Illinois General Assembly

Previous General Assemblies

Public Act 097-0885


 

Public Act 0885 97TH GENERAL ASSEMBLY

  
  
  

 


 
Public Act 097-0885
 
SB2897 EnrolledLRB097 13492 JLS 62053 b

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

 
    Section 1. Short title. This Act may be cited as the
Benefit Corporation Act.
 
    Section 1.05. Application and effect of the Act.
    (a) This Act shall be applicable to all benefit
corporations.
    (b) The existence of a provision of this Act shall not of
itself create an implication that a contrary or different rule
of law is applicable to a corporation which is not a benefit
corporation. This Act shall not affect a statute or rule of law
that is applicable to a business corporation that is not a
benefit corporation.
    (c) The Business Corporation Act of 1983, as heretofore or
hereafter amended, shall be applicable to such benefit
corporations, including their organization, and they shall
enjoy the powers and privileges and be subject to the duties,
restrictions, and liabilities of other corporations, except so
far as the same may be limited or enlarged by this Act. If any
provision of this Act conflicts with the Business Corporation
Act of 1983, this Act shall take precedence.
    (d) A provision of the articles of incorporation or bylaws
of a benefit corporation may not relax, be inconsistent with,
or supersede a provision of this Act.
 
    Section 1.10. Definitions. As used in this Act, unless the
context otherwise requires, the words and phrases defined in
this Section shall have the meanings set forth herein.
    "Benefit corporation" means a corporation organized under
the Business Corporation Act of 1983:
        (1) which has elected to become subject to this Act;
    and
        (2) whose status as a benefit corporation has not been
    terminated under Section 2.10.
    "Benefit director" means either:
        (1) the director designated as the benefit director of
    a benefit corporation under Section 4.05; or
        (2) a person with one or more of the powers, duties, or
    rights of a benefit director to the extent provided in the
    bylaws pursuant to Section 4.05.
    "Benefit enforcement proceeding" means a claim or action
for:
        (1) the failure of a benefit corporation to pursue or
    create general public benefit or a specific public benefit
    set forth in its articles of incorporation; or
        (2) a violation of an obligation, duty, or standard of
    conduct under this Act.
    "Benefit officer" means the individual designated as the
benefit officer of a benefit corporation under Section 4.15.
    "General public benefit" means a material positive impact
on society and the environment, taken as a whole, assessed
against a third-party standard, from the business and
operations of a benefit corporation.
    "Independent" means having no material relationship with a
benefit corporation or a subsidiary of the benefit corporation.
A person serving as benefit director or benefit officer may be
considered independent. For the purposes of this definition, a
percentage of ownership in an entity shall be calculated as if
all outstanding rights to acquire equity interests in the
entity have been exercised. 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 3 years,
    an employee other than a benefit officer of the benefit
    corporation or a subsidiary of the benefit corporation;
        (2) an immediate family member of the person is, or has
    been within the last 3 years, an executive officer other
    than a benefit officer of the benefit corporation or its
    subsidiaries; or
        (3) there is beneficial or record ownership of 5% or
    more of the outstanding shares of the benefit corporation
    by:
            (A) the person; or
            (B) an entity:
                (i) of which the person is a director, an
            officer, or a manager; or
                (ii) in which the person owns beneficially or
            of record 5% or more of the outstanding equity
            interests.
    "Minimum status vote" means that:
        (1) in the case of a corporation, in addition to any
    other approval or vote required by the Business Corporation
    Act of 1983, the bylaws, or the articles of incorporation:
            (A) the shareholders of every class or series shall
        be entitled to vote on the corporate action regardless
        of a limitation stated in the articles of incorporation
        or bylaws on the voting rights of any class or series;
        and
            (B) the corporate action shall be approved by vote
        of the outstanding shares of each class or series
        entitled to vote by at least two-thirds of the votes
        that all shareholders of the class or series are
        entitled to cast on the action; and
        (2) in the case of an entity organized under the laws
    of this State that is not a corporation, in addition to any
    other approval, vote, or consent required by the statutory
    law, if any, that principally governs the internal affairs
    of the entity or any provision of the publicly filed record
    or document required to form the entity, if any, or of any
    agreement binding on some or all of the holders of equity
    interests in the entity:
            (A) the holders of every class or series of equity
        interest in the entity that are entitled to receive a
        distribution of any kind from the entity shall be
        entitled to vote on or consent to the action regardless
        of any otherwise applicable limitation on the voting or
        consent rights of any class or series; and
            (B) the action must be approved by a vote or
        consent of at least two-thirds of such holders.
    "Specific public benefit" means:
        (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 ordinary
    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; or
        (7) the accomplishment of any other particular benefit
    for society or the environment.
    "Subsidiary" of a person means an entity in which the
person owns beneficially or of record 50% or more of the
outstanding equity interests. For the purposes of this
subsection, a percentage of ownership in an entity shall be
calculated as if all outstanding rights to acquire equity
interests in the entity have been exercised.
    "Third-party standard" means a standard for defining,
reporting, and assessing overall corporate, social, and
environmental performance that:
        (1) is a comprehensive assessment of the impact of the
    business and the business' operations upon the
    considerations listed in subdivisions (a)(1)(B) through
    (a)(1)(E) of Section 4.01;
        (2) is developed by an entity that has no material
    financial relationship with the benefit corporation or any
    of its subsidiaries;
        (3) is developed by an entity that is not materially
    financed by any of the following organizations and not more
    than one-third of the members of the governing body of the
    entity are representatives of:
            (A) associations of businesses operating in a
        specific industry, the performance of whose members is
        measured by the standard;
            (B) businesses from a specific industry or an
        association of businesses in that industry; or
            (C) businesses whose performance is assessed
        against the standard; and
        (4) is developed by an entity that:
            (A) accesses necessary and appropriate expertise
        to assess overall corporate social and environmental
        performance; and
            (B) uses a balanced multi-stakeholder approach,
        including a public comment period of at least 30 days
        to develop the standard; and
        (5) makes the following information regarding the
    standard publicly available:
            (A) the factors considered when measuring the
        overall social and environmental performance of a
        business and the relative weight, if any, given to each
        of those factors;
            (B) the identity of the directors, officers, any
        material owners, and the governing body of the entity
        that developed, and controls revisions to, the
        standard, and the process by which revisions to the
        standard and changes to the membership of the governing
        body are made; and
            (C) an accounting of the sources of financial
        support for the entity, with sufficient detail to
        disclose any relationships that could reasonably be
        considered to present a potential conflict of
        interest.
 
Article 2. Formation of Benefit Corporations

 
    Section 2.01. Formation of benefit corporations. A benefit
corporation must be formed in accordance with Article 2 of the
Business Corporation Act of 1983. In addition to the formation
requirements of that Act, the articles of incorporation of a
benefit corporation must state that it is a benefit corporation
in accordance with the provisions of this Article.
 
    Section 2.05. Election of status.
    (a) A corporation may become a benefit corporation under
this Act by amending its articles of incorporation so that they
contain a statement that the corporation is a benefit
corporation. In order to be effective, the amendment must be
adopted by at least the minimum status vote.
    (b) For any entity that is a party to a merger or
consolidation or is the exchanging entity in a share exchange,
where the surviving, new, or resulting entity in the merger,
consolidation, or share exchange is intended to be a benefit
corporation, such plan of merger, consolidation, or share
exchange must be adopted by at least the minimum status vote in
order to be effective.
 
    Section 2.10. Termination of status.
    (a) A benefit corporation may terminate its status as such
and cease to be subject to this Act by amending its articles of
incorporation to remove the statement that the corporation is a
benefit corporation. In order to be effective, the amendment
must be adopted by at least the minimum status vote.
    (b) If a plan of merger, conversion, or share exchange
would have the effect of terminating the status of a
corporation as a benefit corporation, in order to be effective,
the plan must be adopted by at least the minimum status vote.
    (c) A sale, lease, exchange or other disposition of all or
substantially all of the assets of a benefit corporation,
unless the transaction is in the usual and ordinary course of
business, shall not be effective unless the transaction is
adopted by at least the minimum status vote.
 
Article 3. Corporate Purposes

 
    Section 3.01. Corporate purposes.
    (a) A benefit corporation shall have a purpose of creating
general public benefit. This purpose is in addition to its
purposes under Section 3.05 of the Business Corporation Act of
1983 and any specific purpose set forth in its articles of
incorporation in accordance with subsection (b).
    (b) The articles of incorporation of a benefit corporation
may identify one or more specific public benefits the creation
of which is a purpose of the benefit corporation in addition to
its purposes under Section 3.05 of the Business Corporation Act
of 1983 and subsection (a). The identification of a specific
public benefit under this subsection does not limit the
obligation of a benefit corporation under subsection (a).
    (c) The creation of general public benefit and specific
public benefit under subsections (a) and (b) is in the best
interests of the benefit corporation.
    (d) A benefit corporation may amend its articles of
incorporation to add, change, or remove a specific public
benefit. In order to be effective, the amendment must be
adopted by at least the minimum status vote.
    (e) A professional corporation that is a benefit
corporation does not violate Sections 3.4 or 6 of the
Professional Service Corporation Act by having the purpose to
create general public benefit or a specific public benefit.
 
Article 4. Accountability

 
    Section 4.01. Standard of Conduct for Directors.
    (a) Without regard to whether the benefit corporation is
subject to Section 8.85 of the Business Corporation Act of
1983, in discharging the duties of their respective positions,
the board of directors, committees of the board, and individual
directors of a benefit corporation in considering the best
interests of the benefit corporation:
        (1) shall consider the effects of any action upon:
            (A) the shareholders of the benefit corporation;
            (B) the employees and work force of the benefit
        corporation, its subsidiaries, and its suppliers;
            (C) the interests of customers as beneficiaries of
        the general public benefit or specific public benefit
        purposes of the benefit corporation;
            (D) community and societal considerations,
        including those of each community in which offices or
        facilities of the benefit corporation, its
        subsidiaries or its suppliers are located;
            (E) the local and global environment;
            (F) 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; and
            (G) the ability of the benefit corporation to
        accomplish its general public benefit purpose and any
        specific public benefit purpose; and
        (2) may consider:
            (A) considerations listed in Section 8.85 of the
        Business Corporation Act of 1983; and
            (B) any other pertinent factors or the interests of
        any other group that they deem appropriate; but
        (3) need not give priority to the interests of a
    particular person or group referred to in paragraphs (1) or
    (2) over the interests of another person or group unless
    the benefit corporation has stated in its articles of
    incorporation its intention to give priority to certain
    interests related to its accomplishment of its general
    public benefit purpose or a specific public benefit purpose
    identified in its articles of incorporation.
    (b) The consideration of interests and factors in the
manner required by subsection (a) is in addition to the ability
of directors to consider interests and factors as provided in
Section 8.85 of the Business Corporation Act of 1983.
    (c) A director is not personally liable for monetary
damages for:
        (1) any action taken as a director if the director
    performed the duties of office in compliance with Article 8
    of the Business Corporation Act of 1983 and this Section;
    or
        (2) a failure of the benefit corporation to pursue or
    create general public benefit or a specific public benefit.
    (d) A director does not have a duty to a person that is a
beneficiary of the general public benefit purpose or a specific
public benefit purpose of a benefit corporation arising from
the status of the person as a beneficiary.
 
    Section 4.05. Benefit director.
    (a) The board of directors of a benefit corporation shall
include a director, who:
        (1) is designated as the benefit director; and
        (2) has, in addition to the powers, duties, rights, and
    immunities of the other directors of the benefit
    corporation, the powers, duties, rights, and immunities
    provided in this Section.
    (b) The benefit director shall be elected, and may be
removed, in the manner provided by Article 8 of the Business
Corporation Act of 1983 and shall be an individual who is
independent, as defined in Section 1.10. The benefit director
may serve as the benefit officer at the same time as serving as
the benefit director. The articles of incorporation or bylaws
of a benefit corporation may prescribe additional
qualifications of the benefit director not inconsistent with
this Section.
    (c) The benefit director shall prepare, and the benefit
corporation shall include in the annual benefit report to
shareholders required by Section 5.01 of this Act, the opinion
of the benefit director on:
        (1) whether the benefit corporation acted in
    accordance with its general public benefit purpose and any
    specific public benefit purpose in all material respects
    during the period covered by the report; and
        (2) whether the directors and officers complied with
    subsection (a) of Section 4.01 and subsection (a) of
    Section 4.10, respectively, and if, in the opinion of the
    benefit director, the directors and officers did not so
    comply, a description of the failure to comply.
    (d) The acts of an individual in the capacity of a benefit
director shall constitute, for all purposes, acts of that
individual in the capacity of a director of the benefit
corporation.
    (e) If the bylaws of a benefit corporation provide that the
powers and duties conferred or imposed upon the board of
directors shall be exercised or performed by a person or
persons other than the directors, in contrast to subsection (a)
of Section 8.05 of the Business Corporation Act of 1983, or if
the bylaws of a close corporation that is a benefit corporation
provide that the business and affairs of the corporation shall
be managed by or under the director of the shareholders, then
the bylaws of the benefit corporation must provide that the
person, persons, or shareholders who perform the duties of a
board of directors shall include a person with the powers,
duties, rights, and immunities of a benefit director.
    A person who exercises one or more of the powers, duties,
or rights of a benefit director pursuant to this subsection:
        (i) does not need to be independent of the benefit
    corporation;
        (ii) shall have the immunities of a benefit director;
        (iii) may share the powers, duties, and rights of a
    benefit director with one or more other persons; and
        (iv) shall not be subject to the procedures for
    election or removal of directors in Article 8 of the
    Business Corporation Act of 1983 unless the person is also
    a director of the benefit corporation or the bylaws make
    those procedures applicable.
    (f) Regardless of whether the bylaws of a benefit
corporation include a provision eliminating or limiting the
personal liability of directors authorized by paragraph (3) of
subsection (b) of Section 2.10 of the Business Corporation Act
of 1983, a benefit director shall not be personally liable for
an act or omission in the capacity of a benefit director unless
the act or omission constitutes self-dealing, willful
misconduct, or a knowing violation of law.
 
    Section 4.10. Standard of conduct for officers.
    (a) Each officer of a benefit corporation shall consider
the interests and factors described in subsection (a) of
Section 4.01 in the manner provided in that subsection if:
        (1) the officer has discretion to act with respect to a
    matter; and
        (2) it reasonably appears to the officer that the
    matter may have a material effect on the creation by the
    benefit corporation of general public benefit or a specific
    public benefit identified in the articles of incorporation
    by the benefit corporation.
    (b) Exoneration from personal liability. An officer is not
personally liable for monetary damages for:
        (1) action taken as an officer if the officer performed
    the duties of the position in compliance with this Section;
    or
        (2) failure of the benefit corporation to pursue or
    create general public benefit or specific public benefit.
    (c) Limitation on standing. An officer does not have a duty
to a person that is a beneficiary of the general public benefit
purpose or a specific public benefit purpose of a benefit
corporation arising from the status of the person as a
beneficiary.
 
    Section 4.15. Benefit officer.
    (a) A benefit corporation may have an officer designated as
the benefit officer.
    (b) A benefit officer shall have:
        (1) powers and duties relating to the purpose of the
    benefit corporation to create general public benefit or
    specific public benefit provided:
            (A) by the bylaws of the benefit corporation; or
            (B) absent controlling provisions in the bylaws,
        by resolutions or orders of the board of directors; and
        (2) the duty to prepare the benefit report required by
    Section 5.01 of this Act.
 
    Section 4.20. Right of action; benefit enforcement
proceeding.
    (a) No person may bring an action or assert a claim against
a benefit corporation or its directors or officers with respect
to failure to pursue or create general public benefit or a
specific public benefit set forth in its articles of
incorporation or violation of a duty or standard of conduct
under this Act except in a benefit enforcement proceeding.
    (b) A benefit enforcement proceeding may be commenced or
maintained only:
        (1) directly by the benefit corporation; or
        (2) derivatively by:
            (A) a shareholder;
            (B) a director;
            (C) a person or group of persons that owns
        beneficially or of record 5% or more of the equity
        interests in an entity of which the benefit corporation
        is a subsidiary; or
            (D) other persons as specified in the articles of
        incorporation or bylaws of the benefit corporation.
    (c) A benefit corporation shall not be liable for monetary
damages under this Act for any failure of the benefit
corporation to pursue or create general public benefit or a
specific public benefit.
 
Article 5. Transparency

 
    Section 5.01. Annual benefit report.
    (a) A benefit corporation shall prepare an annual benefit
report including all of the following:
        (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 a specific public benefit that the articles
        state 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
        pursuit by the benefit corporation of its general
        public benefit purpose and any specific public benefit
        purpose or the creation by the benefit corporation of
        general public benefit and any specific public
        benefit.
        (2) An assessment of the overall social and
    environmental performance of the benefit corporation
    against a third-party standard:
            (A) applied consistently with any application of
        that standard in prior benefit reports; or
            (B) accompanied by an explanation of the reasons
        for any inconsistent application.
        (3) The name of the benefit director and the benefit
    officer, if any, and the address to which correspondence to
    each of them may be directed.
        (4) The compensation paid by the benefit corporation
    during the year to each director in the capacity of a
    director.
        (5) The name of each person that owns 5% or more of the
    outstanding shares of the benefit corporation either:
            (A) beneficially, to the extent known to the
        benefit corporation without independent investigation;
        or
            (B) of record.
        (6) The statement of the benefit director required by
    subsection (c) of Section 4.05.
        (7) A statement of any connection between the
    organization that established the third-party standard, or
    its directors, officers, or material owners, and the
    benefit corporation or its directors, officers or material
    owners, including any financial or governance relationship
    that might materially affect the credibility of the use of
    the third-party standard.
        (8) If the benefit corporation has dispensed with, or
    restricted the discretion or powers of, the board of
    directors, its annual benefit report must describe the
    persons who exercise the powers, duties, and rights, and
    have the immunities of the board of directors and the
    benefit director as required by subsection (e) of Section
    4.05.
    (b) The benefit corporation shall send a benefit report
annually to each shareholder:
        (1) within 120 days following the end of the fiscal
    year of the benefit corporation; or
        (2) at the same time that the benefit corporation
    delivers any other annual report to its shareholders.
    (c) A benefit corporation shall post all of its benefit
reports on the public portion of its Internet website, if any,
but the compensation paid to directors and financial or
proprietary information included in the benefit reports may be
omitted from the benefit reports as posted.
    (d) If a benefit corporation does not have an Internet
website, the benefit corporation shall provide a copy of its
most recent benefit report, without charge, to any person that
requests a copy.

Effective Date: 1/1/2013