Connecticut Seal

General Assembly

 

Substitute Bill No. 12

    January Session, 2017

 

*_____SB00012JUD___040717____*

AN ACT ESTABLISHING BENEFIT LIMITED LIABILITY COMPANIES.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective October 1, 2017) Sections 1 to 14, inclusive, of this act shall be known and may be cited as the "Connecticut Benefit Limited Liability Company Act".

Sec. 2. (NEW) (Effective October 1, 2017) As used in this section and sections 3 to 14, inclusive, of this act:

(1) "Benefit corporation" means a business corporation (A) that has elected to become subject to the provisions of chapter 604 of the general statutes, and (B) whose status as a benefit corporation has not been terminated pursuant to section 33-1356 of the general statutes, as amended by this act.

(2) "Benefit enforcement proceeding" means any claim or action for (A) the failure of a benefit limited liability company to pursue or create a general public benefit or any specific public benefit purpose set forth in its certificate of organization, or (B) the violation of any obligation, duty or standard of conduct under sections 3 to 14, inclusive, of this act.

(3) "Benefit limited liability company" means a limited liability company (A) that has elected to become subject to the provisions of sections 3 to 14, inclusive, of this act, and (B) whose status as a benefit limited liability company has not been terminated pursuant to section 7 of this act.

(4) "Benefit officer" means an individual designated as the benefit officer of a benefit limited liability company pursuant to section 10 of this act.

(5) "Business corporation" means a corporation whose internal affairs are governed by chapter 601 of the general statutes.

(6) "Charitable organization" means (A) any organization that is exempt from federal income tax under Section 501(a) of the Code as an organization described in Section 501(c)(3) of the Code, or (B) an organization, contributions to which are deductible under Section 170(c)(2) of the Code.

(7) "Code" means the Internal Revenue Code of 1986, or any subsequent internal revenue code of the United States, as amended from time to time.

(8) "General public benefit" means a material positive impact on both society and the environment, taken as a whole, as assessed against a third-party standard, from the business and operations of a benefit limited liability company.

(9) "Independent" means having no material relationship with a benefit limited liability company, provided an individual who serves as a benefit officer does not lack independence solely by serving in such capacity.

(10) "Interest exchange" means a transaction authorized by part III of chapter 616 of the general statutes.

(11) "Legacy preservation provision" means a provision in the certificate of organization of a benefit limited liability company that is adopted in accordance with subsection (a) of section 6 of this act and is identified in the certificate of organization as a legacy preservation provision.

(12) "Limited liability company" has the same meaning as provided in section 34-243a of the general statutes.

(13) "Material relationship" means a relationship between a person and a benefit limited liability company if any of the following apply: (A) The person is, or has been within the last three years, a manager, a benefit officer or an executive officer of the benefit limited liability company; (B) an immediate family member of the person is, or has been within the last three years, a manager or executive officer of the benefit limited liability company; or (C) the person is, or has been within the last three years, a member of the benefit limited liability company and owns or has owned, directly or indirectly, five per cent or more of the transferable interests of the benefit limited liability company.

(14) "Minimum status vote" means, in addition to any other required approval or vote, the action is approved by two-thirds in interest of the members of the limited liability company.

(15) "Specific public benefit" includes: (A) Providing low-income or underserved individuals or communities with beneficial products or services; (B) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; (C) protecting or restoring the environment; (D) improving human health; (E) promoting the arts, sciences or advancement of knowledge; (F) increasing the flow of capital to other benefit limited liability companies, benefit corporations or similar entities whose purpose is to benefit society or the environment; and (G) conferring any other particular benefit on society or the environment.

(16) "Third-party standard" means a recognized standard for defining, reporting and assessing a benefit limited liability company's social and environmental performance that: (A) Is used to assess the effect of its business and operations upon the interests listed in subparagraphs (B), (C), (D) and (E) of subdivision (1) of subsection (a) of section 9 of this act; and (B) is developed by an entity that is independent and makes publicly available the following information about the development and revision of the standard: (i) The identity of the directors, officers, material owners, and the governing body of the entity that developed and controls revisions to the standard; (ii) the process by which revisions to the standard and changes to the membership of such governing body are made; and (iii) an accounting of the revenue and sources of financial support for such entity, with sufficient detail to disclose any relationships that could reasonably be considered to present a potential conflict of interest.

Sec. 3. (NEW) (Effective October 1, 2017) (a) The provisions of this section and sections 4 to 14, inclusive, of this act shall be applicable to all benefit limited liability companies.

(b) The provisions of this section and sections 4 to 14, inclusive, of this act shall not create an implication that a contrary or different rule of law is applicable to a limited liability company that is not a benefit limited liability company. The provisions of this section and sections 4 to 14, inclusive, of this act shall not affect a statute or rule of law that is applicable to a limited liability company that is not a benefit limited liability company.

(c) Except as otherwise provided in this section and sections 4 to 14, inclusive, of this act, the provisions of sections 34-243 to 34-283d, inclusive, of the general statutes shall be generally applicable to all benefit limited liability companies. The specific provisions of this section and sections 4 to 14, inclusive, of this act shall control over the general provisions of sections 34-243 to 34-283d, inclusive, of the general statutes.

(d) A provision of the certificate of organization or operating agreement of a benefit limited liability company may not limit, be inconsistent with or supersede a provision of this section or sections 4 to 14, inclusive, of this act.

(e) Nothing in this section or sections 4 to 14, inclusive, of this act shall (1) be construed as creating or granting to any person any contractual right to, or proprietary interest in, the income or assets of a benefit limited liability company by virtue of the fact that he or she may directly or indirectly benefit from the general public benefit or any specific public benefit of a benefit limited liability company, (2) be construed as imposing or creating a charitable use, interest or restriction on any property or assets of a benefit limited liability company, or (3) deprive the Attorney General of jurisdiction over a benefit limited liability company under any other applicable law.

Sec. 4. (NEW) (Effective October 1, 2017) A benefit limited liability company shall be formed in accordance with the provisions of sections 34-243 to 34-283d, inclusive, of the general statutes by filing a certificate of organization with the office of the Secretary of the State that states that the limited liability company is a benefit limited liability company. The name of each benefit limited liability company shall identify the limited liability company as a benefit limited liability company by including in the name the words "benefit limited liability company" or the abbreviation "BLLC" or "B.L.L.C.".

Sec. 5. (NEW) (Effective October 1, 2017) A limited liability company that is not a benefit limited liability company may elect to become a benefit limited liability company by amending its certificate of organization to contain, in addition to matters required by section 34-247 of the general statutes, a statement that the limited liability company is a benefit limited liability company. Any such amendment to the certificate of organization shall be approved by a minimum status vote.

Sec. 6. (NEW) (Effective October 1, 2017) (a) The members of a benefit limited liability company may, not earlier than twenty-four months after the date that it became a benefit limited liability company, amend its certificate of organization to include a legacy preservation provision. Any such amendment shall be adopted in accordance with the procedures set forth in section 34-247a of the general statutes and shall be approved by the affirmative vote or written consent of all of the members of the benefit limited liability company.

(b) A dissolved benefit limited liability company that adopted a legacy preservation provision shall distribute its remaining property to one or more (1) charitable organizations, or (2) other benefit limited liability companies or benefit corporations that have adopted legacy preservation provisions.

Sec. 7. (NEW) (Effective October 1, 2017) (a) Except for a benefit limited liability company that has adopted a legacy preservation provision, a benefit limited liability company may terminate its status as such and cease to be subject to the provisions of sections 3 to 14, inclusive, of this act by amending its certificate of organization to delete any provision stating that such limited liability company is a benefit limited liability company. Any such amendment must be approved by a minimum status vote.

(b) Except for a benefit limited liability company that has adopted a legacy preservation provision, if a benefit limited liability company is a party to a merger or interest exchange in which (1) the surviving entity will not be a benefit limited liability company or a benefit corporation, or (2) an interest in such benefit limited liability company will be exchanged for or converted into a right to receive a transferable interest of a limited liability company that is not a benefit limited liability company or shares of a corporation that is not a benefit corporation, the plan of merger or interest exchange must be approved by a minimum status vote.

(c) A benefit limited liability company that has adopted a legacy preservation provision may only be a party to (1) a merger in which (A) the surviving entity will be a benefit limited liability company or benefit corporation that has adopted a legacy preservation provision, or (B) transferable interests of such benefit limited liability company will be converted into a right to receive transferable interests of a benefit limited liability company or shares of a benefit corporation that has adopted a legacy preservation provision, or (2) an interest exchange in which the transferable interests of the benefit limited liability company will be exchanged for transferable interests of a benefit limited liability company or shares of a benefit corporation that has adopted a legacy preservation provision, and such merger or interest exchange is approved by a minimum status vote.

(d) Except for a benefit limited liability company that has adopted a legacy preservation provision, any sale, lease, exchange or other disposition of all or substantially all of the assets of a benefit limited liability company that would leave the benefit limited liability company without a significant continuing business activity, within the meaning of subsection (a) of section 33-831 of the general statutes, such disposition must be approved by a minimum status vote. A benefit limited liability company that has adopted a legacy preservation provision shall not enter into a sale, lease, exchange or other disposition of its assets outside the ordinary course of the company's activities and affairs, unless the disposition is to one or more (1) charitable organizations, or (2) other benefit limited liability companies or benefit corporations that have adopted a legacy preservation provision, and such disposition is approved by a minimum status vote.

Sec. 8. (NEW) (Effective October 1, 2017) (a) A benefit limited liability company shall have a purpose of creating a general public benefit. Such purpose shall be in addition to any purpose under sections 34-243g and 34-243h of the general statutes.

(b) The certificate of organization of a benefit limited liability company may identify one or more specific public benefits as a purpose for such benefit limited liability company to create in addition to any purpose under sections 34-243g and 34-243h of the general statutes and subsection (a) of this section. The identification of a specific public benefit under this subsection shall not limit the obligation of a benefit limited liability company under subsection (a) of this section.

(c) The creation of a general public benefit and any specific public benefit under subsections (a) and (b) of this section is in the best interests of the benefit limited liability company.

(d) A benefit limited liability company may amend its certificate of organization to add, amend or delete the identification of a specific public benefit that is the purpose of the benefit limited liability company to create. Any such amendment shall be adopted by a minimum status vote.

Sec. 9. (NEW) (Effective October 1, 2017) (a) In discharging the duties of their respective positions and considering the best interests of the benefit limited liability company, the members of a member-managed benefit limited liability company or the manager or managers of a manager-managed benefit limited liability company, as the case may be:

(1) Shall consider the effects of any company action or inaction upon:

(A) The members of a manager-managed benefit limited liability company, if applicable;

(B) The employees and workforce of the benefit limited liability company and its suppliers;

(C) The interests of the customers of the benefit limited liability company as beneficiaries of the general public benefit purpose and any specific public benefit purpose of the benefit limited liability company;

(D) Community and societal factors, including those of each community in which offices or facilities of the benefit limited liability company or its suppliers are located;

(E) The local and global environment;

(F) The short-term and long-term interests of the benefit limited liability company, including benefits that may accrue to the benefit limited liability company from such company's long-term plans; and

(G) The ability of the benefit limited liability company to accomplish its general public benefit purpose and any specific public benefit purpose;

(2) May consider other pertinent factors or the interests of any other group that the members of a member-managed benefit limited liability company or the manager or managers of a benefit limited liability company, as the case may be, deem appropriate; and

(3) Need not give priority to the interests of a particular person or group referred to in subdivision (1) or (2) of this subsection over the interests of any other person or group unless the certificate of organization of such benefit limited liability company states an intention to give priority to certain interests related to the accomplishment of the company's general public benefit purpose or of a specific public benefit purpose identified in the company's certificate of organization.

(b) The consideration of interests and factors in the manner required or permitted by subsection (a) of this section shall not constitute a violation of the applicable duties described in section 34-255h of the general statutes.

(c) A member or manager of a benefit limited liability company shall not be personally liable for (1) any act or omission in the course of performing the duties of a member of a member-managed benefit limited liability company or the duties of a manager of a manager-managed benefit limited liability company, as the case may be, under subsection (a) of this section if the member or manager performed the applicable duties of such member or manager in compliance with this section and section 34-255h of the general statutes, or (2) failure of the benefit limited liability company to pursue or create a general public benefit or any specific public benefit.

(d) A member or manager of a benefit limited liability company shall not have a duty to a person who is a beneficiary of the general public benefit purpose or a specific public benefit purpose of the benefit limited liability company based on the status of such person as a beneficiary.

Sec. 10. (NEW) (Effective October 1, 2017) (a) The members of a benefit limited liability company may appoint an individual to serve as the benefit officer of the limited liability company in the manner provided for a manager of a manager-managed limited liability company under subdivision (5) of subsection (c) of section 34-255f of the general statutes. A benefit officer shall: (1) Have the powers, duties, rights and immunities provided in sections 3 to 14, inclusive, of this act and set forth in the certificate of organization or operating agreement of the benefit limited liability company, and (2) if such benefit officer is not a member or manager of the benefit limited liability company, be entitled to (A) attend and participate as a nonvoting observer in all meetings of the members if not a member and meetings of the managers if not a manager, (B) receive copies of all notices, minutes, consents and other materials that the limited liability company provides to its members or managers at the same time and in the same manner as provided to such members or managers, and (C) have access to all information available to the members and managers of the benefit limited liability company, provided (i) the benefit officer shall agree to hold such information in confidence and trust and to act in a fiduciary manner with respect to such information, and (ii) the benefit limited liability company shall have the right to withhold any information and to exclude such benefit officer from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the benefit limited liability company and its legal counsel or result in disclosure of trade secrets. The certificate of organization or operating agreement of a benefit limited liability company may provide additional rights and prescribe additional qualifications and duties of the benefit officer that are consistent with this subsection.

(b) The benefit officer may be removed in the same manner as provided for a manager of a manager-managed limited liability company under subdivision (5) of subsection (c) of section 34-255f of the general statutes.

(c) The benefit officer shall prepare, and the benefit limited liability company shall include, in the annual benefit report to its members required by section 14 of this act, the opinion of the benefit officer on each of the following: (1) Whether the benefit limited liability company 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, (2) whether the members or managers, as the case may be, complied with subsection (a) of section 9 of this act, and (3) if, in the opinion of the benefit officer, the benefit limited liability company or its members or managers failed to comply with subsection (a) of section 9 of this act, a description of the ways in which the benefit limited liability company or the company's members or managers failed to comply.

(d) Regardless of whether the certificate of organization of a benefit limited liability company includes a provision limiting the personal liability of officers, a benefit officer shall not be personally liable for any act or omission in the capacity of a benefit officer unless the act or omission constitutes self-dealing, wilful misconduct or a knowing violation of law.

Sec. 11. (NEW) (Effective October 1, 2017) (a) Each officer of a benefit limited liability company shall consider the interests and factors described in subsection (a) of section 9 of this act in the manner provided in said 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 limited liability company of a general public benefit or any specific public benefit identified in the certificate of organization of the benefit limited liability company.

(b) The consideration of interests and factors in the manner described in subsection (a) of section 9 of this act by an officer shall not constitute a breach of the duties of such officer to the benefit limited liability company.

(c) An officer shall not be personally liable for (1) an act or omission as an officer in the course of performing the duties of an officer under subsection (a) of this section if the officer performed the duties of the position in compliance with this section, or (2) the failure of the benefit limited liability company to pursue or create a general public benefit or any specific public benefit.

(d) An officer shall not have a duty to a person who is a beneficiary of the general public benefit purpose or any specific public benefit purpose of a benefit limited liability company based on the status of such person as a beneficiary.

Sec. 12. (NEW) (Effective October 1, 2017) (a) Except in a benefit enforcement proceeding, no person may bring an action or assert a claim against a benefit limited liability company or its members or managers or a benefit officer with respect to (1) the failure to pursue or create a general public benefit or any specific public benefit identified in its certificate of organization, or (2) the violation of an obligation, duty or standard of conduct under sections 3 to 14, inclusive, of this act or the certificate of organization or operating agreement.

(b) A benefit limited liability company shall not be liable for monetary damages under sections 3 to 14, inclusive, of this act for any failure of the benefit limited liability company to pursue or create a general public benefit or any specific public benefit.

(c) A benefit enforcement proceeding may only be commenced or maintained (1) by the benefit limited liability company, or (2) derivatively in accordance with the provisions of sections 34-271a and 34-271b of the general statutes by (A) a member or group of members that own five per cent or more of the transferable interests of the benefit limited liability company, or (B) other persons as specified in the certificate of organization or operating agreement of the benefit limited liability company.

Sec. 13. (NEW) (Effective October 1, 2017) (a) The members of a benefit limited liability company shall select a third-party standard by which to assess such company's pursuit of a general public benefit and any specific public benefit. Selecting or changing a third-party standard shall require approval by the greater of (1) a majority in interest of the members, or (2) the vote or written consent of the members required by the certificate of organization or operating agreement of the benefit limited liability company to take action under this section.

(b) A benefit limited liability company shall prepare an annual benefit report that includes each of the following: (1) A narrative description of (A) the ways in which the benefit limited liability company pursued a general public benefit during the year and the extent to which a general public benefit was created; (B) both (i) the ways in which the benefit limited liability company pursued any specific public benefit identified in the benefit limited liability company's certificate of organization, and (ii) the extent to which such specific public benefit was created; (C) any circumstances that have hindered the creation by the benefit limited liability company of a general public benefit or any specific public benefit; and (D) the process and rationale for selecting or changing the third-party standard used to prepare the benefit report; (2) an assessment of the overall social and environmental performance of the benefit limited liability company 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 or the change to that standard from the standard used in the most recent prior report; (3) the name of the benefit officer, if any, and the address to which correspondence to the benefit officer may be directed; (4) the opinion of the benefit officer described in subsection (c) of section 10 of this act; and (5) a statement of any connection between the organization that established the third-party standard, its directors or officers or any holder of five per cent or more of the voting power or capital interests in such organization, and the benefit limited liability company, or its members or managers or any holder of five per cent or more of the transferable interests of the benefit limited liability company, including any financial or governance relationship that might materially affect the credibility of the use of the third-party standard.

(c) If, during the year covered by a benefit report, a benefit officer resigned from the position of benefit officer, or was removed from the position of benefit officer, and the benefit officer furnished the benefit limited liability company with a written statement or correspondence concerning the circumstances surrounding the resignation or removal, the benefit report shall include that statement or correspondence as an exhibit.

(d) Neither the benefit report nor the assessment of the performance of the benefit limited liability company in the benefit report required by subdivision (2) of subsection (b) of this section shall be required to be audited or certified by the third-party standards provider.

Sec. 14. (NEW) (Effective October 1, 2017) (a) A benefit limited liability company shall send the annual benefit report prepared pursuant to section 13 of this act to each member and manager (1) not later than one hundred twenty days following the end of each fiscal year of the benefit limited liability company after the first full fiscal year following its organization as a benefit limited liability company, or (2) at the same time that the benefit limited liability company delivers any other annual report to its members.

(b) A benefit limited liability company shall post and maintain each annual benefit report on the public portion of its Internet web site, if any, except that any financial, confidential or proprietary information included in any benefit report may be omitted from the benefit report as posted.

(c) If a benefit limited liability company does not have an Internet web site, the benefit limited liability company shall provide a copy of such company's most recent benefit report, without charge, to any person who requests a copy, but any financial, confidential or proprietary information included in any benefit report may be omitted from such copy.

Sec. 15. Section 33-1351 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2017):

As used in this section and sections 33-1352 to 33-1364, inclusive, as amended by this act:

(1) "Benefit corporation" means a business corporation (A) that has elected to become subject to the provisions of sections 33-1352 to 33-1364, inclusive, as amended by this act, and (B) whose status as a benefit corporation has not been terminated pursuant to section 33-1356, as amended by this act.

(2) "Benefit director" means either (A) the director designated as the benefit director of a benefit corporation pursuant to section 33-1359, or (B) a person with one or more of the powers, duties or rights of a benefit director under section 33-1359 to the extent that such person has been granted all or part of the authority to manage the business and affairs of the corporation by a shareholder agreement that complies with section 33-717.

(3) "Benefit enforcement proceeding" means any claim or action for (A) the failure of a benefit corporation to pursue or create a general public benefit or any specific public benefit purpose set forth in its certificate of incorporation, or (B) the violation of any obligation, duty or standard of conduct under sections 33-1352 to 33-1364, inclusive, as amended by this act.

(4) "Benefit officer" means the individual designated as the benefit officer of a benefit corporation pursuant to section 33-1361.

(5) "Benefit limited liability company" has the same meaning as provided in section 2 of this act.

[(5)] (6) "Business corporation" means a corporation whose internal affairs are governed by chapter 601.

[(6)] (7) "Charitable organization" means (A) any organization that is exempt from federal income tax under Section 501(a) of the [Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, and that the United States Treasury Department has expressly determined, by letter, to be] Code as an organization [that is] described in Section 501(c)(3) of [said Internal Revenue] the Code, or (B) an organization, contributions to which are deductible under Section 170(c)(2) of the Code.

(8) "Code" means the Internal Revenue Code of 1986, or any subsequent internal revenue code of the United States, as amended from time to time.

[(7)] (9) "General public benefit" means a material positive impact on both society and the environment, taken as a whole, as assessed against a third-party standard, from the business and operations of a benefit corporation.

[(8)] (10) "Independent" means having no material relationship with a benefit corporation or a subsidiary of the benefit corporation, provided [a person] an individual who serves as a benefit director or benefit officer does not lack independence solely by serving in such capacity.

[(9)] (11) "Legacy preservation provision" means a provision in the certificate of incorporation adopted in accordance with section 33-1355, as amended by this act.

[(10)] (12) "Material relationship" means a relationship between a person and a benefit corporation or any of its subsidiaries if any of the following apply: (A) The person is, or has been within the last three years, an employee other than a benefit officer of the benefit corporation or a subsidiary; (B) an immediate family member of the person is, or has been within the last three years, an executive officer other than a benefit officer of the benefit corporation or a subsidiary; or (C) there is beneficial or record ownership of five per cent or more of the outstanding shares of the benefit corporation, calculated on the assumption that all outstanding rights to acquire shares in the benefit corporation had been exercised, by (i) the person, or (ii) 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 five per cent or more of the outstanding equity interests, calculated on the assumption that all outstanding rights to acquire equity interests in the entity had been exercised.

[(11)] (13) "Minimum status vote" means (A) in the case of a business corporation, in addition to any other required approval or vote, the satisfaction of the following conditions: (i) The shareholders of every class or series shall be entitled to vote as a separate voting group on the corporate action regardless of a limitation stated in the certificate of incorporation or bylaws on the voting rights of any class or series; and (ii) the corporate action is approved by the vote of shareholders of each class or series entitled to cast at least two-thirds of the votes that shareholders of the class or series are entitled to cast on the action; and (B) in the case of a domestic entity other than a business corporation, in addition to any other required approval, vote or consent, the satisfaction of the following conditions: (i) The holders of each 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 such class or series; and (ii) the action is approved by the vote or written consent of the holders described in subparagraph (B)(i) of this subdivision entitled to cast at least two-thirds of the votes that all of those holders are entitled to cast on the action.

[(12)] (14) "Publicly traded corporation" means a business corporation that has shares listed on a national securities exchange or traded in a market maintained by one or more members of a national securities association.

[(13)] (15) "Specific public benefit" includes: (A) Providing low-income or underserved individuals or communities with beneficial products or services; (B) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; (C) protecting or restoring the environment; (D) improving human health; (E) promoting the arts, sciences or advancement of knowledge; (F) increasing the flow of capital to other benefit corporations or similar entities whose purpose is to benefit society or the environment; and (G) conferring any other particular benefit on society or the environment.

[(14)] (16) "Subsidiary" means, in relation to a person, an entity in which the person owns beneficially or of record fifty per cent or more of the outstanding equity interests, calculated on the assumption that all outstanding rights to acquire shares in the benefit corporation have been exhausted.

[(15)] (17) "Third-party standard" means a recognized standard for defining, reporting and assessing corporate social and environmental performance that: (A) Assesses the effect of its business and operations upon the interests listed in subparagraphs (B), (C), (D) and (E) of subdivision (1) of subsection (a) of section 33-1358; (B) is developed by an entity that is independent; and (C) makes publicly available the following information about the development and revision of the standard: (i) The identity of the directors, officers, material owners, and the governing body of the entity that developed and controls revisions to the standard; (ii) the process by which revisions to the standard and changes to the membership of the governing body are made; and (iii) an accounting of the revenue and sources of financial support for such entity, with sufficient detail to disclose any relationships that could reasonably be considered to present a potential conflict of interest.

Sec. 16. Section 33-1353 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2017):

A benefit corporation shall be incorporated in accordance with the provisions of chapter 601 by filing a certificate of incorporation with the office of the Secretary of the State that states that the corporation is a benefit corporation. The name of each benefit corporation shall identify the corporation as a benefit corporation by including in the name the words "benefit corporation" or the abbreviation "BC" or "B.C.".

Sec. 17. Section 33-1355 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2017):

(a) [A] The shareholders of a benefit corporation may, not earlier than twenty-four months after the date that it became a benefit corporation, adopt a legacy preservation provision by amending its certificate of incorporation to [contain a statement that the corporation is subject to] include a legacy preservation provision. Any such amendment shall be adopted in accordance with the procedures set forth in chapter 601 and [shall] must be approved by the unanimous vote or written consent of the shareholders of every class or series, regardless of any limitation stated in the certificate of incorporation or bylaws on the voting rights of any such class or series.

(b) A dissolved benefit corporation that has adopted a legacy preservation provision shall distribute its remaining property only to one or more (1) charitable organizations, or (2) other benefit limited liability companies or benefit corporations that have adopted [a] legacy preservation [provision] provisions.

Sec. 18. Section 33-1356 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2017):

(a) Except for a benefit corporation that [adopts] has adopted a legacy preservation provision, a benefit corporation may terminate its status as such and cease to be subject to the provisions of sections 33-1352 to 33-1364, inclusive, as amended by this act, by amending its certificate of incorporation to delete any provision stating that such corporation is a benefit corporation. Any such amendment shall be approved by a minimum status vote.

(b) Except for a benefit corporation that [adopts] has adopted a legacy preservation provision, if a benefit corporation is a party to (1) a merger in which (A) the surviving entity will not be a benefit limited liability company or a benefit corporation, or (B) shares of such benefit corporation will be converted into a right to receive shares or other equity interests of an entity that is not a benefit limited liability company or a benefit corporation, or (2) a share exchange in which the shares of the benefit corporation will be exchanged for shares or other equity interests of an entity that is not a benefit limited liability entity or a benefit corporation, the plan of merger or share exchange shall be approved by a minimum status vote.

(c) A benefit corporation that [adopts] has adopted a legacy preservation provision may only be a party to (1) a merger in which (A) the surviving entity will be a benefit corporation that has adopted a legacy preservation provision, or (B) shares of such benefit corporation will be converted into a right to receive shares or other equity interests of a benefit limited liability company or a benefit corporation that has adopted a legacy preservation provision, or (2) a share exchange in which the shares of the benefit corporation will be exchanged for shares or other equity interests of a benefit limited liability company or a benefit corporation that has adopted a legacy preservation provision, and such merger or share exchange is approved by a minimum status vote.

(d) Except for a benefit corporation that [adopts] has adopted a legacy preservation provision, any sale, lease, exchange or other disposition of assets of a benefit corporation, other than a disposition described in section 33-830, that would leave the benefit corporation without a significant continuing business activity, within the meaning of subsection (a) of section 33-831, shall be approved by a minimum status vote. A benefit corporation that [adopts] has adopted a legacy preservation provision shall not enter into a sale, lease, exchange or other disposition of its assets, other than a disposition described in section 33-830, unless the disposition is to one or more (1) charitable organizations, or (2) other benefit limited liability companies or a benefit corporations that have adopted legacy preservation provisions, and such disposition is approved by a minimum status vote.

Sec. 19. Subsection (a) of section 33-1364 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2017):

(a) A benefit corporation shall send its annual benefit report to each shareholder (1) not later than one hundred twenty days following the end of [the] each fiscal year of the benefit corporation after the first full fiscal year following its organization as a benefit corporation, or (2) at the same time that the benefit corporation delivers any other annual report to its shareholders, whichever is earlier.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2017

New section

Sec. 2

October 1, 2017

New section

Sec. 3

October 1, 2017

New section

Sec. 4

October 1, 2017

New section

Sec. 5

October 1, 2017

New section

Sec. 6

October 1, 2017

New section

Sec. 7

October 1, 2017

New section

Sec. 8

October 1, 2017

New section

Sec. 9

October 1, 2017

New section

Sec. 10

October 1, 2017

New section

Sec. 11

October 1, 2017

New section

Sec. 12

October 1, 2017

New section

Sec. 13

October 1, 2017

New section

Sec. 14

October 1, 2017

New section

Sec. 15

October 1, 2017

33-1351

Sec. 16

October 1, 2017

33-1353

Sec. 17

October 1, 2017

33-1355

Sec. 18

October 1, 2017

33-1356

Sec. 19

October 1, 2017

33-1364(a)

Statement of Legislative Commissioners:

In Section 10, "benefit" was added before references to "limited liability company" for consistency and in Section 14(a) "pursuant to section 13 of this act" was added for clarity and consistency.

JUD

Joint Favorable Subst.