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An Act Relating To Corporations; Providing For A Voluntary Designation As A Benefit Corporation.

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MOD HB 040

Legislative URL:
HB 040 on
Emergency Clause:
HPREF [2] HBIC/HJC-HBIC [11] DP-HJC [24] DP [26] PASSED/H (62-3) [18] SCORC/SJC-SCORC [32] DP-SJC [40] DP [47] PASSED/S (33-6) POCKET VETO.

Related Legislators

Bill Sponsor:

Related Documents

HBIC Committee Report
HJC Committee Report
Final House Vote
SCORC Committee Report
SJC Committee Report
Final Senate Vote
Fiscal Impact Report
Final Version

House Bill 40 would allow corporations to remain profit corporations but at the same time be designated as a new class of corporations called “benefit corporations” by amending its bylaws (by a 2/3 vote of shares) and taking certain other steps, including:

  • adding to its purposes statement that the corporation also has the purpose “to create the general public benefit of achieving a material positive impact on society and the environment as assessed against a third-party standard,” and possibly naming a specific purpose if so desired;
  • preparing an annual “benefit report” that will be given to shareholders, posted on the company’s public website (if any), and given to anyone else who requests it (at no charge); and,
  • addressing in the benefit report such items as the progress (or lack thereof) toward the public benefit; certain information regarding the third-party standard; and, its social and environmental performance measured against the third-party standard.

The driving force behind benefit corporations is to make explicit that directors of the benefit corporation may take social and environmental, not just financial, benefits into account in making decisions for the corporation. Under the bill the directors must use a standard of care “as an ordinarily prudent person would use under similar circumstances in a like position.” The bill allows directors to take such factors into consideration as:

  • the interests shareholders, employees, and customers;
  • community and societal factors and the local and global environment;
  • the short-term and long-term interests of the benefit corporation; and,
  • the ability of the benefit corporation to accomplish the general and specific public benefits identified by the benefit corporation.

The bill provides that a benefit corporation is not liable for monetary damages should it fail to pursue or create the public benefit intended and limits the potential pool of plaintiffs in any lawsuit for failure to pursue or create the public benefit, or regarding standards for benefit corporations set forth in this legislation, to certain ownership or director interests in the benefit corporation.

The bill also allows shareholders to be bought out by the benefit corporation upon the shareholder’s dissent to the corporation’s decision to become a benefit corporation.

One potential benefit might be that it would provide corporations with greater latitude of purpose than simple profit maximization.

Outcome: HB 40 passed the House (62-3) and passed the Senate (33-6) but was pocket vetoed by the Governor.

Date of Summary:  1/15/13; Updated 5/16/13