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SB 096: VOLUNTARY DESIGNATION AS BENEFIT CORPORATION

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

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MILD SB 096
VOLUNTARY DESIGNATION AS BENEFIT CORPORATION

Legislative URL:
SB 096 on nmlegis.gov
Emergency Clause:
No
Germane:
N/A
Location:
SCORC
Action:
SPREF [3] SCORC/SJC-SCORC API.
Issue(s):

Related Legislators

Bill Sponsor:

Related Documents

Downloads:
Introduced
Fiscal Impact Report

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Upcoming:
Summary

Section 53-12-2(A) NMSA 1978 requires in part that articles of incorporation shall include the purpose for which the corporation is organized. This bill allows a corporation, including a professional corporation, to elect to be designated as a “benefit corporation” with the stated purpose (in addition to the purpose for with it was organized) of achieving a material positive impact on society and the environment.

 

The amendments to the articles of incorporation that relate to the designation or termination of the

designation of the benefit corporation or the general public benefit or a specific public benefit of the corporation shall only be adopted upon receiving the affirmative vote of the holders of a two-thirds majority of the shares entitled to vote.

 

A corporation that elects the designation of a benefit corporation shall:

(1)    include a statement in its articles of incorporation that it is a benefit corporation;

(2)    have the added purpose of achieving a material positive impact on society and the environment, as assessed against a third-party standard, optionally including a specific public benefit;

(3)    prepare an annual benefit report that:

  • describes the corporation’s progress or lack of progress in achieving the general public benefit or specific public benefit stated in the articles of incorporation;
  • describes the process and rationale for selecting or changing the third-party standard used to measure achieving the general public benefit or a specific public benefit;
  • assesses the overall social and environmental performance of the benefit corporation against a third-party standard;
  • identifies each member of the board of directors and the duties and compensation as a director; and
  • discloses any connection with the entity that established the third-party standard used to assess the general public benefit or a specific public benefit.

(4)    provide the benefit report to each shareholder at the time it is due; and

(5)    publish the benefit report on the public portion of its internet web site, if any, or provide a copy free of charge to any person that requests the benefit report.

 

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, including social and conservation goals, than simple profit maximization without being subject to lawsuits by shareholders. These types of companies are sometimes called “companies with a conscience.”