteria) and the process for developing and revising the (continued next page...) HB 13-1138

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Benefit Corporation Legislative Status Chart

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standard, and (b) any material owners of the organization that developed the third party standard, the members of its governing body and how they were selected, and the sources of financial support for the organization. All of this must be disclosed in sufficient detail to disclose any relationships that could reasonably be considered to compromise its independence.

• Dissenter’s rights upon electing benefit corporation status as part of an amendment to an existing corporation’s governing/establishment documents.

• Does not address officers and their duties, standards, etc. In fact, the bill signed by the governor did not contain the word “officer.”

Conneticut

Passed 10/1/2014

Similar to the Model Act, but with one major difference and a few relatively minor differences:

• Major difference: A benefit corporation that has been in existence for at least two years may amend its certificate of incorporation to include a “legacy preservation provision.” Under this provision, a dissolved benefit corporation may distribute its remaining property only to a charitable organization or another benefit corporation that has enacted a legacy preservation provision.

• Deletes provisions relating to professional corporations.

• Deletes provisions explaining how “business judgment” protects directors and officers.

• Increases ownership requirements for bringing a benefit enforcement proceeding from 2% of shares or 5% of equity interests to 5% and 10%, respectively.

• Requires that the annual benefit report be (1) sent to shareholders and (2) posted on the corporation’s website or be sent free of charge to any person who requests a report. The legislation does not require the corporation to file a copy of the benefit report with the Secretary of State.

SB23 HB5597 § 140

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Benefit Corporation Legislative Status Chart

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Delaware Passed 8/1/2013 Amended effective 8/1/2015

Delaware’s law differs from B Lab’s Model Act in significant respects. In fact, most other states’ benefit corporation acts are often referred to as either adopting the “Model approach” or the “Colorado/Delaware approach.” Delaware’s legislature originally passed the law in 2013, but amended it significantly in 2015. As originally passed, the key differences between Delaware’s legislation and the Model Act included the following:

• Delaware requires that the public benefit corporation (“PBC”) identify within its certificate of incorporation one or more specific (as opposed to general) public benefits it will promote.

• The idea of a “public benefit” embodies either a positive effect (or reduction of negative effects) “on one or more categories of persons, entities, communities or interests (other than stockholders in their capacities as stockholders) including, but not limited to, effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature.”

• Whereas the Model Act requires directors of benefit corporations to “consider” the effects of its action or inaction on certain constituencies, Delaware PBCs “shall be managed in a manner that balances the stockholders’ pecuniary interests, the best interests of those materially affected by the corporation’s conduct, and the public benefit or public benefits identified in its certificate of incorporation.”

• Existing non-PBCs in Delaware that wish to become a PBC may only do so upon the vote of ninety percent (90%) of the outstanding shares of each class of stock outstanding, as opposed to the fifty percent (50%) required under the Model Act (this provision was amended in 2015—see below). Dissenters to such a vote are entitled to an appraisal by the Court of Chancery of the fair value of the stockholder’s shares of stock.

• Delaware’s Act contains more detailed provisions relating to directors’ duties. Directors of PBCs do not have any duty “to any person on account of any interest of such person in the public benefit or public benefits identified in the certificate of incorporation or on account of any interest materially affected (continued next page...)

SB 47

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by the corporation’s conduct and … will be deemed to satisfy such director’s fiduciary duties to stockholders and the corporation if such director’s decision is both informed and disinterested and not such that no person of ordinary, sound judgment would approve,” which differs from the Model Act’s language: “A director does not have a duty to a person that is a beneficiary of the general public benefit purpose or a specific public benefit purpose of a benefit corporation arising from the status of the person as a beneficiary.”

• Delaware’s Act is notable for those sections of the Model Act that Delaware omits, including mandatory annual reports (reports are only required every other year), third-party standards for defining, reporting, and assessing the PBC, independent benefit directors, and benefit officers.

The 2015 amendments include three significant changes to the law:

• Removes the requirement that a PBC include the words “public benefit corporation” in its name. If, however, a PBC elects to omit “public benefit corporation” from its name, it must, prior to issuing shares, inform any person to whom shares are issued that the company is, in fact, a PBC.

• In the original law, 90% of all outstanding shares had to approve when a company wished to change its corporate status to (or from) PBC. Under the amended law, only two-thirds of outstanding shares entitled to vote on the issue need approve.

• Although the original law provided appraisal rights for all shareholders of companies changing their status to PBC, the amended law does not provide appraisal rights to such shareholders when their shares are listed on a national securities exchange or held by more than 2000 shareholders.

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Benefit Corporation Legislative Status Chart

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Florida

Passed 7/1/2014

Florida has created two new types of entities: “social purpose corporations” and “benefit corporations.”

Social Purpose Corporation—Differences from Model Act

• The law does not define “general public benefit.” Instead, it offers a thorough definition of “public benefit” that incorporates elements of the Model Act’s definition of “specific public benefit.” The law then defines “specific public benefit” as a benefit that is expressly set forth in the articles of incorporation and is consistent with the law’s definition of “public benefit.”

• If an existing entity elects to become a social purpose corporation, the enti-ty’s shareholders are entitled to appraisal rights. Shareholders are also entitled to appraisal rights when a social purpose corporation terminates its special status.

• Instead of laying out a long list of things that directors “must” consider in carrying out their duties, the law says directors must consider (1) the share-holders and (2) the company’s ability to accomplish its public benefit. Direc-tors “may” then consider a number of other things, such as employees, the environment, and so on.

• The law omits the Model Act’s provisions relating to “business judgment.” • The law permits the articles of incorporation or bylaws to relieve the benefit director of the duty to provide a benefit compliance report.

• The law includes no minimum ownership requirement for shareholders to bring a benefit enforcement proceeding.

• For the purposes of the annual benefit report, the law makes an assessment against a third-party standard optional.

Benefit Corporation—Differences from Model Act

• This portion of Florida’s legislation is nearly identical to the Model Act, except for a few small differences.

• As with Florida’s social purpose corporations, shareholders are entitled to appraisal rights.

• The law omits business judgment provisions.

• The law permits the articles of incorporation or bylaws to relieve the benefit director of the duty to provide a benefit compliance report.

• The law includes no minimum ownership requirement for shareholders to bring a benefit enforcement proceeding.

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Benefit Corporation Legislative Status Chart

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Georgia Legislation drafted in late 2012 but not voted on in 2013.

The bill appeared very similar to the Model Act.

Hawaii

Passed 7/8/2011

Haw. Rev. Stat. §

420d-1 et seq.

Largely adopts the Model Act, with a few important exceptions: • Uses the term “sustainable business corporation” instead of

“benefitcorporation.”

• Replaces the list of interests that the directors MUST consider under Section 301(a) of the Model Act with two requirements under Hawaii’s Act: directors must consider effects of an action on the shareholders AND the accomplishment of the general and specific purposes of the sustainable business corporation. The other interests listed as mandatory in the Model Act are permissible in Hawaii.

• Does not include a definition of “Benefit Enforcement Proceeding,” “Specific Public Benefit,” or “Third Party Standard.”

• Does not expressly exclude a director from personal liability for monetary damages for failure to pursue or create a general or specific public benefit.

• Standing for a right of action is limited to directors and shareholders.

Idaho

Passed 7/1/2015

• The law omits the Model Act’s provisions relating to “business judgment.” • The law adds an additional element to the annual benefit report: “If the

benefit corporation has dispensed with or restricted the discretion or powers of the board of directors, a description of the persons who exercise the powers, duties, and rights and who have the immunities of the board of directors, and the benefit director.” Idaho Code § 30-2012(g).

Illinois

Passed 1/1/2013

805 ILCS 40/1 et seq.

Largely adopts the Model Act, with a few important differences:

• Instead of including “protecting or restoring the environment” as a special public benefit as provided for in the Model Act, the Illinois Act provides for simply “preserving the environment.”

• The Third Party Standard in Illinois must be developed by “an entity that has no material financial relationship with the benefit corporation or any of its subsidiaries.” (The Model’s Act language states that the entity de-veloping the Third Party Standard must not be “controlled by the benefit corporation.”) (continued next page...)

SB 298

S1076

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• Requires that the Standard be 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: (i) associations of businesses operating in a specific industry, the performance of whose members is measured by the standard, (ii) businesses from a specific industry or an association of businesses in that industry, or (iii) a business whose performance is assessed against the standard.

• The entity that develops the third party standard must affirmatively “access” — not merely “have access to” — necessary and appropriate expertise to assess overall corporate social and environmental performance.

• The Standard of Conduct for Directors requires that the directors “consider the effects of any action” upon the constituencies listed in that section – this differs from the Model Act, which suggests that directors consider the effects of “any action or inaction” upon those constituencies (emphases added).

• Does not include the business judgment rule in its Standard of Conduct for Directors (805 Ill. Comp. Stat. §40/4.01) or its Standard of Conduct for Officers (805 Ill. Comp. Stat. §40/4.05).

• An officer is not personally liable for monetary damages for “action taken as an officer if the officer performed the duties of the position in compliance” with that section, whereas the Model Act exonerates the officer for “an action or inaction” (emphases added).

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Iowa

Referred to House Judiciary 2/21/2013

The bill was based largely on the Model Act.

Kansas

Kentucky

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Louisiana

Passed 8/1/2012

La. Rev. Stat. Ann. § 12:1801

ets eq.

Differs from the Model Act in several ways:

• The definition of “independent” is more concise: ‘“Independent’ means having no material relationship with a benefit corporation or a subsidiary of the benefit corporation.” Louisiana provides a separate definition for the term “material relationship,” which incorporates much of the remainder of the Model Act’s definition of “Independent.”

• In Louisiana’s definition of “Specific Public Benefit,” the language of item 7 of the definition in the Model Act concerning “conferring any other particular benefit on society or the environment” is replaced with two separate benefits: “Historic preservation” and “Urban beautification.” • The definition (and scope) of “Third Party Standard” is different: (a) there

is no requirement that the third-party standard be developed by an entity that is not controlled by the benefit corporation; (b) there is no credibility requirement in Louisiana; and (c) Louisiana adopts a more ambitious and expansive view of the term “comprehensive” contained in the third-party standard. The Model Act states that the third-third-party standard must assess “the effect of the business and its operations upon the interests” of particular constituencies identified elsewhere in the Act. Louisiana provides that the third-party standard must be “comprehensive in that it assesses the effect of the corporation and its operations in producing general public benefit and any specific public benefit specified in the articles.” (continued next page...)

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• If an existing business corporation elects to become a benefit corporation by amending its existing articles of incorporation, the notice that is sent regarding the meeting at which a vote is to be taken in furtherance of such amendment must state the specific public benefits, if any, to be included in the purposes of the benefit corporation and must explain the anticipated impact on shareholders of becoming a benefit corporation.

• The corporate name of a benefit corporation must end with the phrase “A Benefit Corporation,” which may be in parentheses.

• All benefit corporation stock certificates must contain the following phrase on the face of the certificate, in “conspicuous language”: “This corporation is a benefit corporation subject to the Benefit Corporations Law, R.S. 12:1801 et seq.”•

• Adds the following to the list of items for which a director shall not be personally liable: “Any act or omission covered by a provision in the articles of incorporation that eliminates or limits the liability of the director as authorized in R.S. 12:24(C)(4).”

• Does not include the business judgment rule in its Standard of Conduct for Directors (La. R.S. § 1821) or its Standard of Conduct for Officers (La. R.S. § 1823).

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Maryland Passed 10/1/2010 MD Code, Corporations and Associations, § 5-6C-01 et seq.

Largely based on the Model Act, with a few differences:

• Defines “General public benefit” as a “combination of specific public benefits.”

• Defines “third party standard” much more simply: Is developed by a person or entity that is independent of the benefit corporation; and is transparent because the following information about the standard is publicly available or accessible: (i) the factors considered when measuring the performance of a business; (ii) the relative weightings of those factors; and (iii) the identity of the persons who developed and control changes to the standard and the process by which those changes were made.

• Does not have a definition of “benefit enforcement proceeding.” • Does not define a “minimum status vote.” The requisite percentage of

votes necessary to amend an existing corporation’s charter to become a benefit corporation is two-thirds (2/3), pursuant to MD. CODE ANN., CORPS. & ASSNS. §§ 5-6C-03 and 2-604.

• “Clear reference to the fact that a corporation is a benefit corporation shall appear prominently” at the head of the charter document in which the election to become a benefit corporation is made, at the head of each subsequent charter document, and on each stock certificate of the benefit corporation.

• Omits the following items directors must consider as part of their standard of conduct: (i) short and long term interest of the benefit corporation, (ii) the ability of the benefit corporation to accomplish its general and specific public benefit purpose.

• Replaces the “Exoneration from personal liability” section (directors) with, in essence, the business judgment rule as set forth under Maryland law. • Does not require a benefit director or a benefit officer.

• Does not require that the annual benefit report contain any of the follow-ing (which are included in the Model Act): (i) the process and rationale for selecting or changing the third-party standard used to prepare the benefit report,” (ii) compensation paid to each director; (iii) name of each person who owns 5% or more of the benefit corporation’s stock; and (iv) material connections between the benefit corporation and the third party standard provider.

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Benefit Corporation Legislative Status Chart

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Massachusetts Passed 12/1/2012 Mass. Gen. Laws ch. 156E, § 1 et seq.

Largely based on the Model Act, with some exceptions:

• When an existing corporation converts to a benefit corporation (through amendment or merger, share exchange, or conversion), existing shareholders have appraisal rights.

• The “Third-party standard” in Massachusetts means a standard that is developed “or performed” by an independent person or organization. This implies that the entity developing the standard does not have to be independent as long as the entity performing (i.e. monitoring) the standards is independent.

• •Adds the following provision: “A business corporation organized under the laws of the commonwealth shall not hold itself out as, advertise itself as, or indicate in any way that it is a benefit corporation unless it was organized under and in full compliance with this chapter.” Mass. Gen. Laws Ann. ch. 156E, § 7.

• Does not adopt the entirety of the “business judgment rule” language found in the Model Act, but does provide that directors shall use “sound and reasonable judgment in determining corporate actions and the best interests of the benefit corporation.”

• Requires all benefit corporations to have a benefit director. Under the Model Act, only publicly-traded benefit corporations must have a benefit director.

• The annual compliance statement must address the “impact the corporation’s status as a benefit corporation is having on its business, including client or consumer opinion, return on investment, impact on shareholders and impact on employees.”

• The business judgment rule for officer conduct is excluded.

• Any shareholder (as opposed to those holding at least 2%) of the benefit corporation may bring a benefit enforcement proceeding, and there is no restriction that such shareholder must have been a shareholder at the time of the act or omission complained of.

Michigan Referred to House Subcommittee 4/11/2013 H 4352 MI HB4526

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Minnesota

Signed by

Governor 1/1/2015

Minnesota’s law is similar to the Model Act, but does include a number of significant changes.

• The law creates both “general benefit corporations” and “specific benefit corporations.”

• A “general benefit corporation” is a benefit corporation that elects to pursue a general public benefit.

• A “specific benefit corporation” is a benefit corporation with a specifically articulated public benefit.

• The name of a general benefit corporation must contain the words “general benefit corporation” or the abbreviation “GBC.” Specific benefit corporations must follow a similar convention.

• The law does not include provisions related to benefit officers or benefit directors. Delaware’s benefit corporation act is similar.

• The law gives appraisal rights to shareholders who dissent from a vote to elect or terminate benefit-corporation status. A similar provision is found in Delaware’s act.

• In defining the duties of directors of general benefit corporations, the law requires the director to consider “the interests of the constituencies” defined in a section of Minnesota’s Business Corporation Act. Interestingly, that section of the MBCA says that directors of ordinary corporations may consider the best interests of employees, customers, suppliers, the economy, and society.

• Although the Model Act says that a shareholder, a director, or the corporation itself can bring a benefit-enforcement proceeding when a benefit corporation fails to pursue a public benefit, the Minnesota law only permits shareholders to bring suit.

• The law imposes no minimum stock ownership requirement for bringing suit (the Model Act requires a minimum of 2% ownership). • Before a shareholder can bring suit, the benefit corporation must

have failed to pursue the benefit for “an unreasonably long time.”

(continued next page...)

SF 2052 HF 2582

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• The law gives courts broad powers to grant relief in benefit-enforcement proceedings, including the removal of directors and the liquidation of the corporation.

• The law permits the Secretary of State to revoke a business’s benefit-corporation status if it fails to file an annual benefit report.

• Although the Minnesota law retains the same conceptual foundation and basic structure of the Model Act, the Minnesota law is reorganized and uses some of its own terminology. Depending on how the Minnesota courts interpret these provisions, the changes might ultimately result in unforeseen differences between the Minnesota law and the Model Act.

Mississippi Missouri Montana Failed – Died in Senate Committee 4/24/2013

Bill appears to be dead at this time; the draft of the bill that died was based largely on the Model Act.

Nebraska

Passed 7/18/2014 Nebraska’s law is nearly identical to the Model Act.

MT HB534

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Nevada

Passed 5/24/2013 1/1/2014

N.R.S. § 78B.010 et seq.

(01/01/2014) (statute not live as of 1/10/2014)

Largely based on the Model Act, with some exceptions:

• Does not include the concept of a “benefit director” or “benefit officer.” • A “benefit enforcement proceeding” includes a claim that the benefit

corporation failed to deliver or post on its Internet website the required annual benefit report.

• “Independent” is not defined.

• The definition of “minimum status vote” includes the optional language provided under the Model Act definition.

• Nevada’s definition of “third party standard” is more rigorous than the definition under the Model Act.

New Hampshire

Passed 1/1/2015

Nearly identical to the Model Act, with three notable exceptions: • If, during a benefit enforcement proceeding, it is determined that the

corporation failed to pursue a public benefit, the Secretary of State may revoke the corporation’s status as a benefit corporation.

• While the Model Act says that the benefit corporation’s benefit report and performance assessment do not “need[] to be” audited or certified by a third party, New Hampshire’s legislation says that “[n]either the benefit report nor the assessment of the performance of the benefit corporation … shall be audited or certified by a third party.”

• If the secretary of state determines that a benefit corporation has failed to make available its annual benefit report (as the corporation is required to do under the statute) then the secretary of state shall administratively dissolve the corporation.

AB 89

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New Jersey

Passed 3/1/2011

N.J. Rev. Stat. § 14a:18-1 et seq.

Largely based on the Model Act, with some differences:

• The definition of “general public benefit” requires that the benefit corporation must “promote some combination of specific public benefits.” • Eliminates “the ability of the benefit corporation to accomplish its general

public benefit purpose and any specific public benefit purpose” from the list of mandatory directors’ considerations under the “standard of conduct for directors” section.

• Limits the “exoneration from personal liability” section applicable to directors to the following: “A director is not personally liable for monetary damages for failure of the benefit corporation to create general or specific public benefits.”

• Omits Sections 301(d) and (e) from the Model Act (addressing limitation on standing and business judgment rule with regard to directors, respectively).

• All benefit corporations (not just publicly traded ones) must have a benefit director.

• Omits Section 302(d) of the Model Act (status of actions).

• Omits Sections 303(d) and (e) from the Model Act (addressing limitation on standing and business judgment rule with regard to officers,

respectively) and redefines “standing” as follows: (i) directly by the benefit corporation; or (ii) derivatively by: (a) a shareholder; (b) a director; (c) a person or group of persons that owns beneficially or of record 10% or more of the equity interests in an entity of which the benefit corporation is a subsidiary; or (d) such other persons as may be specified in the certificate of incorporation or by-laws of the benefit corporation.

• The annual report need not include the process and rationale for selecting or changing the third-party standard used to prepare the report.

• If the benefit corporation does not file a benefit report for two years, the New Jersey treasury department “may prepare and file a statement that the corporation has forfeited its status as a benefit corporation and is no longer subject to” the benefit corporation act.

New Mexico Failed – Pocket Veto by Governor 3/16/2013 S 2170 HB 40

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Benefit Corporation Legislative Status Chart

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New York Passed 2/10/2012 McKinney’s Business Corporation Law § 1701 et seq.

Largely based on the Model Act, with a couple of differences:

• Does not include the “Benefit Enforcement Proceeding” section, which includes language on monetary damage limitations; instead, BCL § 720(a) (1)(C) provides a right of action “In the case of directors or officers of a benefit corporation organized under article seventeen of this chapter: (i) the failure to pursue the general public benefit purpose of a benefit corporation or any specific public benefit set forth in its certificate of incorporation; (ii) the failure by a benefit corporation to deliver or post an annual report as required by section seventeen hundred eight of article seventeen of this chapter; or (iii) the neglect of, or failure to perform, or other violation of his or her duties or standard of conduct under article seventeen of this chapter.”

• The definition of third-party standards does not require comprehensive or credibility provisions.

• A “minimum status vote” requires a ¾ vote (as opposed to the 2/3 vote required by the Model Act).

• All stock certificates must contain the following “conspicuous language” on the face of the certificate: “This entity is a benefit corporation organized under article seventeen of the New York business corporation law.”

• Adding, amending, or deleting a specific public benefit from the certificate of incorporation requires a ¾ vote (versus the 2/3 vote required by the Model Act).

• In discharging their duties, directors may (but are not required to) consider “the resources, intent, and conduct (past, stated, and potential) of any person seeking to acquire control of the corporation.”

(continued next page...) S79-a

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Benefit Corporation Legislative Status Chart

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• There is no requirement to appoint a benefit director or benefit officer. • Addresses standard of conduct of officers and directors in same provision

and applies same standard to both.

• Omits the phrase “and in considering the best interests of the benefit corporation” from the standard of conduct for officers and directors. • Omits Section 301(c) of the Model Act (“Exoneration from personal

liability”) with regard to directors.

• Does not apply business judgment rule to officers or directors. • The annual report must contain, “if applicable, assessment of the

performance of the benefit corporation, relative to its specific public benefit purpose or purposes.”

• Does not require that the annual report contain a statement of any connection between the organization that established the third-party standard, or its directors, officers or any holder of 5 percent or more of the governance interests in the organization (Model Act § 401(a)(6)).

North Carolina Referred to House Subcommittee North Dakota Ohio HB534

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Benefit Corporation Legislative Status Chart

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Oklahoma

Oregon

Passed 1/1/2014 Oregon’s law tracks the Model Act, but includes some important differences.

Pennsylvania

Passed 1/22/2013

15 Pa.C.S.A. § 3301 et seq.

Largely based on the Model Act, with exceptions:

• Includes the following language in the definition of “specific public benefit”: promoting economic development through support of initiatives that increase access to capital for emerging and growing technology enterprises, facilitating the transfer and commercial adoption of new technologies, providing technical and business support to emerging and growing technology enterprises, or forming support partnerships that support those objectives.

• Does not exonerate directors from personal liability for the failure of the benefit corporation to pursue general or specific public benefits, but does include provision exonerating directors for the failure to create a general or specific public benefit.

• The annual benefit report must address whether the corporation has dispensed with or restricted the discretionary power of the board. • Does not include business judgment rule for officers or directors.

Rhode Island

Passed 6/14/2012

R.I. Gen. Laws §

7-5.3-1 et seq. _{Follows the Model Act almost verbatim, with one exception: Rhode Island’s}

Act does not address professional corporations under the “Corporate purposes” section.

HB 2296

HB 1616

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Benefit Corporation Legislative Status Chart

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South Carolina

Passed 6/14/2012

S.C. Code Ann. § 33-38-110 et

seq.

Largely based on the Model Act, with exceptions:

• Does not include concept of minimum status vote; instead, S.C. Code Ann. § 33-38-230 requires the following votes for approval of corporate mat-ters: (i) for corporations (including benefit corporations), all matters must be approved by “sixty-six and two-thirds percent of the outstanding shares of each class and series of stock of the corporation, voting as separate voting groups, regardless of any limitation in the corporation’s articles of incorporation or bylaws of the voting rights of such class or series.” • Does not include a definition of a “publicly traded company.”

• The definition of specific public benefit includes “a benefit that serves one or more public welfare, religious, charitable, scientific, literary, or educa-tional purposes, or other purposes or benefits beyond the strict interest of the shareholders of the benefit corporation.” Examples of a specific public benefit include (a) providing low-income or underserved individuals, families, or communities with beneficial products, services, or educational opportunities; (b) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; (c) preserving or improving the environment; (d) improving human health; (e) promoting the arts, sciences, or advancement of knowledge; (f) in-creasing the flow of capital to entities with a public benefit purpose; or (g) conferring any other particular benefit on society and the environment. • A benefit corporation is not entitled to claim an exemption from any

property tax imposed by law.

• Includes a separate provision setting forth that “a shareholder is entitled to dissent from and obtain payment of the fair value of his shares in the event of the consummation of a designation of a corporation as a benefit corporation.”

• Requires statement of specific benefit public purpose in the articles of incorporation. (continued next page...)

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Benefit Corporation Legislative Status Chart

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• Adds the following as a possible consideration of directors when discharg-ing their duties: “the resources, intent, and past, stated, and potential con-duct of any person seeking to acquire control of the benefit corporation.” • Does not include the business judgment rule for directors or officers. • Requires that all benefit corporations (not just publicly traded ones) have

a benefit director.

• Requires that the benefit director include in the annual benefit report a statement addressing “whether the benefit corporation conferred a gener-al public benefit and any specific public benefit during the period covered by the report.”

• If the benefit corporation dispenses with the board of directors, the articles of incorporation must “provide that a person who exercises one or more of the powers, duties, rights, or obligations of a benefit director under this subsection shall have the powers, duties, rights, and obligations of a benefit director” (emphasis added); that person does not have to be independent of the benefit corporation, does have the immunities of a benefit director, and is not subject to the procedures for election or removal of directors unless the bylaws make those procedures available. • South Carolina changes the concept of “standing” in the following ways: (i)

any shareholder may bring a benefit enforcement proceeding (not limited to shareholders holding at least 2% of the total number of shares out-standing as set forth in the Model Act), and (ii) those who bring an action as an owner of 5% or more of the benefit corporation’s parent company are not limited to those who owned that position “at the time of the act or omission complained of.”

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Benefit Corporation Legislative Status Chart

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Tennessee

Passed 1/1/2016 Tennessee’s law is almost identical to the Model Act. Perhaps the most signif-icant change is that Tennessee’s law calls the new entities “For-Profit Benefit Corporations.” Texas Referred to House Subcommittee 3/18/2013 Withdrawn from schedule 5/7/2013 Utah

Passed 5/13/2014 Utah’s law is almost identical to the Model Act, except that it omits the Model Act’s provisions relating to “business judgment” and its effect on directors and officers.

Vermont

Passed 5/19/2010 7/1/2011

11A V.S.A. § 21.01 et seq.

• Does not include “minimum status vote.” Instead, actions that require such a vote under the Model Act must be approved by the higher of (i) the vote of 2/3 of the shareholders, OR (ii) the vote set forth in the arti-cles of incorporation.

• “Third-party standard” is defined much more concisely: “a recognized standard for defining, reporting, and assessing corporate social and environmental performance that: (A) is developed by a person that is independent of the benefit corporation; and (B) is transparent because the following information about the standard is publicly available: (i) the factors considered when measuring the performance of a business; (ii) the relative weightings of those factors; and (iii) the identity of the persons who developed and control changes to the standard and the process by which those changes are made.” (continued next page...)

HB767

TX HB2565

SB133

S 263 (Act 113)

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Benefit Corporation Legislative Status Chart

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• The “general public benefit” must “promote some combination of specific public benefits.”

• The notice of the meeting of shareholders that will approve the amendment must include a statement from the board of directors setting forth the reasons the board is proposing the amendment and the anticipated effect on shareholders of becoming a benefit corporation. • The election to become a benefit corporation (or to terminate that

status) must be approved by the higher of (i) the vote required by the articles of incorporation, or (ii) 2/3 of the shareholders.

• Removes the following from the list of items the board and individual directors must consider when performing their duties: “the ability of the benefit corporation to accomplish its general public benefit purpose and any specific public benefit purpose.”

• States that directors “shall not be subject to a different or higher standard of care when an action or inaction might affect control of the benefit corporation.”

• Does not include business judgment rule for directors or officers. • Limits “standing” to bring a benefit enforcement proceeding to the

following: (i) a shareholder that would otherwise be entitled to commence or maintain a proceeding in the right of the benefit corporation on any basis; (ii) a director of the corporation; (iii) a person or group of persons that owns beneficially or of record 10 percent or more of the equity interests in an entity of which the benefit corporation is a subsidiary (the Model Act has a requirement of 5%); or (iv) such other persons as may be specified in the articles of incorporation of the benefit corporation.

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Benefit Corporation Legislative Status Chart

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Virginia

Passed 1/1/2012

Va. Code Ann. § 13.1-782 et seq.

• For an existing corporation to amend its articles of incorporation to become a benefit corporation, the amendment must be approved by all shareholders entitled to vote on the amendment.

• Terminating benefit corporation status requires a vote of more than 2/3 of all the votes entitled to be cast.

• When discharging their duties, directors may consider the resources, intent, and past, stated, and potential conduct of any person seeking to acquire control of the benefit corporation.

• Omits the “limitation on standing” in the Model Act, which states that a director does not have a duty to a person that is a beneficiary of the general public benefit purpose or a specific public benefit purpose. • Does not include the business judgment rule for directors.

• Does not include standard of conduct for officers (but does state that “an officer of a benefit corporation shall have no liability for actions taken that the officer believes, in his good faith business judgment, are consistent with (i) the general public benefit or specific public benefit specified in the articles of incorporation or bylaws or otherwise adopted by the board of directors and (ii) the requirements of any third-party standard then in effect for the corporation.

• No requirement to designate a benefit director or benefit officer. • Benefit enforcement proceedings are limited to the following parties: (i)

directly by the benefit corporation; or (ii) derivatively by: (a) a shareholder of the benefit corporation; (b) a director of the benefit corporation; or (c) other persons as specified in the articles of incorporation or bylaws of the benefit corporation.

• Does not require the annual benefit report to include the compensation paid to each director, and does not require the inclusion of each person owning 5% or more of the outstanding shares of the benefit corporation. HB 2358

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Benefit Corporation Legislative Status Chart

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Washington Passed (Social Purpose Corporation) 6/7/2012 RCWA 23B.25.005 et seq.

Some of the important differences in the State of Washington’s “Social Purpose Corporations” code are as follows:

• To become a social purpose corporation (“SPC”), the board of directors of the electing corporation must recommend the election to the share-holders, unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommen-dation and communicates the basis for its determination to the sharehold-ers with the proposed election; and the election must be approved by an affirmative vote of at least 2/3 of the electing corporation’s shareholders entitled to be cast, and by 2/3 of the holders of the outstanding shares of each class or series, voting as separate voting groups, and each other voting group entitled under the articles of incorporation to vote. • The rules for ceasing to be a SPC are basically the same.

• “General social purposes” is defined as “carry[ing] out its business pur-pose under RCW 23B.03.010 in a manner intended to promote positive short-term or long-term effects of, or minimize adverse short-term or long-term effects of, the corporation’s activities upon any or all of (i) the corporation’s employees, suppliers, or customers; (ii) the local, state, national, or world community; or (iii) the environment.”

• SPCs are allowed to pursue “specific social purposes,” which are not defined.

• The corporate name of each SPC must contain the phrase “social purpose corporation” or the initials “SPC.”

• Each SPC’s articles of incorporation must contain a statement that the corporation is organized as a social purpose corporation governed by Washington’s “Social Purpose Corporation” chapter.

• The articles of incorporation must set forth the general social purpose(s) for which the SPC is organized and, if the SPC has identified specific social purposes, the articles must include a statement setting forth those specific purposes. (continued next page...)

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Benefit Corporation Legislative Status Chart

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• The articles of incorporation must state: “The mission of this social purpose corporation is not necessarily compatible with and may be contrary to maximizing profits and earnings for shareholders, or maximizing shareholder value in any sale, merger, acquisition, or other similar actions of the corporation.”

• Prior to the transfer of shares in a SPC, the transferor shareholder shall give notice of the transfer to the corporation, and within a reasonable time after receiving notice, the corporation shall provide the prospective transferee with a copy of the articles of incorporation in the form of a record.

• The duties, standards, and liabilities of directors include (i) discharging “the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner the director reasonably believes to be in the best interests of the corporation in accordance with RCW 23B.08.300; (ii) [u]nless the articles of incorporation provide otherwise, in discharging his or her duties as a director, the director of a social purpose corporation may consider and give weight to one or more of the social purposes of the corporation as the director deems relevant; (iii) [a]ny action taken as a director of a social purpose corporation, or any failure to take any action, that the director reasonably believes is intended to promote one or more of the social purposes of the corporation shall be deemed to be in the best interests of the corporation; (iv) [a] director of a social purpose corporation is not liable for any action taken as a director, or any failure to take any action, if the director performed the duties of the director’s office in compliance with this section; (v) [n]othing in this chapter creates any liability or grants any right in or for any person or any cause of action by or for any person, and a director shall not be responsible to any party other than the corporation and its shareholders.” (continued next page...)

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Benefit Corporation Legislative Status Chart

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• 23B.25.060 and are the same as those of the directors.

• Shares of SPCs must state on the face of the certificate the following language in a conspicuous manner: “This entity is a social purpose corporation organized under Title 23B RCW of the Washington business corporation act. The articles of incorporation of this corporation state one or more social purposes of this corporation. The corporation will furnish the shareholder this information without charge on request in writing.”

• To have standing to bring an enforcement action, one must either have been a shareholder of the SPC when the transaction complained of occurred or have become a shareholder through transfer by operation of law from one who was a shareholder at that time.

• If a proposed amendment to a SPC’s articles of incorporation would materially change one or more of the social purposes of the corporation, or if the SPC desires to sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property, otherwise than in the usual and regular course of business, the amendment to be adopted must be approved by 2/3 of the voting group comprising all the votes entitled to be cast on the proposed amendment, and by 2/3 of the holders of the outstanding shares of each class or series.

• Provides shareholders with dissenter’s rights in the event of: (i) an election by a corporation to become a SPC, (ii) an election to cease being a SPC, and (iii) an amendment to the SPC’s articles of incorporation that would materially change one or more of the social purposes of the SPC.

Washington, DC Passed 2/8/2013 5/1/2013 D.C. Code § 29-1301.01 et seq.

Based on the Model Act, with the following differences:

• Expressly makes directors liable for (i) the amount of a financial benefit received by a director to which the director is not entitled; (ii) an intentional infliction of harm on the corporation or the shareholders; (iii) unlawful distributions (addressed in D.C. Code Ann. § 29-306.32); or (iv) a violation of criminal law.

• No business judgment rule is included for directors or officers. (continued next page...)

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Benefit Corporation Legislative Status Chart

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• Includes the following additional benefit report provision: “The benefit corporation shall deliver a copy of the benefit report to the Mayor for filing when filing the biennial report required by § 29-102. 11, but the compensation paid to directors and financial or proprietary information included in the benefit report may be omitted from the copy of the benefit report that is delivered to the Mayor.”

West Virginia

Passed 7/1/2014

West Virginia’s law is similar to the Model Act, with a few differences:

• The law omits provisions relating to benefit officers and benefit directors. • Unlike the Model Act, which says that third-party assessment standards

must be developed by an entity that is not “controlled” by the benefit corporation, West Virginia’s law says that the third-party standard must be developed by “a person that is independent of the benefit corporation.” “Independent” means “no material relationship.”

• While the Model Act says that any “specific public benefit” must be articulated in the articles of incorporation, West Virginia’s law says that a specific public benefit can also appear in the bylaws or be “otherwise adopted by the board of directors.”

• The law does not provide a comprehensive standard of conduct for officers, but does indicate that officers are immune from liability when they use “good faith business judgment.”

• The law imposes no stock or equity ownership requirements for bringing a benefit enforcement proceeding.

• The law does not require the annual benefit report to disclose director compensation. Wisconsin Failed to Pass Senate 3/23/2012 Wyoming SB202 WI AB742