senate Bill S79
(D) 26th Senate District
- In Committee
- On Floor Calendar
- Passed Senate
- Passed Assembly
- Delivered to Governor
- Signed by Governor
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.
TITLE OF BILL:
to amend the
general construction law and
the business corporation law, in relation to authorizing
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
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
Section 2 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, as measured by 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
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 the director reasonably believes are in the best
interests of the benefit corporation, a director 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 director may consider any other pertinent factors or the interests
of any other group, as appropriate. In the reasonable performance of
duties in accordance with the standard provided in the bill, a
benefit corporation director retains standard personal immunity for
his or her actions as a benefit corporation director.
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 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.
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
* 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
2010: S.7855B (Passed Senate)/A.11498B
Sixtieth day after becoming law.
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