HF 2582

as introduced - 88th Legislature (2013 - 2014) Posted on 03/03/2014 02:51pm

A bill for an act
relating to corporations; providing for the organization and operation of public
benefit corporations; proposing coding for new law as Minnesota Statutes,
chapter 304A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

[304A.001] CITATION.

This chapter may be cited as the "Minnesota Public Benefit Corporation Act."

APPLICATION

Sec. 2.

[304A.011] APPLICATION AND EFFECT OF CHAPTER.

Subdivision 1.

General rule.

This chapter applies to all public benefit corporations.

Subd. 2.

Laws applicable.

Chapter 302A applies to all public benefit corporations
and all statutes and rules of law that apply to a corporation formed under chapter 302A
also apply to a public benefit corporation. If chapter 302A conflicts with sections
304A.001 to 304A.301, sections 304A.001 to 304A.301 govern. The chapter does not
affect a statute or rule of law that applies to a corporation formed under chapter 302A that
is not a public benefit corporation.

Subd. 3.

Articles; bylaws.

A provision of the articles, shareholder control
agreement, or bylaws of a public benefit corporation may not limit, be inconsistent with,
or supersede a provision of this chapter.

Sec. 3.

[304A.021] DEFINITIONS.

Subdivision 1.

Terms.

For the purposes of this chapter, unless the language or
context clearly indicates that a different meaning is intended, the words, terms, and
phrases defined in this section have the meanings given them.

Subd. 2.

General benefit corporation.

"General benefit corporation" means a
public benefit corporation that elects in its articles to pursue general public benefit and that
may state in its articles a specific public benefit purpose it elects to pursue.

Subd. 3.

General public benefit.

"General public benefit" means a net material
positive impact from the business and operations of a general benefit corporation on
society, the environment, and the well-being of present and future generations.

Subd. 4.

Independent.

"Independent" means having no material relationship
with a public benefit corporation or a parent, a subsidiary, or other affiliate of a public
benefit corporation.

Subd. 5.

Minimum status vote.

"Minimum status vote" means that the shareholders
shall take action by the affirmative vote of the holders of at least two-thirds of all of
the issued and outstanding shares.

Subd. 6.

Organization.

"Organization" means a domestic or foreign business or
nonprofit corporation, limited liability company, whether domestic or foreign, partnership,
limited partnership, joint venture, association, trust, estate, enterprise, or other legal or
commercial entity.

Subd. 7.

Public benefit corporation.

"Public benefit corporation" means a
corporation formed under chapter 302A:

(1) that has elected to become subject to this chapter; and

(2) whose status as a public benefit corporation has not been terminated or revoked.

Subd. 8.

Specific benefit corporation.

"Specific benefit corporation" means a
public benefit corporation that states in its articles a specific public benefit purpose it elects
to pursue, but does not include a general benefit corporation that states in its articles a
specific public benefit purpose it elects to pursue.

Subd. 9.

Specific public benefit.

"Specific public benefit" means one or more
positive impacts, or reduction of a negative impact, on specified categories of natural
persons, entities, communities, or interests, other than shareholders in their capacity as
shareholders, as enumerated in the articles of a public benefit corporation.

Subd. 10.

Third-party standard.

"Third-party standard" means:

(1) a publicly available standard or guideline for defining, reporting, and assessing
the performance of a business enterprise as a social or benefit corporation;

(2) promulgated by a natural person or an organization; and

(3) that is independent of the public benefit corporation.

INCORPORATION

Sec. 4.

[304A.101] PUBLIC BENEFIT CORPORATION PURPOSES.

Subdivision 1.

General benefit corporation purpose.

A general benefit corporation
has a purpose of pursuing general public benefit. A general benefit corporation may
also state in its articles one or more specific public benefit purposes the general benefit
corporation elects to pursue. Purposes under these subdivisions are in addition to the
purposes under section 302A.101.

Subd. 2.

Specific benefit corporation purpose.

A specific benefit corporation shall
have a purpose of pursuing one or more specific public benefit purposes stated in its articles.
Purposes under this subdivision are in addition to the purposes under section 302A.101.
The election to pursue a specific public benefit purpose under this subdivision does not
require a specific benefit corporation to pursue general public benefit under subdivision 1.

Subd. 3.

Effect of purposes.

The pursuit of general public benefit or a specific
public benefit purpose under subdivision 1, or a specific public benefit purpose under
subdivision 2, is in the best interests of a public benefit corporation.

Subd. 4.

Amendment of a specific public benefit purpose.

In accordance with
the procedures stated in chapter 302A and with approval by the minimum status vote, a
general benefit corporation or a specific benefit corporation may amend its articles to add,
amend, or delete a specific public benefit purpose unless the amendment would cause a
termination of public benefit corporation status under section 304A.104.

Sec. 5.

[304A.102] INCORPORATION OF A PUBLIC BENEFIT
CORPORATION.

Subdivision 1.

Incorporation.

A public benefit corporation must be incorporated
in accordance with chapter 302A, and its articles must also state that the public benefit
corporation is a:

(1) general benefit corporation;

(2) general benefit corporation that also elects to pursue a specific public benefit
purpose as stated in its articles; or

(3) a specific benefit corporation that elects to pursue a specific public benefit
purpose as stated in its articles.

Subd. 2.

Name requirements.

A public benefit corporation name must comply
with the requirements of section 302A.115 other than subdivision 1, paragraph (b), and
with respect to:

(1) a general benefit corporation, contain the words "general benefit corporation,"
or the abbreviation "GBC;" and

(2) a specific benefit corporation, contain the words "specific benefit corporation," or
the abbreviation "SBC."

Sec. 6.

[304A.103] ELECTION OF PUBLIC BENEFIT CORPORATION
STATUS.

Subdivision 1.

By amendment.

In accordance with the procedures stated in chapter
302A and with approval by the minimum status vote, an existing corporation formed
under chapter 302A may elect to become a public benefit corporation under this chapter
by amending its articles to meet the requirements of section 304A.102.

Subd. 2.

By merger, exchange, conversion, or transfer.

(a) This subdivision
applies if:

(1) an organization, other than a nonprofit corporation, that is not a public benefit
corporation is a party to a merger, exchange, or conversion, or a transfer in accordance
with section 302A.601; and

(2) the surviving organization in the merger, the acquiring organization in an
exchange, the converted organization in the conversion, or the transferee is to be a public
benefit corporation.

(b) If this subdivision applies, the transfer or the plan of merger, exchange, or
conversion, must be adopted in accordance with the procedures stated in chapter 302A
and with approval by the minimum status vote.

Subd. 3.

Rights of dissenting shareholders.

A shareholder of a corporation or the
member of a limited liability company may dissent from, and obtain payment for the
fair value of the shareholder's shares or the member's membership interests pursuant to
sections 302A.471 and 302A.473, or section 322B.383 or 322B.386, in the event of an
election of public benefit corporation status pursuant to this section.

Sec. 7.

[304A.104] TERMINATION OF PUBLIC BENEFIT CORPORATION
STATUS.

Subdivision 1.

By amendment.

In accordance with the procedures stated in chapter
302A and with approval by the minimum status vote, a public benefit corporation may
terminate its status as a public benefit corporation and cease to be subject to this chapter by
amending its articles to delete the requirements of section 304A.102, subdivision 1, and
change its name to remove the information required by section 304A.102, subdivision 2.

Subd. 2.

Merger, exchange, conversion, or transfer.

If a merger, exchange,
conversion, or transfer would have the effect of terminating the status of a public benefit
corporation under this chapter, the transfer or the plan of merger, exchange, or conversion
must be approved by the minimum status vote.

Subd. 3.

Rights of dissenting shareholders.

A shareholder of a public benefit
corporation may dissent from, and obtain payment for the fair value of the shareholder's
shares pursuant to sections 302A.471 and 302A.473 in the event of a termination of public
benefit corporation status pursuant to this section.

Subd. 4.

Effects of termination.

A public benefit corporation that terminates its
status, or has its status revoked more than once pursuant to section 304A.301, subdivision
5, may not elect to become a public benefit corporation under this chapter until three years
have passed since the effective date of termination or revocation.

ACCOUNTABILITY

Sec. 8.

[304A.201] STANDARD OF CONDUCT FOR DIRECTORS.

Subdivision 1.

Considerations for a general benefit corporation.

In discharging
the duties of the position of director of a general benefit corporation, a director:

(1) shall consider the effects of any proposed, contemplated, or actual conduct on:

(i) the general benefit corporation's ability to produce general public benefit;

(ii) if the articles also state a specific public benefit purpose, the general benefit
corporation's ability to produce that specific public benefit; and

(iii) the interests of the constituencies stated in section 302A.251, subdivision 5,
including the pecuniary interests of its shareholders; and

(2) may not give regular, presumptive, or permanent priority to:

(i) the pecuniary interests of the shareholders; or

(ii) any other interest or consideration unless the articles identify the interest or
consideration as having priority.

Subd. 2.

Considerations for a specific benefit corporation.

In discharging the
duties of the position of director of a specific benefit corporation, a director:

(1) shall consider the effects of any proposed, contemplated, or actual conduct on:

(i) the pecuniary interest of its shareholders; and

(ii) the specific benefit corporation's ability to pursue its specific public benefit
purpose;

(2) may consider the interests of the constituencies stated in section 302A.251,
subdivision 5; and

(3) may not give regular, presumptive, or permanent priority to:

(i) the pecuniary interests of the shareholders; or

(ii) any other interest or consideration unless the articles identify the interest or
consideration as having priority.

Subd. 3.

Liability.

A director who performs the duties of a director stated in
subdivisions 1 and 2 is not liable by reason of being or having been a director of a public
benefit corporation.

Subd. 4.

Other applicable law.

The conduct and liability of a director of a public
benefit corporation is subject to section 302A.251, subdivisions 1, 2, 3, and 4.

Subd. 5.

Duty of loyalty.

The articles of a public benefit corporation may include a
provision that any disinterested failure to satisfy subdivision 1 or 2 of this section shall
not, for purposes of this section or section 302A.251, subdivision 4, constitute a breach of
the duty of loyalty.

Sec. 9.

[304A.202] RIGHT OF ACTION.

Subdivision 1.

Standing and grounds for claims.

(a) No person other than a
shareholder may assert a claim under this chapter or chapter 302A against a public benefit
corporation, its directors, or its officers on account of the public benefit corporation's
director's or officer's failure to pursue or create general public benefit or a specific public
benefit.

(b) A public benefit corporation is not liable for monetary damages under this
chapter for any failure of the public benefit corporation to pursue or create general public
benefit or a specific public benefit.

Subd. 2.

Grounds for relief.

In addition to the grounds for relief stated in section
302A.751, subdivision 1, paragraph (b), a court may grant relief under this chapter when:

(1) directors or those in control of a public benefit corporation have breached the
duties stated in section 304A.201 to a substantial extent and in a sustained manner; or

(2) the public benefit corporation has for an unreasonably long period of time failed
to pursue:

(i) in the case of a general benefit corporation:

(A) general public benefit; or

(B) any specific public benefit purpose stated in its articles; and

(ii) in the case of a specific benefit corporation, any specific public benefit purpose
stated in its articles.

Subd. 3.

Particular relief available.

(a) In an action under this chapter, in
addition to granting any other equitable relief the court deems just and reasonable in
the circumstances, the court may:

(1) order the public benefit corporation to terminate its status as a public benefit
corporation pursuant to section 304A.104, subdivision 1;

(2) remove one or more directors from the public benefit corporation's board of
directors and determine whether the vacancy will be filled:

(i) as provided in section 302A.225; or

(ii) by court appointment, with the appointee to serve only until a qualified successor
is elected by the shareholders at the next regular or special meeting of the shareholders;

(3) appoint a receiver of the public benefit corporation to:

(i) wind up and liquidate the activities and business of the public benefit corporation;
or

(ii) carry on the business and activities of the public benefit corporation in a manner
consistent with this chapter.

(b) Paragraph (a) does not imply any limitations on the relief available in a
proceeding brought under section 302A.751 without reference to this chapter.

TRANSPARENCY

Sec. 10.

[304A.301] ANNUAL BENEFIT REPORT.

Subdivision 1.

Report required.

No later than 90 days after the conclusion of each
calendar year, a public benefit corporation must deliver to the secretary of state for filing
an annual benefit report covering the 12-month period ending on December 31 of that year
and pay a fee of $35 to the secretary of state. The annual benefit report must state the
name of the public benefit corporation, be signed by the public benefit corporation's chief
executive officer not more than 30 days before the report is delivered to the secretary of
state for filing, and must be current when signed.

Subd. 2.

Annual benefit report for a specific benefit corporation.

For a specific
benefit corporation, the annual benefit report must contain:

(1) with regard to the period covered by the report, a narrative description of:

(i) the ways in which the corporation pursued and created the specific public benefit
purpose stated in its articles;

(ii) the extent to which that specific public benefit purpose was pursued and created;
and

(iii) any circumstances that hindered efforts to pursue or create the specific public
benefit; and

(2) a certification that its board of directors has reviewed and approved the report.

Subd. 3.

Annual benefit report for a general benefit corporation.

The annual
benefit report of a general benefit corporation must:

(1) certify that its board of directors has:

(i) chosen the third-party standard designated pursuant to clause (2), item (i);

(ii) determined that the organization that promulgated the third-party standard
is independent; and

(iii) approved the report;

(2) with regard to the period covered by the report:

(i) identify a third-party standard determined by the board; and

(ii) with reference to that third-party standard, describe:

(A) how the corporation has pursued general public benefit;

(B) the extent to which and the ways in which the corporation has created general
public benefit; and

(C) any circumstances that hindered efforts to create general public benefit;

(3) if the report is the first delivered for filing by the general benefit corporation,
explain how and why the board chose the third-party standard identified under clause (2),
item (i);

(4) if the third-party standard identified under clause (2), item (i), is the same
third-party standard identified in the immediately prior report:

(i) state whether the third-party standard is being applied in a manner consistent with
the third-party standard's application in the prior reports; and

(ii) if the third-party standard is not being so applied in a consistent manner, explain
why;

(5) if the third-party standard identified under clause (2), item (i), is not the same as
the third-party standard identified in the immediately prior report, explain how and why
the board chose a different third-party standard; and

(6) if the general benefit corporation has also stated a specific public benefit purpose
in its articles, the information required in subdivision 2, clause (1).

Subd. 4.

Audit not required.

A public benefit corporation is not required to have
its annual benefit report audited, certified, or otherwise evaluated by a third party.

Subd. 5.

Failure to file an annual benefit report.

If a public benefit corporation
fails to file an annual benefit report in accordance with this section within 90 days of
the date on which an annual benefit report is due, the secretary of state shall revoke the
corporation's status as a public benefit corporation under this chapter and must notify
the public benefit corporation of the revocation using the information provided by the
corporation pursuant to section 5.002 or 5.34 or provided in the articles.

Subd. 6.

Effects of revocation; reinstatement.

(a) A public benefit corporation
that has lost its public benefit corporation status for failure to timely file an annual benefit
report is not entitled to the benefits afforded to a public benefit corporation under this
chapter as of the date of revocation.

(b) Within 30 days of issuance of revocation of public benefit corporation status by
the secretary of state, filing a renewal complying with this section and a $500 fee with
the secretary of state will reinstate the corporation as a public benefit corporation under
this chapter as of the date of revocation.

Subd. 7.

Intentional failure to file an annual benefit report.

A shareholder of the
public benefit corporation may obtain payment for the fair value of the shareholder's shares
pursuant to section 302A.473 as a result of revocation of public benefit corporation status
pursuant to this section caused by the intentional failure to file an annual benefit report.