98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
SB2358

 

Introduced 2/15/2013, by Sen. Heather A. Steans

 

SYNOPSIS AS INTRODUCED:
 
New Act

    Creates the Benefit Limited Liability Company Act. Provides that a limited liability company may become a benefit limited liability company for public benefit and other purposes. Defines key terms and contains accountability and transparency provisions.


LRB098 06644 JLS 36688 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1    AN ACT concerning business.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4
Article 1.
5
General Provisions

 
6    Section 1-1. Short title. This Act may be cited as the
7Benefit Limited Liability Company Act.
 
8    Section 1-5. Application and effect of the Act.
9    (a) This Act applies to all benefit liability companies.
10    (b) The existence of a provision of this Act shall not of
11itself create an implication that a contrary or different rule
12of law is applicable to a limited liability company that is not
13a benefit limited liability company. This Act shall not affect
14a statute or rule of law that is applicable to a limited
15liability company that is not a benefit limited liability
16company.
17    (c) The Limited Liability Company Act applies to benefit
18limited liability companies, including their organization, and
19they shall enjoy the powers and privileges and be subject to
20the duties, restrictions, and liabilities of other limited
21liability companies, except so far as provided by this Act. If
22any provision of this Act conflicts with the Limited Liability

 

 

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1Company Act, this Act takes precedence.
2    (d) A provision of the articles of organization or
3operating agreement of a benefit limited liability company may
4not relax, be inconsistent with, or supersede a provision of
5this Act.
 
6    Section 1-10. Definitions. As used in this Act, unless the
7context otherwise requires, the words and phrases defined in
8this Section shall have the meanings set forth herein.
9    "Benefit limited liability company" means a limited
10liability company organized under the Limited Liability
11Company Act:
12        (1) that has elected to become subject to this Act; and
13        (2) whose status as a benefit limited liability company
14    has not been terminated under Section 2-10.
15    "Benefit enforcement proceeding" means a claim or action
16for:
17        (1) the failure of a benefit limited liability company
18    to pursue or create general public benefit or a specific
19    public benefit set forth in its articles of organization;
20    or
21        (2) a violation of an obligation, duty, or standard of
22    conduct under this Act.
23    "General public benefit" means a material positive impact
24on society and the environment, taken as a whole, assessed
25against a third-party standard, from the business and

 

 

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1operations of a benefit limited liability company.
2    "Minimum status vote" means that, in addition to any (i)
3other approval, vote, or consent required by the statutory law
4that principally governs the internal affairs of the limited
5liability company, (ii) provision of the publicly filed record
6or document required to form the limited liability company, or
7(iii) agreement binding on some or all of the holders of equity
8interests in the limited liability company, the holders of
9every class or series of equity interest in the limited
10liability company that are entitled to receive a distribution
11of any kind from the limited liability company shall be
12entitled to vote on or consent to the action regardless of any
13otherwise applicable limitation on the voting or consent rights
14of any class or series and the action must be approved by a
15vote or consent of at least two-thirds of those holders.
16    "Specific public benefit" means:
17        (1) providing low-income or underserved individuals or
18    communities with beneficial products or services;
19        (2) promoting economic opportunity for individuals or
20    communities beyond the creation of jobs in the ordinary
21    course of business;
22        (3) preserving the environment;
23        (4) improving human health;
24        (5) promoting the arts, sciences, or advancement of
25    knowledge;
26        (6) increasing the flow of capital to entities with a

 

 

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1    public benefit purpose; or
2        (7) the accomplishment of any other particular benefit
3    for society or the environment.
4    "Subsidiary" of a person means an entity in which the
5person owns beneficially or of record 50% or more of the
6outstanding equity interests. For the purposes of this
7definition, a percentage of ownership in an entity shall be
8calculated as if all outstanding rights to acquire equity
9interests in the entity have been exercised.
10    "Third-party standard" means a standard for defining,
11reporting, and assessing overall corporate, social, and
12environmental performance that:
13        (1) is a comprehensive assessment of the impact of the
14    business and the business' operations upon the
15    considerations listed in subdivisions (a)(1)(B) through
16    (a)(1)(E) of Section 4-1;
17        (2) is developed by an entity that has no material
18    financial relationship with the benefit corporation or any
19    of its subsidiaries;
20        (3) is developed by an entity that is not materially
21    financed by any of the following organizations and not more
22    than one-third of the members of the governing body of the
23    entity are representatives of:
24            (A) associations of businesses operating in a
25        specific industry, the performance of whose members is
26        measured by the standard;

 

 

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1            (B) businesses from a specific industry or an
2        association of businesses in that industry; or
3            (C) businesses whose performance is assessed
4        against the standard;
5        (4) is developed by an entity that:
6            (A) accesses necessary and appropriate expertise
7        to assess overall corporate social and environmental
8        performance; and
9            (B) uses a balanced multi-stakeholder approach,
10        including a public comment period of at least 30 days
11        to develop the standard; and
12        (5) makes the following information regarding the
13    standard publicly available:
14            (A) the factors considered when measuring the
15        overall social and environmental performance of a
16        business and the relative weight, if any, given to each
17        of those factors;
18            (B) the identity of the directors, officers, any
19        material owners, and the governing body of the entity
20        that developed, and controls revisions to, the
21        standard, and the process by which revisions to the
22        standard and changes to the membership of the governing
23        body are made; and
24            (C) an accounting of the sources of financial
25        support for the entity, with sufficient detail to
26        disclose any relationships that could reasonably be

 

 

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1        considered to present a potential conflict of
2        interest.
 
3    Section 1-15. Application to low-profit limited liability
4companies. Nothing contained in this Act prohibits a benefit
5limited liability company from also being or becoming a
6low-profit limited liability company while remaining a benefit
7limited liability company if the benefit limited liability
8company satisfies the requirements for low-profit limited
9liability companies under the Limited Liability Company Act.
 
10
Article 2.
11
Formation of Benefit Limited Liability Companies

 
12    Section 2-1. Formation of benefit limited liability
13companies. A benefit limited liability company must be formed
14in accordance with Article 5 of the Limited Liability Company
15Act. In addition to the formation requirements of that Act, the
16articles of organization of a benefit limited liability company
17must state that it is a benefit limited liability company in
18accordance with the provisions of this Article.
 
19    Section 2-5. Election of status.
20    (a) A limited liability company may become a benefit
21limited liability company under this Act by amending its
22articles of organization so that they contain a statement that

 

 

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1the limited liability company is a benefit limited liability
2company. In order to be effective, the amendment must be
3adopted by at least the minimum status vote.
4    (b) For any entity that is a party to a merger or
5consolidation or is the exchanging entity in a share exchange,
6where the surviving, new, or resulting entity in the merger,
7consolidation, or share exchange is intended to be a benefit
8limited liability company, the plan of merger, consolidation,
9or share exchange must be adopted by at least the minimum
10status vote in order to be effective.
 
11    Section 2-10. Termination of status.
12    (a) A benefit limited liability company may terminate its
13status as such and cease to be subject to this Act by amending
14its articles of organization to remove the statement that the
15limited liability company is a benefit limited liability
16company. In order to be effective, the amendment must be
17adopted by at least the minimum status vote.
18    (b) If a plan of merger, conversion, or share exchange
19would have the effect of terminating the status of a limited
20liability company as a benefit limited liability company, in
21order to be effective, the plan must be adopted by at least the
22minimum status vote.
23    (c) A sale, lease, exchange, or other disposition of all or
24substantially all of the assets of a benefit limited liability
25company, unless the transaction is in the usual and ordinary

 

 

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1course of business, shall not be effective unless the
2transaction is adopted by at least the minimum status vote.
 
3
Article 3.
4
Benefit Limited Liability Company Purposes

 
5    Section 3-1. Benefit limited liability company purposes.
6    (a) A benefit limited liability company shall have a
7purpose of creating general public benefit. This purpose is in
8addition to its purposes under Section 1-25 of the Limited
9Liability Company Act and any specific purpose set forth in its
10articles of organization in accordance with subsection (b).
11    (b) The articles of organization of a benefit limited
12liability company may identify one or more specific public
13benefits the creation of which is a purpose of the benefit
14corporation in addition to its purposes under Section 1-25 of
15the limited Liability Company and subsection (a). The
16identification of a specific public benefit under this
17subsection does not limit the obligation of a benefit limited
18liability company under subsection (a).
19    (c) The creation of general public benefit and specific
20public benefit under subsections (a) and (b) is in the best
21interests of the benefit limited liability company.
22    (d) A benefit limited liability company may amend its
23articles of organization to add, change, or remove a specific
24public benefit. In order to be effective, the amendment must be

 

 

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1adopted by at least the minimum status vote.
 
2
Article 4.
3
Accountability

 
4    Section 4-1. Standard of conduct for members and managers.
5    (a) Without regard to whether the benefit limited liability
6company is subject to Section 15-15 of the Limited Liability
7Company Act, in discharging the duties of their respective
8positions, the members and managers of a benefit limited
9liability company in considering the best interests of the
10benefit limited liability company:
11        (1) shall consider the effects of any action upon:
12            (A) the members of the benefit limited liability
13        company;
14            (B) the employees and work force of the benefit
15        limited liability company, its subsidiaries, and its
16        suppliers;
17            (C) the interests of customers as beneficiaries of
18        the general public benefit or specific public benefit
19        purposes of the benefit limited liability company;
20            (D) community and societal considerations,
21        including those of each community in which offices or
22        facilities of the benefit limited liability company,
23        its subsidiaries or its suppliers are located;
24            (E) the local and global environment;

 

 

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1            (F) the short-term and long-term interests of the
2        benefit limited liability company, including benefits
3        that may accrue to the benefit limited liability
4        company from its long-term plans and the possibility
5        that these interests may be best served by the
6        continued independence of the benefit limited
7        liability company; and
8            (G) the ability of the benefit limited liability
9        company to accomplish its general public benefit
10        purpose and any specific public benefit purpose; and
11        (2) may consider:
12            (A) considerations listed in Section 15-5 of the
13        Limited Liability Company Act; and
14            (B) any other pertinent factors or the interests of
15        any other group that they deem appropriate; but
16        (3) need not give priority to the interests of a
17    particular person or group referred to in paragraphs (1) or
18    (2) over the interests of another person or group unless
19    the benefit limited liability company has stated in its
20    articles of organization its intention to give priority to
21    certain interests related to its accomplishment of its
22    general public benefit purpose or a specific public benefit
23    purpose identified in its articles of organization.
24    (b) The consideration of interests and factors in the
25manner required by subsection (a) is in addition to the ability
26of members and managers to consider interests and factors as

 

 

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1provided in Section 15-15 of the Limited Liability Company Act.
2    (c) A member or manager is not personally liable for
3monetary damages for:
4        (1) any action taken as a member or manager if the
5    member or manager performed the duties of office in
6    compliance with Article 15 of the Limited Liability Company
7    Act and this Section; or
8        (2) a failure of the benefit limited liability company
9    to pursue or create general public benefit or a specific
10    public benefit.
11    (d) A member or manager does not have a duty to a person
12that is a beneficiary of the general public benefit purpose or
13a specific public benefit purpose of a benefit limited
14liability company arising from the status of the person as a
15beneficiary.
 
16    Section 4-5. Right of action; benefit enforcement
17proceeding.
18    (a) No person may bring an action or assert a claim against
19a benefit limited liability company or its members or managers
20with respect to failure to pursue or create general public
21benefit or a specific public benefit set forth in its articles
22of organization or violation of a duty or standard of conduct
23under this Act except in a benefit enforcement proceeding.
24    (b) A benefit enforcement proceeding may be commenced or
25maintained only:

 

 

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1        (1) directly by the benefit limited liability company;
2    or
3        (2) derivatively by:
4            (A) a member;
5            (B) a manager;
6            (C) a person or group of persons that owns
7        beneficially or of record 5% or more of the equity
8        interests in an entity of which the benefit limited
9        liability company is a subsidiary; or
10            (D) other persons as specified in the articles of
11        organization or management agreement of the benefit
12        limited liability company.
13    (c) A benefit limited liability company shall not be liable
14for monetary damages under this Act for any failure of the
15benefit limited liability company to pursue or create general
16public benefit or a specific public benefit.
 
17
Article 5.
18
Transparency

 
19    Section 5-1. Annual benefit report.
20    (a) A benefit limited liability company shall prepare an
21annual benefit report including all of the following:
22        (1) A narrative description of:
23            (A) the process and rationale for selecting the
24        third party standard used to prepare the benefit

 

 

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1        report;
2            (B) the ways in which the benefit limited liability
3        company pursued general public benefit during the year
4        and the extent to which general public benefit was
5        created;
6            (C) the ways in which the benefit limited liability
7        company pursued a specific public benefit that the
8        articles of organization state it is the purpose of the
9        benefit limited liability company to create and the
10        extent to which that specific public benefit was
11        created; and
12            (D) any circumstances that have hindered the
13        pursuit by the benefit limited liability company of its
14        general public benefit purpose and any specific public
15        benefit purpose or the creation by the benefit limited
16        liability company of general public benefit and any
17        specific public benefit.
18        (2) An assessment of the overall social and
19    environmental performance of the benefit limited liability
20    company against a third-party standard:
21            (A) applied consistently with any application of
22        that standard in prior benefit reports; or
23            (B) accompanied by an explanation of the reasons
24        for any inconsistent application.
25        (3) The compensation paid by the benefit limited
26    liability company during the year to each manager in the

 

 

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1    capacity of a manager.
2        (4) The name of each person that owns 5% or more of the
3    outstanding shares of the benefit limited liability
4    company either:
5            (A) beneficially, to the extent known to the
6        benefit limited liability company without independent
7        investigation; or
8            (B) of record.
9        (5) A statement of any connection between the
10    organization that established the third-party standard, or
11    its directors, officers, or material owners, and the
12    benefit limited liability company or its members or
13    managers, including any financial or governance
14    relationship that might materially affect the credibility
15    of the use of the third-party standard.
16    (b) The benefit limited liability company shall send a
17benefit report annually to each member:
18        (1) within 120 days following the end of the fiscal
19    year of the benefit limited liability company; or
20        (2) at the same time that the benefit limited liability
21    company delivers any other annual report to its members.
22    (c) A benefit limited liability company shall post all of
23its benefit reports on the public portion of its Internet
24website, if any, but the compensation paid to managers and
25financial or proprietary information included in the benefit
26reports may be omitted from the benefit reports as posted.

 

 

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1    (d) If a benefit limited liability company does not have an
2Internet website, the benefit limited liability company shall
3provide a copy of its most recent benefit report, without
4charge, to any person that requests a copy.