1     
BENEFIT CORPORATIONS AMENDMENTS

2     
2015 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Keven J. Stratton

5     
Senate Sponsor: Curtis S. Bramble

6     

7     LONG TITLE
8     General Description:
9          This bill modifies benefit corporations amendments.
10     Highlighted Provisions:
11          This bill:
12          ▸     corrects the definition of "minimum status vote";
13          ▸     requires annual benefit reports to be filed with the Division of Corporations and
14     Commercial Code at the same time the corporation files the annual report with the
15     Division of Corporations and Commercial Code; and
16          ▸     makes technical changes.
17     Money Appropriated in this Bill:
18          None
19     Other Special Clauses:
20          None
21     Utah Code Sections Affected:
22     AMENDS:
23          16-10b-103, as enacted by Laws of Utah 2014, Chapter 394
24          16-10b-402, as enacted by Laws of Utah 2014, Chapter 394
25     

26     Be it enacted by the Legislature of the state of Utah:
27          Section 1. Section 16-10b-103 is amended to read:

28          16-10b-103. Definitions.
29          As used in this chapter:
30          (1) "Annual benefit report" means a report required under Section 16-10b-401.
31          (2) "Benefit corporation" means a business corporation:
32          (a) that elects to become subject to this chapter; and
33          (b) the status of which as a benefit corporation has not been terminated.
34          (3) "Benefit director" means the director designated as the benefit director of a benefit
35     corporation under Section 16-10b-302.
36          (4) "Benefit enforcement proceeding" means a proceeding in a court of competent
37     jurisdiction for:
38          (a) failure of a benefit corporation to pursue or create general public benefit or a
39     specific public benefit purpose set forth in its articles of incorporation; or
40          (b) a violation of an obligation, duty, or standard of conduct under this chapter.
41          (5) "Benefit officer" means the individual designated as the benefit officer of a benefit
42     corporation under Section 16-10b-304.
43          (6) "Business corporation" means a corporation formed under Chapter 10a, Utah
44     Revised Business Corporation Act, or Chapter 11, Professional Corporation Act.
45          (7) "Division" means the Division of Corporations and Commercial Code.
46          (8) "Executive officer" means:
47          (a) a benefit corporation's president;
48          (b) a vice president of the benefit corporation in charge of a principal business unit,
49     division, or function; or
50          (c) any other officer who performs a policy-making function for the benefit
51     corporation.
52          (9) "General public benefit" means a material positive impact on society and the
53     environment:
54          (a) taken as a whole;
55          (b) assessed against a third-party standard; and
56          (c) from the business of a benefit corporation.
57          (10) "Immediate family" means a parent, spouse, surviving spouse, child, or sibling of
58     a person.

59          (11) (a) "Independent" means having no material relationship with a benefit
60     corporation or a subsidiary of the benefit corporation.
61          (b) Serving as a benefit director or benefit officer does not make an individual not
62     independent.
63          (c) A material relationship between an individual and a benefit corporation or any of its
64     subsidiaries will be conclusively presumed to exist if one or more of the following apply:
65          (i) the individual is, or has been within the last three years, an employee other than a
66     benefit officer of the benefit corporation or a subsidiary of the benefit corporation;
67          (ii) an immediate family member of the individual is, or has been within the last three
68     years, an executive officer other than a benefit officer of the benefit corporation or a subsidiary
69     of the benefit corporation; or
70          (iii) there is beneficial or record ownership of 5% or more of the outstanding shares of
71     the benefit corporation, calculated as if all outstanding rights to acquire equity interests in the
72     benefit corporation had been exercised, by:
73          (A) the individual; or
74          (B) an entity of which the individual is a director, an officer, or a manager, or in which
75     the individual owns beneficially or of record 5% or more of the outstanding equity interests,
76     calculated as if all outstanding rights to acquire equity interests in the entity had been
77     exercised.
78          (12) "Minimum status vote" means:
79          (a) in the case of a business corporation, in addition to any other required approval or
80     vote, the satisfaction of the following conditions:
81          (i) the shareholders of every class or series may vote as a separate voting group on the
82     corporate action regardless of a limitation stated in the articles of incorporation or bylaws on
83     the voting rights of a class or series; [or] and
84          (ii) the corporate action is required to be approved by vote of the shareholders of each
85     class or series entitled to cast at least two-thirds of the votes that all shareholders of the class or
86     series are entitled to cast on the action; or
87          (b) in the case of a domestic entity other than a business corporation, in addition to any
88     other required approval, vote, or consent, the satisfaction of the following conditions:
89          (i) the holders of every class or series of equity interest in the entity that are entitled to

90     receive a distribution of any kind from the entity may vote on or consent to the action
91     regardless of any otherwise applicable limitation on the voting or consent rights of a class or
92     series; [or] and
93          (ii) the action must be approved by vote or consent of the holders described in
94     Subsection (12)(b)(i) entitled to cast at least two-thirds of the votes or consents that all of those
95     holders are entitled to cast on the action.
96          (13) "Publicly traded corporation" means a business corporation that has shares listed
97     on a national securities exchange or traded in a market maintained by one or more members of
98     a national securities association.
99          (14) "Specific public benefit" includes:
100          (a) providing low-income or underserved individuals or communities with beneficial
101     products or services;
102          (b) promoting economic opportunity for individuals or communities beyond the
103     creation of jobs in the normal course of business;
104          (c) protecting or restoring the environment;
105          (d) improving human health;
106          (e) promoting the arts, sciences, or advancement of knowledge;
107          (f) increasing the flow of capital to entities with a purpose to benefit society or the
108     environment; and
109          (g) conferring any other particular benefit on society or the environment.
110          (15) "Subsidiary" means, in relation to a person, an entity in which the person owns
111     beneficially or of record 50% or more of the outstanding equity interests, calculated as if all
112     outstanding rights to acquire equity interests in the entity had been exercised.
113          (16) "Third-party standard" means a recognized standard for defining, reporting, and
114     assessing corporate social and environmental performance that:
115          (a) assesses the effect of the business and its operations upon the interests listed in
116     Subsections 16-10b-301(1)(a)(ii), (iii), (iv), and (v);
117          (b) is developed by an entity that is not controlled by the benefit corporation;
118          (c) is developed by an entity that both:
119          (i) has access to necessary expertise to assess overall corporate social and
120     environmental performance; and

121          (ii) uses a balanced multistakeholder approach to develop the standard, including a
122     reasonable public comment period; or
123          (d) makes the following information publicly available:
124          (i) about the standard:
125          (A) the criteria considered when measuring the overall social and environmental
126     performance of a business; and
127          (B) the relative weightings, if any, of those criteria; and
128          (ii) about the development and revision of the standard:
129          (A) the identity of the directors, officers, material owners, and the governing body of
130     the entity that developed and controls revisions to the standard;
131          (B) the process by which revisions to the standard and changes to the membership of
132     the governing body are made; or
133          (C) an accounting of the revenue and sources of financial support for the entity, with
134     sufficient detail to disclose a relationship that could reasonably be considered to present a
135     potential conflict of interest.
136          Section 2. Section 16-10b-402 is amended to read:
137          16-10b-402. Availability of annual benefit report.
138          (1) A benefit corporation shall send its annual benefit report required by Section
139     16-10b-401 to each shareholder on the earlier of:
140          (a) 120 days following the end of the fiscal year of the benefit corporation; or
141          (b) the same time that the benefit corporation delivers another annual report to its
142     shareholders.
143          (2) A benefit corporation shall post all of its annual benefit reports on the public
144     portion of its Internet website, if any, but financial or proprietary information included in the
145     annual benefit reports may be omitted from the annual benefit reports as posted.
146          (3) If a benefit corporation does not have an Internet website, the benefit corporation
147     shall provide a copy of its most recent annual benefit report, without charge, to a person that
148     requests a copy, but financial or proprietary information included in the annual benefit report
149     may be omitted from the copy of the benefit report provided.
150          (4) (a) [Concurrently with the delivery of the benefit report to shareholders under
151     Subsection (2),] At the same time that the benefit corporation files its annual report with the

152     division in accordance with Section 16-10a-1607, the benefit corporation shall deliver [a] the
153     most recent copy of the annual benefit report to the division for filing, but financial or
154     proprietary information included in the annual benefit report may be omitted from the annual
155     benefit report as delivered to the division.
156          (b) The division shall charge a fee established by the division in accordance with
157     Section 63J-1-504 for filing an annual benefit report.
158          (c) The benefit corporation shall file the annual benefit report in addition to the annual
159     report required by Section [16-10a-1603] 16-10a-1607.






Legislative Review Note
     as of 12-2-14 10:11 AM


Office of Legislative Research and General Counsel