senate Bill S79A

Signed By Governor
2011-2012 Legislative Session

Authorizes the incorporation of benefit corporations

download bill text pdf

Sponsored By

Archive: Last Bill Status - Signed by Governor


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed by Governor

do you support this bill?

Actions

view actions (18)
Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Dec 12, 2011 approval memo.16
signed chap.599
Nov 30, 2011 delivered to governor
Jun 17, 2011 returned to senate
passed assembly
ordered to third reading rules cal.395
substituted for a4692a
Jun 16, 2011 referred to codes
delivered to assembly
passed senate
Jun 13, 2011 advanced to third reading
Jun 07, 2011 2nd report cal.
Jun 06, 2011 1st report cal.1014
Jun 01, 2011 reported and committed to corporations, authorities and commissions
May 26, 2011 print number 79a
amend and recommit to judiciary
Apr 05, 2011 notice of committee consideration - requested
Jan 05, 2011 referred to judiciary

Votes

view votes

Jun 6, 2011 - Corporations, Authorities and Commissions committee Vote

S79A
6
0
committee
6
Aye
0
Nay
0
Aye with Reservations
0
Absent
0
Excused
0
Abstained
show Corporations, Authorities and Commissions committee vote details

Corporations, Authorities and Commissions Committee Vote: Jun 6, 2011

Jun 1, 2011 - Judiciary committee Vote

S79A
20
0
committee
20
Aye
0
Nay
2
Aye with Reservations
0
Absent
1
Excused
0
Abstained
show Judiciary committee vote details

Bill Amendments

Original
A (Active)
Original
A (Active)

Co-Sponsors

view additional co-sponsors

S79 - Bill Details

See Assembly Version of this Bill:
A4692A
Law Section:
General Construction Law
Laws Affected:
Amd §§65 & 66, Gen Con L; add Art 17 §§1701 - 1709, amd §720, BC L
Versions Introduced in 2009-2010 Legislative Session:
S7855B, A11498B

S79 - Bill Texts

view summary

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.

view sponsor memo
BILL NUMBER:S79

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 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
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 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.

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.

view full text
download pdf
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                   79

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 5, 2011
                               ___________

Introduced by Sens. SQUADRON, BRESLIN, PARKER, SERRANO -- read twice and
  ordered  printed, and when printed to be committed to the Committee on
  Judiciary

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 THAT HAS
ELECTED TO BECOME SUBJECT TO ARTICLE SEVENTEEN OF  THE  BUSINESS  CORPO-
RATION LAW AND WHOSE STATUS AS A BENEFIT CORPORATION HAS NOT BEEN TERMI-
NATED 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.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD01470-01-1

S. 79                               2

        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.
        1708. ANNUAL BENEFIT REPORT.
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 GENERALLY APPLICABLE TO ALL BENEFIT CORPORATIONS.
  (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  THAT  HAS
ELECTED  TO BECOME SUBJECT TO 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, AS MEASURED BY A THIRD-PARTY STANDARD.
  (C) "INDEPENDENT" MEANS THAT A PERSON  HAS  NO  MATERIAL  RELATIONSHIP
WITH  A  BENEFIT  CORPORATION OR ANY OF ITS SUBSIDIARIES (OTHER THAN THE
RELATIONSHIP OF SERVING AS THE BENEFIT  DIRECTOR  OR  BENEFIT  OFFICER),
EITHER DIRECTLY OR AS A SHAREHOLDER, PARTNER, MEMBER OR OTHER OWNER OR A
DIRECTOR,  OFFICER  OR  OTHER  MANAGER  OF AN ENTITY THAT HAS A MATERIAL
RELATIONSHIP WITH THE BENEFIT CORPORATION OR ANY OF ITS SUBSIDIARIES.  A
MATERIAL RELATIONSHIP BETWEEN AN INDIVIDUAL 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.
  (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 SHALL  BE  ENTITLED
TO  VOTE  ON THE CORPORATE ACTION REGARDLESS OF ANY LIMITATION STATED IN
THE CERTIFICATE OF INCORPORATION OR BYLAWS ON THE VOTING RIGHTS  OF  ANY
CLASS OR SERIES.
  (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

S. 79                               3

VOTES  THAT ALL SHAREHOLDERS OF THE CLASS OR SERIES ARE ENTITLED TO CAST
THEREON.
  (E)  "SPECIFIC PUBLIC BENEFIT," AS MEASURED BY A THIRD-PARTY STANDARD,
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.
  (G)  "THIRD-PARTY  STANDARD" MEANS A STANDARD RECOGNIZED BY THE SECRE-
TARY OF STATE OR ITS DESIGNEE OR DESIGNEES FOR DEFINING,  REPORTING  AND
ASSESSING CORPORATE SOCIAL AND ENVIRONMENTAL PERFORMANCE 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.
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  PLAN  OR  MERGER OR CONSOLIDATION WOULD HAVE THE EFFECT OF
TERMINATING THE STATUS OF A BUSINESS CORPORATION  AS  A  BENEFIT  CORPO-
RATION, THE PLAN SHALL NOT BE EFFECTIVE UNLESS IT IS ADOPTED BY AT LEAST
THE MINIMUM STATUS VOTE.

S. 79                               4

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 ARTICLES UNDER PARAGRAPH (B) OF THIS SECTION.  THE PURPOSE
TO CREATE GENERAL PUBLIC BENEFIT  MAY  BE  A  LIMITATION  ON  THE  OTHER
PURPOSES  OF  THE BENEFIT CORPORATION, AND SHALL CONTROL OVER ANY INCON-
SISTENT PURPOSE OF THE BENEFIT CORPORATION.
  (B) THE ARTICLES OF A BENEFIT CORPORATION MAY  IDENTIFY  ONE  OR  MORE
SPECIFIC  PUBLIC  BENEFITS  THAT IT IS THE PURPOSE OF THE BENEFIT CORPO-
RATION TO CREATE IN ADDITION TO ITS PURPOSES UNDER SECTION  TWO  HUNDRED
ONE OF THIS CHAPTER AND PARAGRAPH (A) OF THIS SECTION.
  (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.
  (A) IN DISCHARGING THE DUTIES OF THEIR RESPECTIVE POSITIONS, THE BOARD
OF DIRECTORS, COMMITTEES OF THE BOARD  AND  INDIVIDUAL  DIRECTORS  OF  A
BENEFIT CORPORATION:
  (1) SHALL CONSIDER THE EFFECTS OF ANY ACTION UPON:
  (A)  THE  ABILITY FOR THE BENEFIT CORPORATION TO ACCOMPLISH ITS 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 SECTION
SEVEN HUNDRED SEVENTEEN OF THIS CHAPTER; AND

S. 79                               5

  (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) NOTWITHSTANDING THE PROVISIONS OF PARAGRAPH (B) OF THIS SECTION, A
DIRECTOR OF A BENEFIT CORPORATION HAS THE FIDUCIARY DUTIES OF A DIRECTOR
OF  A  BUSINESS  CORPORATION THAT IS NOT A BENEFIT CORPORATION EXCEPT TO
THE EXTENT THOSE DUTIES ARE INCONSISTENT WITH  THE  PROVISIONS  OF  THIS
ARTICLE.
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 WAYS IN WHICH THE BENEFIT CORPORATION PURSUED  GENERAL  PUBLIC
BENEFIT  DURING  THE YEAR AND THE EXTENT TO WHICH GENERAL PUBLIC BENEFIT
WAS CREATED;
  (B) 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
  (C)  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  AND,  IF  APPLICABLE,  ITS
SPECIFIC PUBLIC BENEFIT PURPOSE OR PURPOSES, PREPARED IN ACCORDANCE WITH
A THIRD-PARTY 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;
  (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  OR  AT  THE SAME TIME THAT THE BENEFIT CORPORATION
DELIVERS ANY OTHER ANNUAL REPORT TO ITS SHAREHOLDERS.    DELIVERY  OF  A
BENEFIT  REPORT  TO SHAREHOLDERS IS IN ADDITION TO ANY OTHER REQUIREMENT
TO DELIVER AN ANNUAL REPORT TO SHAREHOLDERS.
  (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) IF A BENEFIT CORPORATION HAS NOT DELIVERED A BENEFIT REPORT TO THE
SECRETARY OF STATE FOR A PERIOD OF TWO YEARS, THE SECRETARY OF STATE MAY
PREPARE  AND  FILE  A  STATEMENT  THAT THE CORPORATION HAS FORFEITED ITS
STATUS AS A BENEFIT CORPORATION AND IS NO LONGER SUBJECT TO  THIS  ARTI-
CLE.  IF  THE  CORPORATION SUBSEQUENTLY DELIVERS A BENEFIT REPORT TO THE
SECRETARY OF STATE FOR FILING, THE STATUS OF THE CORPORATION AS A  BENE-
FIT CORPORATION SHALL BE AUTOMATICALLY REINSTATED UPON THE FILING OF THE
BENEFIT REPORT BY THE SECRETARY OF STATE AND THE CORPORATION SHALL AGAIN
BE SUBJECT TO THIS ARTICLE.

S. 79                               6

  (F)  THE  ANNUAL  BENEFIT  REPORT  SHALL  BE  IN ADDITION TO ALL OTHER
REPORTING REQUIREMENTS UNDER THIS CHAPTER.
  S  4.  This  act  shall take effect on the sixtieth day after it shall
have become a law.

Co-Sponsors

view additional co-sponsors

S79A (ACTIVE) - Bill Details

See Assembly Version of this Bill:
A4692A
Law Section:
General Construction Law
Laws Affected:
Amd §§65 & 66, Gen Con L; add Art 17 §§1701 - 1709, amd §720, BC L
Versions Introduced in 2009-2010 Legislative Session:
S7855B, A11498B

S79A (ACTIVE) - Bill Texts

view summary

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.

view sponsor 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.

view full text
download pdf
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  79--A

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                               (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.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD01470-02-1

S. 79--A                            2

        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

S. 79--A                            3

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-

S. 79--A                            4

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;

S. 79--A                            5

  (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

S. 79--A                            6

  (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.

Comments

Open Legislation comments facilitate discussion of New York State legislation. All comments are subject to moderation. Comments deemed off-topic, commercial, campaign-related, self-promotional; or that contain profanity or hate speech; or that link to sites outside of the nysenate.gov domain are not permitted, and will not be published. Comment moderation is generally performed Monday through Friday.

By contributing or voting you agree to the Terms of Participation and verify you are over 13.