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7 LONG TITLE
8 General Description:
9 This bill enacts the Benefit Limited Liability Company Act.
10 Highlighted Provisions:
11 This bill:
12 ▸ defines terms;
13 ▸ provides for the formation of a benefit company;
14 ▸ addresses termination of a benefit company;
15 ▸ requires a benefit company to adopt a purpose of creating general public benefit;
16 ▸ establishes standards of conduct for a member, manager, or officer of a benefit
17 company;
18 ▸ creates a right of action; and
19 ▸ requires a benefit company to prepare, distribute, and make public an annual benefit
20 report.
21 Money Appropriated in this Bill:
22 None
23 Other Special Clauses:
24 None
25 Utah Code Sections Affected:
26 ENACTS:
27 48-4-101, Utah Code Annotated 1953
28 48-4-102, Utah Code Annotated 1953
29 48-4-103, Utah Code Annotated 1953
30 48-4-104, Utah Code Annotated 1953
31 48-4-105, Utah Code Annotated 1953
32 48-4-201, Utah Code Annotated 1953
33 48-4-301, Utah Code Annotated 1953
34 48-4-302, Utah Code Annotated 1953
35 48-4-303, Utah Code Annotated 1953
36 48-4-401, Utah Code Annotated 1953
37 48-4-402, Utah Code Annotated 1953
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39 Be it enacted by the Legislature of the state of Utah:
40 Section 1. Section 48-4-101 is enacted to read:
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43 48-4-101. Title.
44 This chapter is known as the "Benefit Limited Liability Company Act."
45 Section 2. Section 48-4-102 is enacted to read:
46 48-4-102. Application and effect of chapter.
47 (1) This chapter applies to a benefit company organized under this chapter.
48 (2) (a) The existence of a provision in this chapter does not itself create an implication
49 that a contrary or different rule of law is applicable to a limited liability company that is not a
50 benefit company.
51 (b) This chapter does not affect a statute or rule of law that is applicable to a limited
52 liability company that is not a benefit limited liability company.
53 (3) (a) Except as otherwise provided in this chapter, Title 48, Chapter 3a, Utah Revised
54 Uniform Limited Liability Company Act, applies to a benefit company.
55 (b) The provisions of this chapter control over any inconsistent provision of Title 48,
56 Chapter 3a, Utah Revised Uniform Limited Liability Company Act.
57 (4) The operating agreement of a benefit company may not limit, be inconsistent with,
58 or supersede a provision of this chapter.
59 Section 3. Section 48-4-103 is enacted to read:
60 48-4-103. Definitions.
61 As used in this chapter:
62 (1) "Benefit company" means a limited liability company:
63 (a) that elects to become subject to this chapter; and
64 (b) the status of which as a benefit company has not been terminated.
65 (2) "Benefit enforcement proceeding" means a proceeding in a court of competent
66 jurisdiction for:
67 (a) failure of a benefit company to pursue or create general public benefit or a specific
68 public benefit described in the benefit company's certificate of organization; or
69 (b) a violation of an obligation, duty, or standard of conduct under this chapter.
70 (3) "General public benefit" means a material positive impact on society and the
71 environment:
72 (a) taken as a whole;
73 (b) assessed against a third-party standard; and
74 (c) from the business of a benefit company.
75 (4) "Immediate family member" means a parent, spouse, surviving spouse, child, or
76 sibling.
77 (5) (a) "Independent person" means a person who has no material relationship with a
78 benefit company or a subsidiary of the benefit company.
79 (b) "Independent person" does not include a person:
80 (i) who is, or has been within the last three years, an employee of the benefit company
81 or a subsidiary of the benefit company;
82 (ii) whose immediate family member is, or has been within the last three years, an
83 executive officer of the benefit company or a subsidiary of the benefit company;
84 (iii) who owns 5% or more of the outstanding interests of the benefit company,
85 calculated as if all outstanding rights to acquire interests in the benefit company have been
86 exercised; or
87 (iv) who owns 5% or more of the outstanding interests in an entity, calculated as if all
88 outstanding rights to acquire interests in the entity have been exercised, that owns 5% or more
89 of the outstanding interests of the benefit company, calculated as if all outstanding rights to
90 acquire interests in the benefit company have been exercised.
91 (6) "Minimum status vote" means:
92 (a) in the case of a limited liability company, in addition to any other required approval
93 or vote, the satisfaction of the following conditions:
94 (i) the members of every class or series may vote as a separate voting group on an
95 action of the limited liability company regardless of a limitation state in the certificate of
96 organization or operating agreement on the voting rights of any class or series; and
97 (ii) the action of the limited liability company is required to be approved by vote of the
98 members of each class or series entitled to cast at least two-thirds of the votes that all members
99 of the class or series are entitled to cast on the action; or
100 (b) in the case of a domestic entity other than a limited liability company, in addition to
101 any other required approval, vote, or consent, the satisfaction of the following conditions:
102 (i) the holders of every class or series of interest in the entity that are entitled to receive
103 a distribution of any kind from the entity may vote on or consent to the action regardless of any
104 otherwise applicable limitation on voting or consent rights of the class or series; and
105 (ii) the action of the limited liability company is required to be approved by vote or
106 consent of the holders described in Subsection (6)(b)(i) entitled to cast at least two-thirds of the
107 votes or consents that all of those holders are entitled to cast on the action.
108 (7) "Owns" includes ownership as the owner of record or as a beneficial owner.
109 (8) "Specific public benefit" includes:
110 (a) providing low-income or underserved individuals or communities with beneficial
111 products or services;
112 (b) promoting economic opportunity for individuals or communities beyond the
113 creation of jobs in the normal course of business;
114 (c) protecting or restoring the environment;
115 (d) improving human health;
116 (e) promoting the arts, sciences, or advancement of knowledge;
117 (f) increasing the flow of capital to entities with a purpose to benefit society or the
118 environment; and
119 (g) conferring any other particular benefit on society or the environment.
120 (9) "Subsidiary" means, in relation to a person, an entity in which the person owns
121 beneficially or of record, 50% or more of the outstanding equity interests, calculated as if all
122 outstanding rights to acquire equity interests in the entity have been exercised.
123 (10) "Third-party standard" means a standard for defining, reporting, and assessing
124 overall social and environmental performance that:
125 (a) assesses the effect of a business and a business's operations on the interests
126 described in Subsections 48-4-301(1)(a)(ii) through (v);
127 (b) is developed by an entity:
128 (i) that is independent of the benefit company;
129 (ii) whose governing body is comprised of no more than one-third of members who are
130 representatives of any of the following:
131 (A) an association of businesses that operate in a specific industry whose members are
132 measured by the standard;
133 (B) businesses from a specific industry or an association of businesses in that industry;
134 or
135 (C) businesses whose performance is assessed against the standard;
136 (iii) that is not materially financed by an association or business described in
137 Subsection (10)(b)(ii);
138 (iv) that has access to necessary expertise to assess overall social and environmental
139 performance;
140 (v) uses a balanced multistakeholder approach to develop the standard, including a
141 public comment period of at least 30 days; and
142 (vi) makes the following information publically available:
143 (A) the criteria considered when measuring the overall social and environmental
144 performance of a business;
145 (B) the relative weightings, if any, of the criteria described in Subsection
146 (10)(b)(vi)(A);
147 (C) the identity of each director, officer, material owner, and governing body of the
148 entity that developed and controls revisions to the standard;
149 (D) the process by which revisions to the standard and changes to the membership of
150 the governing body are made; and
151 (E) an accounting of the revenue and sources of financial support for the entity, with
152 sufficient detail to disclose a relationship that could reasonably be considered to present a
153 potential conflict of interest.
154 Section 4. Section 48-4-104 is enacted to read:
155 48-4-104. Benefit company status.
156 (1) A person may form a benefit company in accordance with Title 48, Chapter 3a,
157 Utah Revised Uniform Limited Liability Company Act, except the certificate of organization
158 shall state that the limited liability company is a benefit company.
159 (2) (a) A limited liability company may elect to become a benefit company by
160 amending, in accordance with Section 48-3a-202, the limited liability company's certificate of
161 organization to contain a statement that the limited liability company is a benefit company.
162 (b) An amendment described in Subsection (2)(a) is not effective unless the
163 amendment is adopted by at least the minimum status vote.
164 (3) If an entity that is not a benefit company is a party to a merger or is the exchanging
165 entity in an interest exchange, and the surviving entity in the merger or interest exchange is a
166 benefit company, the merger or interest exchange is not effective unless the merger or interest
167 exchange is adopted by the entity by at least the minium status vote.
168 (4) (a) A benefit company may terminate the benefit company's status as a benefit
169 company and cease to be subject to this chapter by amending the benefit company's certificate
170 of organization in accordance with Section 48-3a-202 to delete the provision described in
171 Subsection (1) or (2) that states that the limited liability company is a benefit company.
172 (b) An amendment described in Subsection (4)(a) is not effective unless the
173 amendment is adopted by at least the minimum status vote.
174 (5) (a) If a proposed merger or interest exchange would have the effect of terminating a
175 benefit company's status as a benefit company, the merger or interest exchange is not effective
176 unless the merger or interest exchange is adopted by at least the minimum status vote.
177 (b) Unless the transaction is in the usual and regular course of the benefit company's
178 business, a sale, lease, exchange, or other disposition of all or substantially all of the assets of a
179 benefit company is not effective unless the transaction is approved by at least the minium status
180 vote.
181 Section 5. Section 48-4-105 is enacted to read:
182 48-4-105. Benefit company name.
183 (1) The name of a benefit company may contain the words "benefit limited liability
184 company," "benefit limited company," or "benefit company" or the abbreviation "B.L.L.C.,"
185 "BLLC," "B.L.C.," or "BLC." "Limited" may be abbreviated as "Ltd.," and "company" may be
186 abbreviated as "Co."
187 (2) A benefit company that complies with Subsection (1) satisfies the requirement
188 described in Subsection 48-3a-108(1).
189 Section 6. Section 48-4-201 is enacted to read:
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191 48-4-201. Company purpose.
192 (1) In addition to the benefit company's purpose under Section 48-3a-104, a benefit
193 company shall have a purpose of creating general public benefit.
194 (2) (a) A benefit company's certificate of organization may identify one or more
195 specific public benefits that are the purposes of the benefit company to create.
196 (b) Identifying a specific public benefit in accordance with Subsection (2)(a) does not
197 affect a benefit company's obligation to create general public benefit in accordance with
198 Subsection (1).
199 (3) The creation of general public benefit and one or more specific public benefits is in
200 the best interests of the benefit company.
201 (4) (a) A benefit company may amend the benefit company's certificate or organization
202 to add, amend, or delete a specific public benefit.
203 (b) An amendment described in Subsection (4)(a) is not effective unless adopted by at
204 least the minimum status vote.
205 Section 7. Section 48-4-301 is enacted to read:
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207 48-4-301. Standard of conduct for members.
208 (1) When discharging a duty under this chapter, each member of a member-managed
209 benefit company:
210 (a) shall consider the effect of any action or inaction on:
211 (i) the members of the benefit company;
212 (ii) the employees and workforce of the benefit company;
213 (iii) the interests of customers as beneficiaries of the benefit company's general public
214 benefit purpose or specific public benefit purpose of the benefit company;
215 (iv) community and societal considerations, including those of each community in
216 which offices or facilities of the benefit company or the benefit company's subsidiaries or
217 suppliers are located;
218 (v) the local and global environment;
219 (vi) the short-term and long-term interests of the benefit company, including benefits
220 that may accrue to the benefit company from the benefit company's long-term plans and the
221 possibility that the interests may be best served by the continued independence of the benefit
222 company; and
223 (vii) the ability of the benefit company to accomplish the benefit company's general
224 public benefit purpose and any specific public benefit purpose; and
225 (b) may consider other pertinent factors or the interests of any other group that the
226 member considers appropriate.
227 (2) A member is not required to prioritize the interests of a person or factor described
228 in Subsection (1)(a) or (b) over the interests of any other person or factor, unless the benefit
229 company's certificate of organization states an intention to give priority to certain interests
230 related to the benefit company's accomplishment of the benefit company's general public
231 benefit purpose or a specific public benefit purpose identified in the benefit company's
232 certificate of organization.
233 (3) A member's consideration of interests and factors in accordance with Subsections
234 (1) and (2) does not constitute a violation of Section 48-3a-409.
235 (4) A member of a member-managed limited liability company that is a benefit
236 company does not have a duty to a person who is a beneficiary of the benefit company's general
237 public benefit purpose or specific public benefit purpose arising from the person's status as a
238 beneficiary.
239 Section 8. Section 48-4-302 is enacted to read:
240 48-4-302. Standard of conduct for managers and officers.
241 (1) Each manager of a manager-managed benefit company shall consider the interests
242 and factors described in Subsections 48-4-301(1) and (2) when discharging the manager's
243 duties under this chapter and the operating agreement.
244 (2) If a benefit company has a person serving as an officer, the person shall consider
245 the interests and factors described in Subsections 48-4-301(1) and (2) when discharging the
246 person's duties under this chapter and the operating agreement if:
247 (a) the officer has discretion to act with respect to the matter; and
248 (b) it reasonably appears to the officer that the matter may have a material affect on the
249 benefit company's creation of a general public benefit or a specific public benefit identified in
250 the benefit company's certificate of organization.
251 (3) A manager's consideration of the interests and factors described in Subsections
252 48-4-301(1) and (2) does not constitute a violation of Section 48-3a-409.
253 (4) A manager or officer does not have a duty to a person who is a beneficiary of the
254 benefit company's general public benefit purpose or a specific public benefit purpose arising
255 from the person's status as a beneficiary.
256 Section 9. Section 48-4-303 is enacted to read:
257 48-4-303. Right of action.
258 (1) Except in a benefit enforcement proceeding, a person may not bring an action or
259 assert a claim against a benefit company or a benefit company's member, manager, or officer
260 with respect to:
261 (a) failure to pursue or create general public benefit or a specific public benefit set forth
262 in the benefit company's certificate of organization; or
263 (b) violation of a duty or standard of conduct under this chapter.
264 (2) A benefit company is not liable for monetary damages under this chapter for a
265 failure of the benefit company to pursue or create general public benefit or a specific public
266 benefit.
267 (3) Only the following may commence or maintain a benefit enforcement proceeding:
268 (a) the benefit company, directly; or
269 (b) one or more of the following, derivatively:
270 (i) a member that owned at least 2% of the total number of interests of a class or series
271 outstanding at the time of the act or omission complained of;
272 (ii) a manager of a manager-managed benefit company;
273 (iii) a person or group of persons who own beneficially or of record at least 5% of the
274 interests in an association of which the benefit company is a subsidiary at the time of the act or
275 omission complained of; or
276 (iv) any person or group of persons specified in the benefit company's certificate of
277 organization or operating agreement.
278 Section 10. Section 48-4-401 is enacted to read:
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280 48-4-401. Annual benefit report.
281 (1) A benefit company shall prepare an annual benefit report that includes:
282 (a) a narrative description of:
283 (i) the ways in which the benefit company pursued the benefit company's general
284 public benefit purpose during the year and the extent to which general public benefit was
285 created;
286 (ii) the ways in which the benefit company pursued any specific public benefit that the
287 benefit company's certificate of organization states is the purpose of the benefit company to
288 create and the extent to which the specific public benefit was created;
289 (iii) any circumstances that have hindered the benefit company's creation of the general
290 public benefit or any specific public benefit; and
291 (iv) the process and rationale for selecting or changing the third-party standard used to
292 prepare the benefit report;
293 (b) an assessment of the overall social and environmental performance of the benefit
294 company against a third-party standard:
295 (i) applied consistently with any application of the standard in prior benefit reports; or
296 (ii) accompanied by an explanation of the reasons for any inconsistent application; and
297 (c) any connection between the organization that established the third-party standard,
298 or the organization's directors or officers, or a holder of 5% or more of the governance interests
299 in the organization, and the benefit company or the benefit company's members, managers, or
300 officers or any holder of 5% or more of the outstanding interests in the benefit company,
301 including any financial or governance relationship that might materially affect the credibility of
302 the use of the third-party standard.
303 (2) The assessment described in Subsection (1)(b) does not need to be audited or
304 certified by a third party.
305 Section 11. Section 48-4-402 is enacted to read:
306 48-4-402. Availability of annual benefit report.
307 (1) Each year, a benefit company shall send the benefit report described in Section
308 48-4-401 to each member:
309 (a) within 120 days after the day on which the benefit company's fiscal year ends; or
310 (b) the day on which the benefit company delivers any other annual report to the
311 benefit company's members.
312 (2) (a) Within five days after the day on which a benefit company sends a benefit report
313 to each member in accordance with Subsection (1), the benefit company shall:
314 (i) subject to Subsection (2)(b), post a copy of the benefit report on a public portion of
315 the benefit company's website; and
316 (ii) deliver a copy of the benefit report to the division for filing.
317 (b) If a benefit company does not have a website, the benefit company shall provide a
318 copy of the benefit report, without charge, to any person who requests a copy.
319 (c) The benefit company may omit any financial or proprietary information from a copy
320 of a benefit report described in Subsection (2)(a) or (b).
321 (d) The division may charge a fee established by the division in accordance with
322 Section 63J-1-504 for filing an annual benefit report in accordance with this section.