Chapter 604 - Benefit Corporations

Sec. 33-1351. Definitions. As used in this section and sections 33-1352 to 33-1364, inclusive:

(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, and (B) whose status as a benefit corporation has not been terminated pursuant to section 33-1356.

(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.

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

(5) “Business corporation” means a corporation whose internal affairs are governed by chapter 601.

(6) “Charitable organization” means 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 an organization that is described in Section 501(c)(3) of said Internal Revenue Code.

(7) “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) “Independent” means having no material relationship with a benefit corporation or a subsidiary of the benefit corporation, provided a person who serves as a benefit director or benefit officer does not lack independence solely by serving in such capacity.

(9) “Legacy preservation provision” means a provision in the certificate of incorporation adopted in accordance with section 33-1355.

(10) “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) “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) “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) “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) “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.

(15) “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.

(P.A. 14-217, S. 141.)

Sec. 33-1352. Construction of statutes. (a) The provisions of this section and sections 33-1353 to 33-1364, inclusive, shall be applicable to all benefit corporations.

(b) The provisions of this section and sections 33-1353 to 33-1364, inclusive, shall not create an implication that a contrary or different rule of law is applicable to a business corporation that is not a benefit corporation. The provisions of this section and sections 33-1353 to 33-1364, inclusive, shall not affect a statute or rule of law that is applicable to a business corporation that is not a benefit corporation.

(c) Except as otherwise provided in this section and sections 33-1353 to 33-1364, inclusive, the provisions of chapter 601 shall be generally applicable to all benefit corporations. The specific provisions of this section and sections 33-1353 to 33-1364, inclusive, shall control over the general provisions of chapter 601.

(d) A provision of the certificate of incorporation or bylaws of a benefit corporation may not limit, be inconsistent with, or supersede a provision of this section or sections 33-1353 to 33-1364, inclusive.

(e) Nothing in this section or sections 33-1353 to 33-1364, inclusive, 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 corporation 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 corporation, (2) be construed as imposing or creating a charitable use, interest or restriction on any property or assets of a benefit corporation, or (3) deprive the Attorney General of jurisdiction over a benefit corporation under any other applicable law.

(P.A. 14-217, S. 142.)

Sec. 33-1353. Incorporation of benefit corporation. 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.

(P.A. 14-217, S. 143.)

Sec. 33-1354. Election of benefit corporation status. (a) A business corporation that is not a benefit corporation may elect to become a benefit corporation by amending its certificate of incorporation to contain, in addition to matters required by section 33-636, a statement that the corporation is a benefit corporation. Any such amendment to the certificate of incorporation shall be approved by a minimum status vote.

(b) If an entity that is not a benefit corporation is a party to (1) a merger in which (A) the surviving entity will be a benefit corporation, or (B) shares or other equity interests in such entity will be converted into a right to receive shares of a benefit corporation, or (2) a share exchange with a benefit corporation in which the shares or other equity interests of the entity will be exchanged for shares of a benefit corporation, the plan of merger or share exchange shall be approved by a minimum status vote. If an entity other than a business corporation is a party to any such transaction and a minimum status vote by the equity owners of such entity is required for approval of the transaction, the equity owners of such entity shall be entitled to appraisal rights under the procedures set forth in chapter 601 as if the entity were a business corporation.

(P.A. 14-217, S. 144.)

Sec. 33-1355. Legacy preservation provision. (a) 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 a legacy preservation provision. Any such amendment shall be adopted in accordance with the procedures set forth in chapter 601 and shall 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 corporations that have adopted a legacy preservation provision.

(P.A. 14-217, S. 145.)

Sec. 33-1356. Termination of benefit corporation status. (a) Except for a benefit corporation that adopts 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, 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 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 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 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 corporation, the plan of merger or share exchange shall be approved by a minimum status vote.

(c) A benefit corporation that adopts 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 of 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 of 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 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 shall be approved by a minimum status vote. A benefit corporation that adopts 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 corporations that have adopted legacy preservation provisions, and such disposition is approved by a minimum status vote.

(P.A. 14-217, S. 146.)

Sec. 33-1357. Purposes. (a) A benefit corporation shall have a purpose of creating a general public benefit. Such purpose shall be in addition to any purpose under chapter 601.

(b) The certificate of incorporation of a benefit corporation may identify one or more specific public benefits as a purpose for such benefit corporation to create in addition to any purpose under chapter 601 and subsection (a) of this section. The identification of a specific public benefit under this subsection shall not limit the obligation of a benefit corporation 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 corporation.

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

(P.A. 14-217, S. 147.)

Sec. 33-1358. Standards of conduct for directors. (a) In discharging the duties of their respective positions and considering the best interests of the benefit corporation, the board of directors, any committee of the board and the individual directors of the benefit corporation:

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

(A) The shareholders of the benefit corporation;

(B) The employees and workforce of the benefit corporation, its subsidiaries and its suppliers;

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

(D) Community and societal factors, 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 such corporation's long-term plans and the possibility that such 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;

(2) May consider (A) in the circumstances described in subsection (g) of section 33-756, the interests referred to in said subsection, and (B) other pertinent factors or the interests of any other group that the board of directors, any committee of the board and the directors of the benefit corporation 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 incorporation for such benefit corporation states an intention to give priority to certain interests related to the accomplishment of the corporation's general public benefit purpose or of a specific public benefit purpose identified in the corporation's certificate of incorporation.

(b) The consideration of interests and factors in the manner required by subsection (a) of this section (1) shall not constitute a violation of section 33-756, and (2) is in addition to the power of directors to consider the interests and factors listed in subsection (d) of section 33-756 in the circumstances described in said subsection.

(c) A director shall not be personally liable for (1) any act or omission in the course of performing the duties of a director under subsection (a) of this section if the director performed the duties of the position in compliance with section 33-756 and this section, or (2) failure of the benefit corporation to pursue or create a general public benefit or any specific public benefit.

(d) A director 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 a benefit corporation based on the status of such person as a beneficiary.

(P.A. 14-217, S. 148; P.A. 17-108, S. 24.)

History: P.A. 17-108 amended Subsec. (a)(2)(A) by replacing “subsection (d) of section 33-756” with “subsection (g) of section 33-756”.

Sec. 33-1359. Benefit director. (a) The board of directors of a benefit corporation that is a publicly traded corporation shall, and the board of any other benefit corporation may, include a director who shall (1) be designated the benefit director, and (2) have, 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 sections 33-1352 to 33-1364, inclusive.

(b) The benefit director shall be elected, and may be removed, in the manner provided under chapter 601. The benefit director shall be an individual who is independent. The benefit director may serve as the benefit officer at the same time as serving as the benefit director. The certificate of incorporation or bylaws or a shareholder agreement of a benefit corporation may prescribe additional qualifications of the benefit director that are consistent with this subsection.

(c) The benefit director shall prepare, and the benefit corporation shall include in the annual benefit report to its shareholders required by section 33-1363, the opinion of the benefit director on each of the following: (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, (2) whether the directors and officers complied with subsection (a) of section 33-1358 and subsection (a) of section 33-1360, respectively, and (3) if, in the opinion of the benefit director, the benefit corporation or its directors or officers failed to comply with subsection (a) of section 33-1358 or subsection (a) of section 33-1360, a description of the ways in which the benefit corporation or the corporation's directors or officers failed to comply.

(d) The act or omission of an individual in the capacity of a benefit director shall constitute for all purposes an act or omission of that individual in the capacity of a director of the benefit corporation.

(e) Regardless of whether the certificate of incorporation of a benefit corporation includes a provision limiting the personal liability of directors, as authorized by chapter 601, a benefit director shall not be personally liable for any act or omission in the capacity of a benefit director unless the act or omission constitutes self-dealing, wilful misconduct or a knowing violation of law.

(P.A. 14-217, S. 149.)

Sec. 33-1360. Standards of conduct for officers. (a) Each officer of a benefit corporation shall consider the interests and factors described in subsection (a) of section 33-1358 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 a general public benefit or any specific public benefit identified in the certificate of incorporation of the benefit corporation.

(b) The consideration of interests and factors in the manner described in subsection (a) of this section shall not constitute a violation of section 33-765.

(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 section 33-765 and this section, or (2) the failure of the benefit corporation to pursue or create a general public benefit or any specific public benefit.

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

(P.A. 14-217, S. 150.)

Sec. 33-1361. Benefit officer. A benefit corporation may designate a benefit officer. A benefit officer shall have (1) the powers and duties relating to the purpose of the corporation to create a general public benefit or any specific public benefit provided (A) by the bylaws, 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 33-1363.

(P.A. 14-217, S. 151.)

Sec. 33-1362. Right of action. Benefit enforcement proceeding. (a) Except in a benefit enforcement proceeding, no person may bring an action or assert a claim against a benefit corporation or its directors or officers with respect to (1) the failure to pursue or create a general public benefit or any specific public benefit identified in its certificate of incorporation, or (2) the violation of an obligation, duty or standard of conduct under sections 33-1352 to 33-1364, inclusive.

(b) A benefit corporation shall not be liable for monetary damages under sections 33-1352 to 33-1364, inclusive, for any failure of the benefit corporation to pursue or create a general public benefit or any specific public benefit.

(c) A benefit enforcement proceeding may be commenced or maintained only (1) directly by the benefit corporation, or (2) derivatively in accordance with the provisions of chapter 601 by (A) a person or group of persons that owns beneficially or of record not less than five per cent of the total number of shares of a class or series outstanding at the time of the act or omission complained of, (B) a person or group of persons that owns beneficially or of record ten per cent or more of the outstanding equity interests in an entity of which the benefit corporation is a majority-owned subsidiary at the time of the act or omission complained of, or (C) other persons as specified in the certificate of incorporation or bylaws of the benefit corporation.

(d) For purposes of this section, a person is the beneficial owner of shares or equity interests if the shares or equity interests are held in a voting trust or by a nominee on behalf of the beneficial owner.

(P.A. 14-217, S. 152.)

Sec. 33-1363. Third-party standard. Preparation of annual benefit report. (a) A benefit corporation shall select a third-party standard by which to assess such corporation's pursuit of a general public benefit and any specific public benefit. Selecting or changing a third-party standard shall require approval by (1) the greater of (A) a majority of all the directors in office when the action is taken, or (B) the number of directors required by the certificate of incorporation or bylaws of the benefit corporation to take action under this section, or (2) the vote or written consent of the shareholders required by the certificate of incorporation or bylaws of the benefit corporation to take action under this section.

(b) A benefit corporation shall prepare an annual benefit report that includes each of the following:

(1) A narrative description of (A) the ways in which the benefit corporation 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 corporation pursued any specific public benefit identified in the benefit corporation's certificate of incorporation, and (ii) the extent to which such specific public benefit was created; (C) any circumstances that have hindered the creation by the benefit corporation 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 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 or the change to that standard from the standard used in the most recent prior report;

(3) The name of the benefit director and the benefit officer, if any, and the address to which correspondence to the benefit director or the benefit officer may be directed;

(4) The compensation paid by the benefit corporation during the year to each director in his or her capacity as a director;

(5) The opinion of the benefit director described in subsection (c) of section 33-1359; and

(6) 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 the organization, and the benefit corporation, its directors or officers or any holder of five per cent or more of the outstanding shares of the benefit corporation, 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 director or benefit officer resigned from or refused to stand for reelection to the position of benefit director or benefit officer, or was removed from the position of benefit director or benefit officer, and the benefit director or benefit officer furnished the benefit corporation with a written statement or correspondence concerning the circumstances surrounding the resignation, refusal 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 corporation 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.

(P.A. 14-217, S. 153.)

Sec. 33-1364. Availability of annual benefit report. (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 fiscal year of the benefit corporation, or (2) at the same time that the benefit corporation delivers any other annual report to its shareholders, whichever is earlier.

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

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

(P.A. 14-217, S. 154.)

Secs. 33-1365 to 33-1999. Reserved for future use.

Note: Chapters 605 to 607 are also reserved for future use.