Bill S79A-2011

Authorizes the incorporation of benefit corporations

Authorizes the incorporation of benefit corporations and provides for the public benefit to be created by benefit corporations, for the election and termination of the status of a benefit corporation, for the standards of conduct for directors and officers of a benefit corporation, and for the preparation and distribution of an annual benefit report by a benefit corporation.

Details

Actions

  • Dec 12, 2011: APPROVAL MEMO.16
  • Dec 12, 2011: SIGNED CHAP.599
  • Nov 30, 2011: DELIVERED TO GOVERNOR
  • Jun 17, 2011: returned to senate
  • Jun 17, 2011: passed assembly
  • Jun 17, 2011: ordered to third reading rules cal.395
  • Jun 17, 2011: substituted for a4692a
  • Jun 16, 2011: referred to codes
  • Jun 16, 2011: DELIVERED TO ASSEMBLY
  • Jun 16, 2011: PASSED SENATE
  • Jun 13, 2011: ADVANCED TO THIRD READING
  • Jun 7, 2011: 2ND REPORT CAL.
  • Jun 6, 2011: 1ST REPORT CAL.1014
  • Jun 1, 2011: REPORTED AND COMMITTED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS
  • May 26, 2011: PRINT NUMBER 79A
  • May 26, 2011: AMEND AND RECOMMIT TO JUDICIARY
  • Apr 5, 2011: NOTICE OF COMMITTEE CONSIDERATION - REQUESTED
  • Jan 5, 2011: REFERRED TO JUDICIARY

Votes

VOTE: COMMITTEE VOTE: - Judiciary - Jun 1, 2011
Ayes (20): Bonacic, DeFrancisco, Flanagan, Fuschillo, Lanza, Little, Nozzolio, O'Mara, Ranzenhofer, Saland, Zeldin, Hassell-Thompson, Breslin, Dilan, Espaillat, Gianaris, Perkins, Serrano, Squadron, Stavisky
Ayes W/R (2): LaValle, Krueger
Excused (1): Adams
VOTE: COMMITTEE VOTE: - Corporations, Authorities and Commissions - Jun 6, 2011
Ayes (6): Ranzenhofer, Flanagan, Larkin, Martins, Perkins, Squadron

Memo

BILL NUMBER:S79A

TITLE OF BILL: An act to amend the general construction law and the business corporation law, in relation to authorizing the incorporation of benefit corporations, providing for the public benefit to be created by benefit corporations, for the election and termination of the status of a benefit corporation, for the standards of conduct for directors of a benefit corporation, and for the preparation and distribution of an annual benefit report by a benefit corporation

PURPOSE: This bill authorizes a New York corporation to elect to be a benefit corporation and thus to have as one of its purposes the creation of general public benefit.

SUMMARY OF PROVISIONS: Section 1 of the bill makes conforming changes to the general construction law.

Section 3 of the bill amends the New York Corporation Law by adding a new Article 17 entitled "Benefit Corporations."

Within Article 17, section 1701 establishes the application of the article only to benefit corporations and makes clear that Article 17 does not change the law applicable to corporations that do not elect to be benefit corporations.

The bill permits the incorporation in New York of "benefit corporations," which must have a "general public benefit" purpose, defined in the bill as a material, positive impact on society and the environment, taken as a whole, as assessed against a third-party standard, through activities that promote a combination of specific public benefits. Likewise, the bill defines a "specific public benefit" to mean providing individuals or communities with beneficial products or services; promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; preserving the environment; improving human health; promoting the arts, sciences, or advancement of knowledge; increasing the flow of capital to entities with a public benefit purpose; or the accomplishment of any other particular benefit for society or the environment.

The bill allows a corporation to elect to be a benefit corporation by amending its charter to include a statement that the corporation is a benefit corporation. An amendment electing benefit corporation status, and the subsequent termination of benefit corporation status, must be approved by the stockholders. The bill further allows a benefit corporation to identify and include one or more specific public benefits in its charter with the approval of the stockholders.

In determining what directors and officers reasonably believe are in the best interests of the benefit corporation, a director or officer must consider the effects of any action or decision not to act on: the benefit corporation's stockholders; the benefit corporation's employees and workforce, including the employees and workforce of subsidiaries and suppliers; the interests of customers as beneficiaries of the general or specific public benefit purposes of the benefit corporation; community and societal considerations, including those of any community in which offices or facilities of the benefit corporation or the benefit corporation's subsidiaries or suppliers are located; and the local and global environment.

The bill requires a benefit corporation to deliver an annual benefit report to all stockholders that includes (1) the ways in which the benefit corporation pursued general public benefit during the preceding year and the extent to which the general public benefit was created; and (2) the ways in which the benefit corporation pursued any specific public benefit included in its charter and the extent to which that specific public benefit was created. The annual report must also discuss circumstances hindering the benefit corporation's ability to create the public benefit and an assessment of the societal and environmental performance of the benefit corporation. The report must be delivered to stockholders within 120 days of the end of the benefit corporation's fiscal year, and posted on the benefit corporation's public web site, if any exists.

Section 4 of the bill amends section 720 of the business corporation law to include actions against directors and officers for misconduct which are unique to benefit corporations. Such actions include (1) 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, (2) the failure by a benefit corporation to deliver or post an annual report, or (3) the neglect of, or failure to perform, or violation of his or her duties or standard of conduct under article 17.

Section 5 of the bill provides that it shall take effect on the 60th day after it becomes law.

FISCAL IMPACT ON THE STATE: Potential minimal increase in revenues from filings by existing corporations that elect to change their status.

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. Benefit corporations have the potential to be the corporate entity that can offer entrepreneurs and investors the option to build and invest in businesses that meet higher standards of corporate purpose, accountability and transparency.

As a leading center of business, New York is well-positioned to become one of the first states to allow the incorporation of these cutting-edge benefit corporations. Currently, socially-minded companies are often left with the catch-22 of either not being able to earn a profit or opening their directors up to possible personal liability for decisions that do not maximize shareholder value or increasingly going to states other than New York that are pursuing this corporate form. This bill solves that dilemma.

Without increasing regulation or impacting the state budget, the bill:

* Removes legal impediments preventing businesses and investors from making their own decisions to use sustainability and social innovation as a competitive advantage;

* Gives New York a competitive advantage as a leading state by accelerating development of a new sector of the economy in New York by providing legal recognition for businesses that adopt higher standards of corporate purpose, accountability and transparency;

* Provides clarity to business leaders, general counsels and investors that the fiduciary duty of benefit corporations affirmatively includes creating public benefit;

* Expands shareholder rights to enforce this expanded definition of fiduciary duty, as well as a higher standard of conduct for directors to consider the impact of their decisions on both financial and non-financial interests;

* Includes higher standards of transparency, requiring annual reporting to shareholders and the public about the corporation's social and environmental performance;

* Helps ensure that these corporations and the positive social and environmental impact they create are built to last beyond marketing trends, strong business cycles or existing corporate leadership by requiring a 3/4 majority vote of shareholders to remove these higher standards.

LEGISLATIVE HISTORY: 2010: S.7855B (Passed Senate)/A.11498B

EFFECTIVE DATE: Sixtieth day after becoming law.


Text

STATE OF NEW YORK ________________________________________________________________________ 79--A 2011-2012 Regular Sessions IN SENATE (PREFILED) January 5, 2011 ___________
Introduced by Sens. SQUADRON, BRESLIN, LARKIN, PARKER, SAMPSON, SERRANO -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the general construction law and the business corpo- ration law, in relation to authorizing the incorporation of benefit corporations, providing for the public benefit to be created by bene- fit corporations, for the election and termination of the status of a benefit corporation, for the standards of conduct for directors of a benefit corporation, and for the preparation and distribution of an annual benefit report by a benefit corporation THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraphs 3 and 4 of subdivision d of section 65 of the general construction law, as added by chapter 451 of the laws of 1973 are amended and a new paragraph 5 is added to read as follows: 3. A railroad corporation, [or] 4. A transportation corporation[.], OR 5. A BENEFIT CORPORATION. S 2. Section 66 of the general construction law is amended by adding a new subdivision 4-a to read as follows: 4-A. A "BENEFIT CORPORATION" MEANS A BUSINESS CORPORATION INCORPORATED UNDER ARTICLE SEVENTEEN 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. S 3. The business corporation law is amended by adding a new article 17 to read as follows: ARTICLE 17 BENEFIT CORPORATIONS SECTION 1701. APPLICATION AND EFFECT OF ARTICLE.
1702. DEFINITIONS. 1703. FORMATION OF BENEFIT CORPORATIONS. 1704. ELECTION OF AN EXISTING BUSINESS CORPORATION TO BECOME A BENEFIT CORPORATION. 1705. TERMINATION OF BENEFIT CORPORATION STATUS. 1706. CORPORATE PURPOSES. 1707. STANDARD OF CONDUCT FOR DIRECTORS AND OFFICERS. 1708. ANNUAL BENEFIT REPORT. 1709. CONSPICUOUS LANGUAGE ON THE FACE OF CERTIFICATES. S 1701. APPLICATION AND EFFECT OF ARTICLE. (A) THIS ARTICLE SHALL BE APPLICABLE TO ALL BENEFIT CORPORATIONS. (B) THE EXISTENCE OF A PROVISION OF THIS ARTICLE SHALL NOT OF ITSELF CREATE ANY IMPLICATION THAT A CONTRARY OR DIFFERENT RULE OF LAW IS OR WOULD BE APPLICABLE TO A BUSINESS CORPORATION THAT IS NOT A BENEFIT CORPORATION. THIS ARTICLE SHALL NOT AFFECT ANY STATUTE OR RULE OF LAW THAT IS OR WOULD BE APPLICABLE TO A BUSINESS CORPORATION THAT IS NOT A BENEFIT CORPORATION. (C) EXCEPT AS OTHERWISE PROVIDED IN THIS ARTICLE, THIS CHAPTER SHALL BE APPLICABLE TO ALL BENEFIT CORPORATIONS. THE SPECIFIC PROVISIONS OF THIS ARTICLE SHALL CONTROL OVER THE GENERAL PROVISIONS OF THIS CHAPTER. (D) A PROVISION OF THE CERTIFICATE OF INCORPORATION OR BYLAWS OF A BENEFIT CORPORATION MAY NOT RELAX, BE INCONSISTENT WITH OR SUPERSEDE ANY PROVISION OF THIS ARTICLE. S 1702. DEFINITIONS. AS USED IN THIS ARTICLE, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM: (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. (B) "GENERAL PUBLIC BENEFIT" MEANS A MATERIAL POSITIVE IMPACT ON SOCI- ETY AND THE ENVIRONMENT, TAKEN AS A WHOLE, ASSESSED AGAINST A THIRD-PAR- TY STANDARD, FROM THE BUSINESS AND OPERATIONS OF A BENEFIT CORPORATION. (C) "INDEPENDENT" MEANS THAT A PERSON HAS NO MATERIAL RELATIONSHIP WITH A BENEFIT CORPORATION OR ANY OF ITS SUBSIDIARIES. A MATERIAL RELATIONSHIP BETWEEN A PERSON AND A BENEFIT CORPORATION OR ANY OF ITS SUBSIDIARIES WILL BE CONCLUSIVELY PRESUMED TO EXIST IF: (1) THE PERSON IS, OR HAS BEEN WITHIN THE LAST THREE YEARS, AN EMPLOY- EE OF THE BENEFIT CORPORATION OR ANY OF ITS SUBSIDIARIES; (2) AN IMMEDIATE FAMILY MEMBER OF THE PERSON IS, OR HAS BEEN WITHIN THE LAST THREE YEARS, AN EXECUTIVE OFFICER OF THE BENEFIT CORPORATION OR ANY OF ITS SUBSIDIARIES; OR (3) THE PERSON, OR AN ENTITY OF WHICH THE PERSON IS A DIRECTOR, OFFI- CER OR OTHER MANAGER OR IN WHICH THE PERSON OWNS BENEFICIALLY OR OF RECORD FIVE PERCENT OR MORE OF THE EQUITY INTERESTS, OWNS BENEFICIALLY OR OF RECORD FIVE PERCENT OR MORE OF THE SHARES OF THE BENEFIT CORPO- RATION. A PERCENTAGE OF OWNERSHIP IN AN ENTITY SHALL BE CALCULATED AS IF ALL OUTSTANDING RIGHTS TO ACQUIRE EQUITY INTERESTS IN THE ENTITY HAD BEEN EXERCISED. (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: (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. (E) "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) THE ACCOMPLISHMENT OF ANY OTHER PARTICULAR BENEFIT FOR SOCIETY OR THE ENVIRONMENT. (F) "SUBSIDIARY" MEANS AN ENTITY IN WHICH A PERSON OWNS BENEFICIALLY OR OF RECORD FIFTY PERCENT OR MORE OF THE EQUITY INTERESTS. A PERCENT- AGE OF OWNERSHIP IN AN ENTITY SHALL BE CALCULATED AS IF ALL OUTSTANDING RIGHTS TO ACQUIRE EQUITY INTERESTS IN THE ENTITY HAD BEEN EXERCISED. (G) "THIRD-PARTY STANDARD" MEANS A RECOGNIZED STANDARD FOR DEFINING, REPORTING AND ASSESSING GENERAL PUBLIC BENEFIT THAT IS: (1) DEVELOPED BY A PERSON THAT IS INDEPENDENT OF THE BENEFIT CORPO- RATION; AND (2) TRANSPARENT BECAUSE THE FOLLOWING INFORMATION ABOUT THE STANDARD IS PUBLICLY AVAILABLE: (A) THE FACTORS CONSIDERED WHEN MEASURING THE PERFORMANCE OF A BUSI- NESS; (B) THE RELATIVE WEIGHTINGS OF THOSE FACTORS; AND (C) THE IDENTITY OF THE PERSONS WHO DEVELOPED AND CONTROL CHANGES TO THE STANDARD AND THE PROCESS BY WHICH THOSE CHANGES ARE MADE. S 1703. FORMATION OF BENEFIT CORPORATIONS. A BENEFIT CORPORATION SHALL BE FORMED IN ACCORDANCE WITH THIS CHAPTER EXCEPT THAT ITS CERTIFICATE OF INCORPORATION SHALL ALSO STATE THAT IT IS A BENEFIT CORPORATION. S 1704. ELECTION OF AN EXISTING BUSINESS CORPORATION TO BECOME A BENEFIT CORPORATION. (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 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 MUST APPROVE THE PLAN OF MERG- ER OR CONSOLIDATION 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. (C) ANY CORPORATION THAT IS NOT A BENEFIT CORPORATION THAT IS PARTY TO A MERGER OR CONSOLIDATION IN WHICH SHARES OF STOCK OF SUCH CORPORATION WILL BE CONVERTED INTO A RIGHT TO RECEIVE SHARES OF STOCK OF 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 1705. TERMINATION OF BENEFIT CORPORATION STATUS. (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 AMENDMENT SHALL NOT BE EFFECTIVE UNLESS IT IS ADOPTED BY AT LEAST THE MINIMUM STATUS VOTE. (B) IF A BENEFIT CORPORATION IS A PARTY TO A MERGER OR CONSOLIDATION IN WHICH THE SURVIVING OR NEW CORPORATION WILL NOT BE A BENEFIT CORPO- RATION, 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 INCORPO- RATION OR THE BYLAWS. (C) ANY BENEFIT CORPORATION THAT IS PARTY TO A MERGER OR CONSOLIDATION IN WHICH SHARES OF STOCK OF SUCH BENEFIT CORPORATION WILL BE CONVERTED INTO A RIGHT TO RECEIVE SHARES OF STOCK OF A CORPORATION THAT IS NOT 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. (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 TRANSACTION IS APPROVED 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 1706. CORPORATE PURPOSES. (A) EVERY BENEFIT CORPORATION SHALL HAVE A PURPOSE OF CREATING GENERAL PUBLIC BENEFIT. THIS PURPOSE IS IN ADDITION TO ITS PURPOSES UNDER SECTION TWO HUNDRED ONE OF THIS CHAPTER AND ANY SPECIFIC PURPOSE SET FORTH IN ITS CERTIFICATE OF INCORPORATION UNDER PARAGRAPH (B) OF THIS SECTION. THE PURPOSE TO CREATE GENERAL PUBLIC BENEFIT SHALL BE A LIMI- TATION ON THE OTHER PURPOSES OF THE BENEFIT CORPORATION, AND SHALL CONTROL OVER ANY INCONSISTENT PURPOSE OF THE BENEFIT CORPORATION. (B) THE CERTIFICATE OF INCORPORATION 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 TWO HUNDRED ONE OF THIS CHAPTER AND PARAGRAPH (A) OF THIS SECTION. THE IDENTIFICATION OF A SPECIFIC PUBLIC BENEFIT UNDER THIS PARAGRAPH DOES NOT LIMIT THE OBLIGATION OF A BENEFIT CORPORATION TO CREATE GENERAL PUBLIC BENEFIT. (C) THE CREATION OF GENERAL AND SPECIFIC PUBLIC BENEFITS AS PROVIDED IN PARAGRAPHS (A) AND (B) OF THIS SECTION IS IN THE BEST INTERESTS OF THE BENEFIT CORPORATION. (D) A BENEFIT CORPORATION MAY AMEND ITS CERTIFICATE OF INCORPORATION TO ADD, AMEND OR DELETE THE IDENTIFICATION OF A SPECIFIC PUBLIC BENEFIT THAT IT IS THE PURPOSE OF THE BENEFIT CORPORATION TO CREATE. THE AMEND- MENT SHALL NOT BE EFFECTIVE UNLESS IT IS ADOPTED BY AT LEAST THE MINIMUM STATUS VOTE. S 1707. STANDARD OF CONDUCT FOR DIRECTORS AND OFFICERS. (A) IN DISCHARGING THE DUTIES OF THEIR RESPECTIVE POSITIONS, THE BOARD OF DIRECTORS, COMMITTEES OF THE BOARD AND INDIVIDUAL DIRECTORS AND OFFI- CERS OF A BENEFIT CORPORATION: (1) SHALL CONSIDER THE EFFECTS OF ANY ACTION UPON: (A) THE ABILITY FOR THE BENEFIT CORPORATION TO ACCOMPLISH ITS GENERAL AND ANY SPECIFIC PUBLIC BENEFIT PURPOSE; (B) THE SHAREHOLDERS OF THE BENEFIT CORPORATION; (C) THE EMPLOYEES AND WORKFORCE OF THE BENEFIT CORPORATION AND ITS SUBSIDIARIES AND SUPPLIERS; (D) THE INTERESTS OF CUSTOMERS AS BENEFICIARIES OF THE GENERAL OR SPECIFIC PUBLIC BENEFIT PURPOSES OF THE BENEFIT CORPORATION;
(E) COMMUNITY AND SOCIETAL CONSIDERATIONS, INCLUDING THOSE OF ANY COMMUNITY IN WHICH OFFICES OR FACILITIES OF THE BENEFIT CORPORATION OR ITS SUBSIDIARIES OR SUPPLIERS ARE LOCATED; (F) THE LOCAL AND GLOBAL ENVIRONMENT; AND (G) 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; (2) MAY CONSIDER: (A) THE RESOURCES, INTENT AND CONDUCT (PAST, STATED AND POTENTIAL) OF ANY PERSON SEEKING TO ACQUIRE CONTROL OF THE CORPORATION; AND (B) ANY OTHER PERTINENT FACTORS OR THE INTERESTS OF ANY OTHER GROUP THAT THEY DEEM APPROPRIATE; AND (3) SHALL NOT BE REQUIRED TO GIVE PRIORITY TO THE INTERESTS OF ANY PARTICULAR PERSON OR GROUP REFERRED TO IN SUBPARAGRAPHS ONE AND TWO OF THIS PARAGRAPH OVER THE INTERESTS OF ANY OTHER PERSON OR GROUP UNLESS THE BENEFIT CORPORATION HAS STATED ITS INTENTION TO GIVE PRIORITY TO INTERESTS RELATED TO A SPECIFIC PUBLIC BENEFIT PURPOSE IDENTIFIED IN ITS CERTIFICATE OF INCORPORATION. (B) THE CONSIDERATION OF INTERESTS AND FACTORS IN THE MANNER REQUIRED BY PARAGRAPH (A) OF THIS SECTION: (1) SHALL NOT CONSTITUTE A VIOLATION OF THE PROVISIONS OF SECTIONS SEVEN HUNDRED FIFTEEN OR SEVEN HUNDRED SEVENTEEN OF THIS CHAPTER; AND (2) IS IN ADDITION TO THE ABILITY OF DIRECTORS TO CONSIDER INTERESTS AND FACTORS AS PROVIDED IN SECTION SEVEN HUNDRED SEVENTEEN OF THIS CHAP- TER. (C) A DIRECTOR DOES NOT HAVE A FIDUCIARY DUTY TO A PERSON THAT IS A BENEFICIARY OF THE GENERAL OR SPECIFIC PUBLIC BENEFIT PURPOSES OF A BENEFIT CORPORATION ARISING FROM THE STATUS OF THE PERSON AS A BENEFICI- ARY, UNLESS OTHERWISE STATED IN THE CERTIFICATE OF INCORPORATION OR THE BYLAWS OF THE BENEFIT CORPORATION. S 1708. ANNUAL BENEFIT REPORT. (A) A BENEFIT CORPORATION MUST DELIVER TO EACH SHAREHOLDER AN ANNUAL BENEFIT REPORT INCLUDING: (1) A NARRATIVE DESCRIPTION OF: (A) THE PROCESS AND RATIONALE FOR SELECTING THE THIRD PARTY STANDARD USED TO PREPARE THE BENEFIT REPORT; (B) THE WAYS IN WHICH THE BENEFIT CORPORATION PURSUED GENERAL PUBLIC BENEFIT DURING THE YEAR AND THE EXTENT TO WHICH GENERAL PUBLIC BENEFIT WAS CREATED; (C) THE WAYS IN WHICH THE BENEFIT CORPORATION PURSUED ANY SPECIFIC PUBLIC BENEFIT THAT THE CERTIFICATE OF INCORPORATION STATES IT IS THE PURPOSE OF THE BENEFIT CORPORATION TO CREATE AND THE EXTENT TO WHICH THAT SPECIFIC PUBLIC BENEFIT WAS CREATED; AND (D) ANY CIRCUMSTANCES THAT HAVE HINDERED THE CREATION BY THE BENEFIT CORPORATION OF GENERAL OR SPECIFIC PUBLIC BENEFIT; (2) AN ASSESSMENT OF THE PERFORMANCE OF THE BENEFIT CORPORATION, RELA- TIVE TO ITS GENERAL PUBLIC BENEFIT PURPOSE ASSESSED AGAINST A THIRD-PAR- TY STANDARD APPLIED CONSISTENTLY WITH ANY APPLICATION OF THAT STANDARD IN PRIOR BENEFIT REPORTS OR ACCOMPANIED BY AN EXPLANATION OF THE REASONS FOR ANY INCONSISTENT APPLICATION AND, IF APPLICABLE, ASSESSMENT OF THE PERFORMANCE OF THE BENEFIT CORPORATION, RELATIVE TO ITS SPECIFIC PUBLIC BENEFIT PURPOSE OR PURPOSES; (3) THE COMPENSATION PAID BY THE BENEFIT CORPORATION DURING THE YEAR TO EACH DIRECTOR IN THAT CAPACITY; AND
(4) THE NAME OF EACH PERSON THAT OWNS BENEFICIALLY OR OF RECORD FIVE PERCENT OR MORE OF THE OUTSTANDING SHARES OF THE BENEFIT CORPORATION. (B) THE BENEFIT REPORT MUST BE SENT ANNUALLY TO EACH SHAREHOLDER WITH- IN ONE HUNDRED TWENTY DAYS FOLLOWING THE END OF THE FISCAL YEAR OF THE BENEFIT CORPORATION. DELIVERY OF A BENEFIT REPORT TO SHAREHOLDERS IS IN ADDITION TO ANY OTHER REQUIREMENT TO DELIVER AN ANNUAL REPORT TO SHARE- HOLDERS. (C) A BENEFIT CORPORATION MUST POST ITS MOST RECENT BENEFIT REPORT ON THE PUBLIC PORTION OF ITS WEBSITE, IF ANY, EXCEPT THAT THE COMPENSATION PAID TO DIRECTORS AND ANY FINANCIAL OR PROPRIETARY INFORMATION INCLUDED IN THE BENEFIT REPORT MAY BE OMITTED FROM THE BENEFIT REPORT AS POSTED. (D) CONCURRENTLY WITH THE DELIVERY OF THE BENEFIT REPORT TO SHAREHOLD- ERS PURSUANT TO PARAGRAPH (B) OF THIS SECTION, THE BENEFIT CORPORATION MUST DELIVER A COPY OF THE BENEFIT REPORT TO THE DEPARTMENT FOR FILING, EXCEPT THAT THE COMPENSATION PAID TO DIRECTORS AND ANY FINANCIAL OR PROPRIETARY INFORMATION INCLUDED IN THE BENEFIT REPORT MAY BE OMITTED FROM THE BENEFIT REPORT AS FILED UNDER THIS SECTION. (E) THE ANNUAL BENEFIT REPORT SHALL BE IN ADDITION TO ALL OTHER REPORTING REQUIREMENTS UNDER THIS CHAPTER. S 1709. CONSPICUOUS LANGUAGE ON THE FACE OF CERTIFICATES. ALL CERTIFICATES REPRESENTING SHARES OF A BENEFIT CORPORATION SHALL CONTAIN, IN ADDITION TO ANY OTHER STATEMENTS REQUIRED BY THE BUSINESS CORPORATION LAW, THE FOLLOWING CONSPICUOUS LANGUAGE ON THE FACE OF THE CERTIFICATE: "THIS ENTITY IS A BENEFIT CORPORATION ORGANIZED UNDER ARTICLE SEVEN- TEEN OF THE NEW YORK BUSINESS CORPORATION LAW." S 4. Subparagraph 1 of paragraph (a) of section 720 of the business corporation law is amended by adding a new clause (C) to read as follows: (C) 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 INCORPO- RATION; (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. S 5. This act shall take effect on the sixtieth day after it shall have become a law.

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