Bill S6088-2011

Relates to the incorporation of benefit corporations and standards of conduct of directors and officers of benefit corporations

Relates to the incorporation of benefit corporations and standards of conduct of directors and officers of benefit corporations.

Details

Actions

  • Jun 21, 2012: COMMITTED TO RULES
  • Jun 5, 2012: ADVANCED TO THIRD READING
  • Jun 4, 2012: 2ND REPORT CAL.
  • May 31, 2012: 1ST REPORT CAL.984
  • Jan 4, 2012: REFERRED TO JUDICIARY

Votes

VOTE: COMMITTEE VOTE: - Judiciary - May 31, 2012
Ayes (19): Bonacic, Flanagan, Fuschillo, Lanza, Little, Nozzolio, O'Mara, Ranzenhofer, Saland, Zeldin, Adams, Breslin, Dilan, Espaillat, Gianaris, Krueger, Perkins, Serrano, Squadron
Ayes W/R (2): DeFrancisco, LaValle
Excused (2): Hassell-Thompson, Stavisky

Memo

BILL NUMBER:S6088

TITLE OF BILL: An act to amend the general construction law and the business corporation law, in relation to benefit corporations

PURPOSE OR GENERAL IDEA OF BILL: This bill amends Chapter 599 of the laws of 2011 establishing a new corporate form known as benefit corporation.

SUMMARY OF PROVISIONS: Section 1 of the bill makes technical changes to clarify that a benefit corporation is an Article 4 corporation, which has also elected to become a benefit corporation pursuant to Article 17 of the business corporation law.

Section 2 of the bill amends the minimum status vote to be the greater of two thirds or whatever vote is required in the certificate of incorporation.

Section 3 and 4 of the bill make conforming changes.

Section 5 of the bill eliminates the allowance for a benefit corporation to sell or lease substantially all of its assets even if such transaction is in the usual and regular course of business.

JUSTIFICATION: Tens of thousands of companies are using sustainability and social innovation as a competitive advantage in the marketplace. Corporate leaders need to be able to shape business models that enable them to satisfy the demands of investors, employees and customers who increasingly demand that corporations serve both shareholders and society, considering the impact of their decisions on multiple stakeholders rather than maintaining a singular focus on short term maximization of financial profits. The proposed amendments will further ensure this new corporate form is able to achieve its intended purpose.

EFFECTIVE DATE: On the same date and in the same manner as section five of chapter 599 of the laws of 2011, takes effect.


Text

STATE OF NEW YORK ________________________________________________________________________ S. 6088 A. 8907 S E N A T E - A S S E M B L Y (PREFILED) January 4, 2012 ___________
IN SENATE -- Introduced by Sens. SQUADRON, LARKIN -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary IN ASSEMBLY -- Introduced by M. of A. SILVER -- read once and referred to the Committee on Corporations, Authorities and Commissions AN ACT to amend the general construction law and the business corpo- ration law, in relation to benefit corporations THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subdivision 4-a of section 66 of the general construction law, as added by chapter 599 of the laws of 2011, is amended to read as follows: 4-a. A "benefit corporation" means a business corporation incorporated under article [seventeen] FOUR of the business corporation law [and whose status as a benefit corporation has not been terminated as provided in article seventeen of the business corporation law] THAT WAS FORMED AS A BENEFIT CORPORATION OR HAS ELECTED TO BECOME A BENEFIT CORPORATION AS PROVIDED IN ARTICLE SEVENTEEN OF THE BUSINESS CORPORATION LAW UNTIL SUCH TIME AS IT HAS CEASED TO BE A BENEFIT CORPORATION AS PROVIDED IN ARTICLE SEVENTEEN OF THE BUSINESS CORPORATION LAW. S 2. Paragraphs (a) and (d) of section 1702 of the business corpo- ration law, as added by chapter 599 of the laws of 2011, are amended to read as follows: (a) "Benefit corporation" means a business corporation incorporated under [this article and whose status as a benefit corporation has not been terminated as provided in this article] ARTICLE FOUR OF THIS CHAP- TER THAT WAS FORMED AS A BENEFIT CORPORATION OR HAS ELECTED TO BECOME A BENEFIT CORPORATION AS PROVIDED IN THIS ARTICLE UNTIL SUCH TIME AS IT HAS CEASED TO BE A BENEFIT CORPORATION AS PROVIDED IN THIS ARTICLE. (d) "Minimum status vote" means that, in addition to any other approval or vote required by this chapter, the certificate of incorpo- ration or a bylaw adopted by the shareholders, THE HIGHER OF: (1) [The holders of shares of every class or series that are entitled to vote on the corporate action shall be entitled to vote as a class on the corporate action; and
(2) The corporate action must be approved by vote of the shareholders of each class or series entitled to cast at least three-quarters of the votes that all shareholders of the class or series are entitled to cast thereon]
THE VOTE REQUIRED BY THE CERTIFICATE OF INCORPORATION; OR (2) TWO-THIRDS OF THE VOTES ENTITLED TO BE CAST BY THE OUTSTANDING SHARES OF THE CORPORATION, PROVIDED THAT IF ANY CLASS OF SHARES IS ENTI- TLED TO VOTE AS A GROUP, APPROVAL SHALL ALSO REQUIRE THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS OF THE VOTES ENTITLED TO BE CAST BY THE OUTSTANDING SHARES OF EACH VOTING GROUP. S 3. Section 1703 of the business corporation law, as added by chapter 599 of the laws of 2011, is amended to read as follows: S 1703. Formation of benefit corporations. A benefit corporation shall be [formed in accordance with this chapter except that] INCORPORATED UNDER ARTICLE FOUR OF THIS CHAPTER, IN ACCORD- ANCE WITH THE PROVISIONS OF THIS ARTICLE, AND its certificate of incor- poration shall also state that it is a benefit corporation. S 4. Paragraphs (a) and (b) of section 1704 of the business corpo- ration law, as added by chapter 599 of the laws of 2011, are amended to read as follows: (a) A business corporation may become a benefit corporation under this article by amending its certificate of incorporation so that it contains a statement that the corporation is a benefit corporation. [The] SUCH amendment shall [not] be [effective unless it is] adopted by at least the minimum status vote. (b) Any corporation that is not a benefit corporation that is a party to a merger or consolidation in which [the surviving or consolidated corporation will be a benefit corporation] SUCH CORPORATION WILL BECOME A BENEFIT CORPORATION must approve the plan of merger or consolidation by at least the minimum status vote in addition to any other vote required by this chapter, the certificate of incorporation or the bylaws. S 5. Paragraphs (a), (b) and (d) of section 1705 of the business corporation law, as added by chapter 599 of the laws of 2011, are amended to read as follows: (a) A benefit corporation may terminate its status as such and cease to be subject to this article by amending its certificate of incorpo- ration to delete the statement that the corporation is a benefit corpo- ration. [The] SUCH amendment shall [not] be [effective unless it is] adopted by at least the minimum status vote. (b) [If a] ANY benefit corporation THAT is a party to a merger or consolidation in which [the surviving or new corporation will not be] SUCH CORPORATION WILL NO LONGER BE a benefit corporation[,] AS A RESULT OF THE TRANSACTION, MUST APPROVE the plan of merger or consolidation [shall not be effective unless it is adopted] by at least the minimum status vote in addition to any other vote required by this chapter, the certificate of incorporation or the bylaws. (d) A sale, lease, conveyance, exchange, transfer, or other disposi- tion of all or substantially all of the assets of a benefit corporation, [unless the transaction is in the usual and regular course of business of the benefit corporation,] shall [not] be [effective unless the trans- action is] approved by at least the minimum status vote in addition to any other vote required by this chapter, the certificate of incorpo- ration or the bylaws. S 6. This act shall take effect on the same date and in the same manner as section 5 of chapter 599 of the laws of 2011, takes effect.

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