Illinois General Assembly - Full Text of SB2897
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Full Text of SB2897  97th General Assembly




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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:
Article 1. General Provisions

5    Section 1. Short title. This Act may be cited as the
6Benefit Corporation Act.
7    Section 1.05. Application and effect of the Act.
8    (a) This Act shall be applicable to all benefit
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 corporation which is not a benefit
13corporation. This Act shall not affect a statute or rule of law
14that is applicable to a business corporation that is not a
15benefit corporation.
16    (c) The Business Corporation Act of 1983, as heretofore or
17hereafter amended, shall be applicable to such benefit
18corporations, including their organization, and they shall
19enjoy the powers and privileges and be subject to the duties,
20restrictions, and liabilities of other corporations, except so
21far as the same may be limited or enlarged by this Act. If any
22provision of this Act conflicts with the Business Corporation



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1Act of 1983, this Act shall take precedence.
2    (d) A provision of the articles of incorporation or bylaws
3of a benefit corporation may not relax, be inconsistent with,
4or supersede a provision of this Act.
5    Section 1.10. Definitions. As used in this Act, unless the
6context otherwise requires, the words and phrases defined in
7this Section shall have the meanings set forth herein.
8    "Benefit corporation" means a corporation organized under
9the Business Corporation Act of 1983:
10        (1) which has elected to become subject to this Act;
11    and
12        (2) whose status as a benefit corporation has not been
13    terminated under Section 2.10.
14    "Benefit director" means either:
15        (1) the director designated as the benefit director of
16    a benefit corporation under Section 4.05; or
17        (2) a person with one or more of the powers, duties, or
18    rights of a benefit director to the extent provided in the
19    bylaws pursuant to Section 4.05.
20    "Benefit enforcement proceeding" means a claim or action
22        (1) the failure of a benefit corporation to pursue or
23    create general public benefit or a specific public benefit
24    set forth in its articles of incorporation; or
25        (2) a violation of an obligation, duty, or standard of



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1    conduct under this Act.
2    "Benefit officer" means the individual designated as the
3benefit officer of a benefit corporation under Section 4.15.
4    "General public benefit" means a material positive impact
5on society and the environment, taken as a whole, assessed
6against a third-party standard, from the business and
7operations of a benefit corporation.
8    "Independent" means having no material relationship with a
9benefit corporation or a subsidiary of the benefit corporation.
10A person serving as benefit director or benefit officer may be
11considered independent. For the purposes of this definition, a
12percentage of ownership in an entity shall be calculated as if
13all outstanding rights to acquire equity interests in the
14entity have been exercised. A material relationship between a
15person and a benefit corporation or any of its subsidiaries
16will be conclusively presumed to exist if:
17        (1) the person is, or has been within the last 3 years,
18    an employee other than a benefit officer of the benefit
19    corporation or a subsidiary of the benefit corporation;
20        (2) an immediate family member of the person is, or has
21    been within the last 3 years, an executive officer other
22    than a benefit officer of the benefit corporation or its
23    subsidiaries; or
24        (3) there is beneficial or record ownership of 5% or
25    more of the outstanding shares of the benefit corporation
26    by:



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1            (A) the person; or
2            (B) an entity:
3                (i) of which the person is a director, an
4            officer, or a manager; or
5                (ii) in which the person owns beneficially or
6            of record 5% or more of the outstanding equity
7            interests.
8    "Minimum status vote" means that:
9        (1) in the case of a corporation, in addition to any
10    other approval or vote required by the Business Corporation
11    Act of 1983, the bylaws, or the articles of incorporation:
12            (A) the shareholders of every class or series shall
13        be entitled to vote on the corporate action regardless
14        of a limitation stated in the articles of incorporation
15        or bylaws on the voting rights of any class or series;
16        and
17            (B) the corporate action shall be approved by vote
18        of the outstanding shares of each class or series
19        entitled to vote by at least two-thirds of the votes
20        that all shareholders of the class or series are
21        entitled to cast on the action; and
22        (2) in the case of an entity organized under the laws
23    of this State that is not a corporation, in addition to any
24    other approval, vote, or consent required by the statutory
25    law, if any, that principally governs the internal affairs
26    of the entity or any provision of the publicly filed record



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1    or document required to form the entity, if any, or of any
2    agreement binding on some or all of the holders of equity
3    interests in the entity:
4            (A) the holders of every class or series of equity
5        interest in the entity that are entitled to receive a
6        distribution of any kind from the entity shall be
7        entitled to vote on or consent to the action regardless
8        of any otherwise applicable limitation on the voting or
9        consent rights of any class or series; and
10            (B) the action must be approved by a vote or
11        consent of at least two-thirds of such holders.
12    "Specific public benefit" means:
13        (1) providing low-income or underserved individuals or
14    communities with beneficial products or services;
15        (2) promoting economic opportunity for individuals or
16    communities beyond the creation of jobs in the ordinary
17    course of business;
18        (3) preserving the environment;
19        (4) improving human health;
20        (5) promoting the arts, sciences or advancement of
21    knowledge;
22        (6) increasing the flow of capital to entities with a
23    public benefit purpose; or
24        (7) the accomplishment of any other particular benefit
25    for society or the environment.
26    "Subsidiary" of a person means an entity in which the



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1person owns beneficially or of record 50% or more of the
2outstanding equity interests. For the purposes of this
3subsection, a percentage of ownership in an entity shall be
4calculated as if all outstanding rights to acquire equity
5interests in the entity have been exercised.
6    "Third-party standard" means a standard for defining,
7reporting, and assessing overall corporate, social, and
8environmental performance that:
9        (1) is a comprehensive assessment of the impact of the
10    business and the business' operations upon the
11    considerations listed in subdivisions (a)(1)(B) through
12    (a)(1)(E) of Section 4.01;
13        (2) is developed by an entity that has no material
14    financial relationship with the benefit corporation or any
15    of its subsidiaries;
16        (3) is developed by an entity that is not materially
17    financed by any of the following organizations and not more
18    than one-third of the members of the governing body of the
19    entity are representatives of:
20            (A) associations of businesses operating in a
21        specific industry, the performance of whose members is
22        measured by the standard;
23            (B) businesses from a specific industry or an
24        association of businesses in that industry; or
25            (C) businesses whose performance is assessed
26        against the standard; and



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




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1    Section 2.01. Formation of benefit corporations. A benefit
2corporation must be formed in accordance with Article 2 of the
3Business Corporation Act of 1983. In addition to the formation
4requirements of that Act, the articles of incorporation of a
5benefit corporation must state that it is a benefit corporation
6in accordance with the provisions of this Article.
7    Section 2.05. Election of status.
8    (a) A corporation may become a benefit corporation under
9this Act by amending its articles of incorporation so that they
10contain a statement that the corporation is a benefit
11corporation. In order to be effective, the amendment must be
12adopted by at least the minimum status vote.
13    (b) For any entity that is a party to a merger or
14consolidation or is the exchanging entity in a share exchange,
15where the surviving, new, or resulting entity in the merger,
16consolidation, or share exchange is intended to be a benefit
17corporation, such plan of merger, consolidation, or share
18exchange must be adopted by at least the minimum status vote in
19order to be effective.
20    Section 2.10. Termination of status.
21    (a) A benefit corporation may terminate its status as such
22and cease to be subject to this Act by amending its articles of
23incorporation to remove the statement that the corporation is a



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1benefit corporation. In order to be effective, the amendment
2must be adopted by at least the minimum status vote.
3    (b) If a plan of merger, conversion, or share exchange
4would have the effect of terminating the status of a
5corporation as a benefit corporation, in order to be effective,
6the plan must be adopted by at least the minimum status vote.
7    (c) A sale, lease, exchange or other disposition of all or
8substantially all of the assets of a benefit corporation,
9unless the transaction is in the usual and ordinary course of
10business, shall not be effective unless the transaction is
11adopted by at least the minimum status vote.
Article 3. Corporate Purposes

13    Section 3.01. Corporate purposes.
14    (a) A benefit corporation shall have a purpose of creating
15general public benefit. This purpose is in addition to its
16purposes under Section 3.05 of the Business Corporation Act of
171983 and any specific purpose set forth in its articles of
18incorporation in accordance with subsection (b).
19    (b) The articles of incorporation of a benefit corporation
20may identify one or more specific public benefits the creation
21of which is a purpose of the benefit corporation in addition to
22its purposes under Section 3.05 of the Business Corporation Act
23of 1983 and subsection (a). The identification of a specific
24public benefit under this subsection does not limit the



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1obligation of a benefit corporation under subsection (a).
2    (c) The creation of general public benefit and specific
3public benefit under subsections (a) and (b) is in the best
4interests of the benefit corporation.
5    (d) A benefit corporation may amend its articles of
6incorporation to add, change, or remove a specific public
7benefit. In order to be effective, the amendment must be
8adopted by at least the minimum status vote.
9    (e) A professional corporation that is a benefit
10corporation does not violate Sections 3.4 or 6 of the
11Professional Service Corporation Act by having the purpose to
12create general public benefit or a specific public benefit.
Article 4. Accountability

14    Section 4.01. Standard of Conduct for Directors.
15    (a) Without regard to whether the benefit corporation is
16subject to Section 8.85 of the Business Corporation Act of
171983, in discharging the duties of their respective positions,
18the board of directors, committees of the board, and individual
19directors of a benefit corporation in considering the best
20interests of the benefit corporation:
21        (1) shall consider the effects of any action upon:
22            (A) the shareholders of the benefit corporation;
23            (B) the employees and work force of the benefit
24        corporation, its subsidiaries, and its suppliers;



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1            (C) the interests of customers as beneficiaries of
2        the general public benefit or specific public benefit
3        purposes of the benefit corporation;
4            (D) community and societal considerations,
5        including those of each community in which offices or
6        facilities of the benefit corporation, its
7        subsidiaries or its suppliers are located;
8            (E) the local and global environment;
9            (F) the short-term and long-term interests of the
10        benefit corporation, including benefits that may
11        accrue to the benefit corporation from its long-term
12        plans and the possibility that these interests may be
13        best served by the continued independence of the
14        benefit corporation; and
15            (G) the ability of the benefit corporation to
16        accomplish its general public benefit purpose and any
17        specific public benefit purpose; and
18        (2) may consider:
19            (A) considerations listed in Section 8.85 of the
20        Business Corporation Act of 1983; and
21            (B) any other pertinent factors or the interests of
22        any other group that they deem appropriate; but
23        (3) need not give priority to the interests of a
24    particular person or group referred to in paragraphs (1) or
25    (2) over the interests of another person or group unless
26    the benefit corporation has stated in its articles of



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1    incorporation its intention to give priority to certain
2    interests related to its accomplishment of its general
3    public benefit purpose or a specific public benefit purpose
4    identified in its articles of incorporation.
5    (b) The consideration of interests and factors in the
6manner required by subsection (a) is in addition to the ability
7of directors to consider interests and factors as provided in
8Section 8.85 of the Business Corporation Act of 1983.
9    (c) A director is not personally liable for monetary
10damages for:
11        (1) any action taken as a director if the director
12    performed the duties of office in compliance with Article 8
13    of the Business Corporation Act of 1983 and this Section;
14    or
15        (2) a failure of the benefit corporation to pursue or
16    create general public benefit or a specific public benefit.
17    (d) A director does not have a duty to a person that is a
18beneficiary of the general public benefit purpose or a specific
19public benefit purpose of a benefit corporation arising from
20the status of the person as a beneficiary.
21    Section 4.05. Benefit director.
22    (a) The board of directors of a benefit corporation shall
23include a director, who:
24        (1) is designated as the benefit director; and
25        (2) has, in addition to the powers, duties, rights, and



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1    immunities of the other directors of the benefit
2    corporation, the powers, duties, rights, and immunities
3    provided in this Section.
4    (b) The benefit director shall be elected, and may be
5removed, in the manner provided by Article 8 of the Business
6Corporation Act of 1983 and shall be an individual who is
7independent, as defined in Section 1.10. The benefit director
8may serve as the benefit officer at the same time as serving as
9the benefit director. The articles of incorporation or bylaws
10of a benefit corporation may prescribe additional
11qualifications of the benefit director not inconsistent with
12this Section.
13    (c) The benefit director shall prepare, and the benefit
14corporation shall include in the annual benefit report to
15shareholders required by Section 5.01 of this Act, the opinion
16of the benefit director on:
17        (1) whether the benefit corporation acted in
18    accordance with its general public benefit purpose and any
19    specific public benefit purpose in all material respects
20    during the period covered by the report; and
21        (2) whether the directors and officers complied with
22    subsection (a) of Section 4.01 and subsection (a) of
23    Section 4.10, respectively, and if, in the opinion of the
24    benefit director, the directors and officers did not so
25    comply, a description of the failure to comply.
26    (d) The acts of an individual in the capacity of a benefit



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1director shall constitute, for all purposes, acts of that
2individual in the capacity of a director of the benefit
4    (e) If the bylaws of a benefit corporation provide that the
5powers and duties conferred or imposed upon the board of
6directors shall be exercised or performed by a person or
7persons other than the directors, in contrast to subsection (a)
8of Section 8.05 of the Business Corporation Act of 1983, or if
9the bylaws of a close corporation that is a benefit corporation
10provide that the business and affairs of the corporation shall
11be managed by or under the director of the shareholders, then
12the bylaws of the benefit corporation must provide that the
13person, persons, or shareholders who perform the duties of a
14board of directors shall include a person with the powers,
15duties, rights, and immunities of a benefit director.
16    A person who exercises one or more of the powers, duties,
17or rights of a benefit director pursuant to this subsection:
18        (i) does not need to be independent of the benefit
19    corporation;
20        (ii) shall have the immunities of a benefit director;
21        (iii) may share the powers, duties, and rights of a
22    benefit director with one or more other persons; and
23        (iv) shall not be subject to the procedures for
24    election or removal of directors in Article 8 of the
25    Business Corporation Act of 1983 unless the person is also
26    a director of the benefit corporation or the bylaws make



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1    those procedures applicable.
2    (f) Regardless of whether the bylaws of a benefit
3corporation include a provision eliminating or limiting the
4personal liability of directors authorized by paragraph (3) of
5subsection (b) of Section 2.10 of the Business Corporation Act
6of 1983, a benefit director shall not be personally liable for
7an act or omission in the capacity of a benefit director unless
8the act or omission constitutes self-dealing, willful
9misconduct, or a knowing violation of law.
10    Section 4.10. Standard of conduct for officers.
11    (a) Each officer of a benefit corporation shall consider
12the interests and factors described in subsection (a) of
13Section 4.01 in the manner provided in that subsection if:
14        (1) the officer has discretion to act with respect to a
15    matter; and
16        (2) it reasonably appears to the officer that the
17    matter may have a material effect on the creation by the
18    benefit corporation of general public benefit or a specific
19    public benefit identified in the articles of incorporation
20    by the benefit corporation.
21    (b) Exoneration from personal liability. An officer is not
22personally liable for monetary damages for:
23        (1) action taken as an officer if the officer performed
24    the duties of the position in compliance with this Section;
25    or



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1        (2) failure of the benefit corporation to pursue or
2    create general public benefit or specific public benefit.
3    (c) Limitation on standing. An officer does not have a duty
4to a person that is a beneficiary of the general public benefit
5purpose or a specific public benefit purpose of a benefit
6corporation arising from the status of the person as a
8    Section 4.15. Benefit officer.
9    (a) A benefit corporation may have an officer designated as
10the benefit officer.
11    (b) A benefit officer shall have:
12        (1) powers and duties relating to the purpose of the
13    benefit corporation to create general public benefit or
14    specific public benefit provided:
15            (A) by the bylaws of the benefit corporation; or
16            (B) absent controlling provisions in the bylaws,
17        by resolutions or orders of the board of directors; and
18        (2) the duty to prepare the benefit report required by
19    Section 5.01 of this Act.
20    Section 4.20. Right of action; benefit enforcement
22    (a) No person may bring an action or assert a claim against
23a benefit corporation or its directors or officers with respect
24to failure to pursue or create general public benefit or a



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1specific public benefit set forth in its articles of
2incorporation or violation of a duty or standard of conduct
3under this Act except in a benefit enforcement proceeding.
4    (b) A benefit enforcement proceeding may be commenced or
5maintained only:
6        (1) directly by the benefit corporation; or
7        (2) derivatively by:
8            (A) a shareholder;
9            (B) a director;
10            (C) a person or group of persons that owns
11        beneficially or of record 5% or more of the equity
12        interests in an entity of which the benefit corporation
13        is a subsidiary; or
14            (D) other persons as specified in the articles of
15        incorporation or bylaws of the benefit corporation.
16    (c) A benefit corporation shall not be liable for monetary
17damages under this Act for any failure of the benefit
18corporation to pursue or create general public benefit or a
19specific public benefit.
Article 5. Transparency

21    Section 5.01. Annual benefit report.
22    (a) A benefit corporation shall prepare an annual benefit
23report including all of the following:
24        (1) A narrative description of:



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1            (A) the process and rationale for selecting the
2        third party standard used to prepare the benefit
3        report;
4            (B) the ways in which the benefit corporation
5        pursued general public benefit during the year and the
6        extent to which general public benefit was created;
7            (C) the ways in which the benefit corporation
8        pursued a specific public benefit that the articles
9        state it is the purpose of the benefit corporation to
10        create and the extent to which that specific public
11        benefit was created; and
12            (D) any circumstances that have hindered the
13        pursuit by the benefit corporation of its general
14        public benefit purpose and any specific public benefit
15        purpose or the creation by the benefit corporation of
16        general public benefit and any specific public
17        benefit.
18        (2) An assessment of the overall social and
19    environmental performance of the benefit corporation
20    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 name of the benefit director and the benefit
26    officer, if any, and the address to which correspondence to



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1    each of them may be directed.
2        (4) The compensation paid by the benefit corporation
3    during the year to each director in the capacity of a
4    director.
5        (5) The name of each person that owns 5% or more of the
6    outstanding shares of the benefit corporation either:
7            (A) beneficially, to the extent known to the
8        benefit corporation without independent investigation;
9        or
10            (B) of record.
11        (6) The statement of the benefit director required by
12    subsection (c) of Section 4.05.
13        (7) A statement of any connection between the
14    organization that established the third-party standard, or
15    its directors, officers, or material owners, and the
16    benefit corporation or its directors, officers or material
17    owners, including any financial or governance relationship
18    that might materially affect the credibility of the use of
19    the third-party standard.
20        (8) If the benefit corporation has dispensed with, or
21    restricted the discretion or powers of, the board of
22    directors, its annual benefit report must describe the
23    persons who exercise the powers, duties, and rights, and
24    have the immunities of the board of directors and the
25    benefit director as required by subsection (e) of Section
26    4.05.



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1    (b) The benefit corporation shall send a benefit report
2annually to each shareholder:
3        (1) within 120 days following the end of the fiscal
4    year of the benefit corporation; or
5        (2) at the same time that the benefit corporation
6    delivers any other annual report to its shareholders.
7    (c) A benefit corporation shall post all of its benefit
8reports on the public portion of its Internet website, if any,
9but the compensation paid to directors and financial or
10proprietary information included in the benefit reports may be
11omitted from the benefit reports as posted.
12    (d) If a benefit corporation does not have an Internet
13website, the benefit corporation shall provide a copy of its
14most recent benefit report, without charge, to any person that
15requests a copy.