H.F. 2154 Section 1. NEW SECTION . 490.102A Benefit corporation. 1 A corporation may incorporate as a benefit corporation 2 as provided in chapter 490B. A benefit corporation shall be 3 subject to this chapter as a corporation, except as otherwise 4 provided in chapter 490B. 5 SUBCHAPTER I 6 PRELIMINARY PROVISIONS 7 Sec. 2. NEW SECTION . 490B.101 Short title. 8 This chapter is entitled and may be cited as the “Iowa 9 Benefit Corporation Act” . 10 Sec. 3. NEW SECTION . 490B.102 Application and effect of 11 chapter. 12 1. General rule. This chapter shall be applicable to all 13 benefit corporations. 14 2. Application of business corporation law generally. The 15 existence of a provision of this chapter shall not of itself 16 create any implication that a contrary or different rule of law 17 is or would be applicable to a business corporation organized 18 under chapter 490 that is not a benefit corporation. This 19 chapter shall not affect any statute or rule of law that is or 20 would be applicable to a business corporation organized under 21 chapter 490 that is not a benefit corporation as provided in 22 this chapter. 23 3. Laws applicable to benefit corporations. Except as 24 otherwise provided in this chapter, a benefit corporation shall 25 be subject to the provisions of chapter 490. However, the 26 specific provisions of this chapter as applied to a benefit 27 corporation shall control over the general provisions or 28 conflicting provisions of chapter 490. 29 4. Organic records may not be inconsistent. A provision 30 of the articles of incorporation or bylaws of a benefit 31 corporation shall not relax, be inconsistent with, or supersede 32 any provision of this chapter. 33 Sec. 4. NEW SECTION . 490B.103 Definitions. 34 As used in this chapter, unless the context otherwise 35 -1- LSB 5373YH (4) 84 da/nh 1/ 15

H.F. 2154 requires: 1 1. “Benefit corporation” means a business corporation 2 organized and incorporated under chapter 490 that has elected 3 to become subject to this chapter and whose status as a benefit 4 corporation under this chapter has not been terminated as 5 provided in this subchapter. 6 2. “Benefit director” means a director designated as the 7 benefit director of a benefit corporation as provided in 8 section 490B.302. 9 3. “Benefit enforcement proceeding” means a claim or action 10 brought directly by a benefit corporation, or derivatively on 11 behalf of a benefit corporation, against a director or officer 12 for any of the following: 13 a. A failure to pursue the general public benefit purpose of 14 the benefit corporation or any specific public benefit purpose 15 set forth in its articles. 16 b. A violation of a duty or standard of conduct under this 17 chapter. 18 4. “Benefit officer” means an officer of a benefit 19 corporation, if any, as provided in section 490B.304. 20 5. “Business corporation” or “corporation” means a 21 corporation organized and incorporated under chapter 490. 22 6. “General public benefit” means a material positive impact 23 on society or the environment, by the operations of a benefit 24 corporation taken as a whole, as measured by a third-party 25 standard, through activities that promote a general public 26 benefit or any specific public benefit or some combination of 27 specific public benefits. 28 7. a. “Independent” means that a person does not have a 29 material relationship with a benefit corporation or any of 30 its subsidiaries, either directly as a shareholder, partner, 31 member, or other owner or as a director, officer, or other 32 manager of an association that has a material relationship with 33 the benefit corporation or any of its subsidiaries. 34 b. A person may be “independent” even if the person serves 35 -2- LSB 5373YH (4) 84 da/nh 2/ 15

H.F. 2154 as a benefit director or benefit officer as provided in this 1 chapter. 2 c. A material relationship between a person and a benefit 3 corporation or any of its subsidiaries shall be conclusively 4 presumed to exist if one or more of the following applies: 5 (1) The person is, or has been within the last three 6 years, an employee of the benefit corporation or any of its 7 subsidiaries, other than as a benefit officer. 8 (2) An immediate family member of the person is, or has 9 been within the last three years, an executive officer, other 10 than a benefit officer, of the benefit corporation or any of 11 its subsidiaries. 12 (3) The person, or an association of which the person 13 is a director, officer, or other manager, owns beneficially 14 or of record five percent or more of the outstanding equity 15 interest, or owns beneficially or of record five percent or 16 more of the outstanding shares of the benefit corporation. A 17 percentage of ownership in an association shall be calculated 18 as if all outstanding rights to acquire equity interests in the 19 association had been exercised. 20 8. “Minimum status vote” means that, in addition to any 21 other approval or vote required by chapter 490 or by the 22 articles of incorporation of a benefit corporation or a bylaw 23 adopted by a benefit corporation pursuant to chapter 490, all 24 of the following apply: 25 a. The holders of shares of every class or series shall 26 be entitled to vote on the corporate action regardless of any 27 limitation on the voting rights of any class or series stated 28 in the articles of incorporation or bylaws. 29 b. The corporate action must be approved by vote of the 30 shareholders of each class or series entitled to cast votes by 31 at least two-thirds of the votes that all shareholders of the 32 class or series are entitled to cast thereon. 33 9. “Specific public benefit” includes any of the following: 34 a. Providing low-income or underserved individuals or 35 -3- LSB 5373YH (4) 84 da/nh 3/ 15

H.F. 2154 communities with beneficial products or services. 1 b. Promoting economic opportunity for individuals or 2 communities beyond the creation of jobs in the normal course 3 of business. 4 c. Preserving the environment. 5 d. Improving human health. 6 e. Promoting the arts, sciences, or advancement of 7 knowledge. 8 f. Increasing the flow of capital to entities with a public 9 benefit purpose. 10 g. Accomplishing any other particular benefit for society 11 or the environment. 12 10. “Subsidiary” means an entity in which fifty or more of 13 the entity’s outstanding equity interest is owned or otherwise 14 held by another person. A percentage of ownership in an 15 association shall be calculated as if all outstanding rights to 16 acquire equity interests in the association had been exercised. 17 11. “Third-party standard” means a recognized standard 18 for defining, reporting, and assessing corporate social or 19 environmental performance that is all of the following: 20 a. Developed by a person that is independent of the benefit 21 corporation. 22 b. Transparent because the following information about the 23 standard is publicly available: 24 (1) The factors considered when measuring the performance 25 of a business. 26 (2) The relative weighting of those factors. 27 (3) The identity of each person who developed and controlled 28 changes to the standard and the process by which those changes 29 were made. 30 Sec. 5. NEW SECTION . 490B.104 Formation of benefit 31 corporations. 32 A benefit corporation shall be organized in accordance 33 with chapter 490 except that its articles of incorporation 34 as provided in section 490.202 shall also state that it is a 35 -4- LSB 5373YH (4) 84 da/nh 4/ 15

H.F. 2154 benefit corporation. 1 Sec. 6. NEW SECTION . 490B.105 Election of an existing 2 business corporation to become a benefit corporation. 3 1. Amendment. A business corporation may become a benefit 4 corporation under this chapter by amending its articles of 5 incorporation so that the articles contain, in addition to 6 the requirements of section 490.202, a statement that the 7 corporation is a benefit corporation. The amendment shall not 8 be effective unless it is adopted by at least a minimum status 9 vote. 10 2. Fundamental transactions. A business corporation that 11 is not a benefit corporation may be a party to a merger, 12 share exchange, or conversion in which the surviving, new or 13 resulting business corporation is a benefit corporation. In 14 that case, the plan of merger or share exchange or the plan of 15 conversion, as provided in chapter 490, division XI, shall not 16 be effective unless it is adopted by the business corporation 17 by a minimum status vote. 18 Sec. 7. NEW SECTION . 490B.106 Termination of benefit 19 corporation status. 20 1. Amendment. A business corporation may terminate its 21 status as a benefit corporation and cease to be subject to 22 this chapter by amending its articles of incorporation to 23 delete the provision required to be included in the articles of 24 incorporation by section 490B.104 or 490B.105. The termination 25 of status must be stated in the articles of incorporation 26 as provided in section 490.202. The amendment shall not be 27 effective unless it is adopted by at least a minimum status 28 vote. 29 2. Fundamental transaction. If any plan adopted under 30 chapter 490 would have the effect of terminating the status of 31 a business corporation as a benefit corporation, the plan shall 32 not be effective unless it is adopted by a minimum status vote. 33 SUBCHAPTER II 34 CORPORATE PURPOSE 35 -5- LSB 5373YH (4) 84 da/nh 5/ 15

H.F. 2154 Sec. 8. NEW SECTION . 490B.201 Corporate purpose. 1 1. General public benefit purpose. A benefit corporation 2 shall have the purpose of creating a general public benefit. 3 This purpose is in addition to, and may be a limitation on, 4 its purpose under section 490.301 and any specific purpose set 5 forth in its articles of incorporation under subsection 2. 6 2. Optional specific public benefit purpose. The articles 7 of incorporation of a benefit corporation may identify one 8 or more specific public benefits that it is the purpose 9 of the benefit corporation to create in addition to the 10 purposes specified pursuant to subsection 1 and section 11 490.301. The identification of a specific public benefit under 12 this subsection does not limit the obligation of a benefit 13 corporation to create a general public benefit as provided in 14 subsection 1. 15 3. Effect of purposes. The creation of a general public 16 benefit as provided in subsection 1 and any specific public 17 benefit as provided in subsection 2 is in the best interests of 18 the benefit corporation. 19 4. Amendment. A benefit corporation may amend its articles 20 of incorporation as provided in chapter 490, division X, to 21 add, amend, or delete a reference to a specific public benefit. 22 However, the amendment is not effective unless it is adopted 23 by a minimum status vote. The benefit corporation shall 24 amend its bylaws as necessary to comply with its articles of 25 incorporation. 26 SUBCHAPTER III 27 ACCOUNTABILITY 28 Sec. 9. NEW SECTION . 490B.301 Standard of conduct for 29 directors. 30 1. Required considerations. Notwithstanding the 31 applicability of section 490.302 or 490.303, the members of 32 the board of directors of a benefit corporation, including 33 when acting as a board, as a member of a committee of the 34 board of directors, or as an individual director of the 35 -6- LSB 5373YH (4) 84 da/nh 6/ 15

H.F. 2154 benefit corporation, when discharging their respective duties 1 shall consider all of the following when considering the best 2 interests of the benefit corporation: 3 a. The director shall consider the effects of any action 4 considered by the benefit corporation upon all of the 5 following: 6 (1) The shareholders of the benefit corporation. 7 (2) The employees and workforce of the benefit corporation. 8 (3) The subsidiaries and suppliers of the benefit 9 corporation. 10 (4) The interests of customers as beneficiaries of the 11 benefit corporation. 12 (5) Any community and societal considerations impacted 13 by the action, including impacts upon any community in which 14 offices or facilities of the benefit corporation or its 15 subsidiaries or suppliers are located. 16 (6) The local and global environment. 17 (7) The short-term and long-term interests of the benefit 18 corporation, including benefits that may accrue to the benefit 19 corporation from its long-term plans and the possibility 20 that these interests may be best served by the continued 21 independence of the benefit corporation. 22 b. The director may consider any of the following: 23 (1) The resources, intent, and conduct, including past, 24 stated, and potential conduct of any person seeking to acquire 25 control of the corporation. 26 (2) Any other pertinent factors or the interests of any 27 other group that the director deems appropriate. 28 c. The director shall not be required to give priority to 29 the interests of any particular person or group referred to in 30 paragraph “a” or “b” over the interests of any other person or 31 group unless the benefit corporation has stated its intention 32 to give priority to interests related to a specific public 33 benefit purpose identified in its articles of incorporation. 34 2. Coordination with other provisions of law. 35 -7- LSB 5373YH (4) 84 da/nh 7/ 15

H.F. 2154 a. The consideration of interests or factors as required by 1 subsection 1, or action based on such consideration, is not a 2 violation of section 490.830. 3 b. The consideration of such interests or factors shall 4 be in addition to the ability of directors to do all things 5 necessary or convenient to carry out the business and affairs 6 of the benefit corporation as provided in section 490.302 or 7 490.303. 8 3. Exoneration from liability. A director is not liable for 9 any action taken as a director if the director performed the 10 duties of his or her office in compliance with section 490.830 11 and this section. 12 Sec. 10. NEW SECTION . 490B.302 Benefit director. 13 1. General rule. The board of directors of a benefit 14 corporation shall include one director who shall be designated 15 by the board as the benefit director. The benefit director 16 shall have, in addition to all of the powers, duties, 17 rights, and immunities of the other directors of the benefit 18 corporation as provided in chapter 490, including section 19 490.801, the powers, duties, rights, and immunities provided 20 in this subchapter. 21 2. Election, removal, and qualifications. A benefit director 22 shall be elected, and may be removed, in the same manner as 23 other directors as provided in chapter 490, division VIII. 24 a. The benefit director shall be an individual who is 25 independent. 26 b. The benefit director may serve as the benefit officer at 27 the same time as serving as the benefit director. 28 c. The articles of incorporation or bylaws of the benefit 29 corporation may prescribe additional qualifications of the 30 benefit director not inconsistent with this subchapter. 31 3. Annual compliance verification statement. A benefit 32 director shall prepare a benefit compliance verification 33 statement as provided in this subsection. 34 a. The benefit compliance verification statement shall 35 -8- LSB 5373YH (4) 84 da/nh 8/ 15

H.F. 2154 be an opinion rendered by the benefit director that during 1 the reporting period all of the following requirements were 2 satisfied: 3 (1) The benefit corporation acted in accordance with 4 its general public benefit purpose, and any specific, public 5 benefit purpose, as provided in section 490B.201 in all 6 material respects. 7 (2) The directors and officers of the benefit corporation 8 complied with section 490B.301, subsection 1, and section 9 490B.303, subsection 1. 10 b. If the requirements provided in paragraph “a” have not 11 been satisfied, the benefit compliance verification statement 12 shall include a description of the ways in which the benefit 13 corporation or its directors or officers failed to satisfy 14 those requirements. 15 4. Status of actions. An act of an individual in the 16 capacity of a benefit director shall constitute an act of 17 that individual in the capacity of a director of the benefit 18 corporation. 19 5. Alternative governance arrangements. To the extent that 20 section 490.732 or 490.801 authorizes a person or persons other 21 than the benefit corporation’s board of directors to exercise 22 the authority of, and the business and affairs of, the benefit 23 corporation, then the articles of incorporation or bylaws of 24 the benefit corporation must provide for the designation of a 25 person with the powers, duties, rights, and immunities of a 26 benefit director. 27 6. Exoneration from liability. Regardless of whether the 28 articles of incorporation or bylaws of a benefit corporation 29 include a provision eliminating or limiting the liability of 30 its board of directors, a person who is a benefit director 31 shall not be liable for any act or omission in the person’s 32 capacity as a benefit director, unless the person’s act or 33 omission constitutes self-dealing, willful misconduct, or a 34 knowing violation of law. 35 -9- LSB 5373YH (4) 84 da/nh 9/ 15

H.F. 2154 Sec. 11. NEW SECTION . 490B.303 Standard of conduct for 1 officers. 2 1. General rule. An officer of a benefit corporation 3 shall consider the interests and factors described in section 4 490B.301, subsection 1, in the manner provided in that 5 subsection when all of the following apply: 6 a. The officer has discretion to act with respect to a 7 matter. 8 b. It reasonably appears to the officer that the matter may 9 have a material effect on any of the following: 10 (1) The creation of a general public benefit or specific 11 public benefit of the benefit corporation as provided in 12 section 490B.201. 13 (2) Any of the interests or factors described in section 14 490B.301, subsection 1. 15 2. Coordination with other provisions of law. An officer’s 16 use of discretion as provided in subsection 1 shall not 17 constitute a violation of section 490.842. 18 3. Exoneration from liability. An officer is not liable for 19 any action taken as an officer if the officer performed the 20 duties of the position in compliance with sections 490.841 and 21 490.842 and this section. 22 Sec. 12. NEW SECTION . 490B.304 Benefit officer. 23 1. A benefit corporation may have an officer designated the 24 “benefit officer” as provided in this section. 25 2. A benefit officer shall have such authority and 26 shall perform such duties in the management of the benefit 27 corporation relating to the purpose of the corporation to 28 create a general or specific public benefit pursuant to section 29 490B.201, as may be provided by any of the following: 30 a. The articles of incorporation. 31 b. The bylaws. 32 c. A resolution or order of the board of directors as 33 authorized in chapter 490. 34 3. A benefit officer shall prepare a benefit report required 35 -10- LSB 5373YH (4) 84 da/nh 10/ 15

H.F. 2154 by section 490B.401. 1 Sec. 13. NEW SECTION . 490B.305 Right of action. 2 1. General rule. The duties of directors and officers of a 3 benefit corporation under this chapter, and the general public 4 benefit purpose and any specific public benefit purpose of a 5 benefit corporation as provided in section 490B.201, may be 6 enforced only in a benefit enforcement proceeding. A person 7 shall not bring an action or assert a claim against a benefit 8 corporation or its directors or officers with respect to the 9 duties of directors and officers under this chapter and the 10 general benefit public purpose and any specific public benefit 11 purpose of the benefit corporation as provided in section 12 490B.201, except in a benefit enforcement proceeding. 13 2. Parties with standing. A benefit enforcement proceeding 14 may be commenced or maintained only by any of the following: 15 a. Directly by the benefit corporation. 16 b. Derivatively by any of the following: 17 (1) Notwithstanding section 490.741, a shareholder of the 18 benefit corporation who was a shareholder of the corporation 19 at the time of the act or omission complained of or became a 20 shareholder through transfer by operation of law from one who 21 was a shareholder at that time. 22 (2) A director of the benefit corporation. 23 (3) A person or group of persons that owns beneficially or 24 of record ten percent or more of the equity interests in an 25 entity of which the benefit corporation is a subsidiary. 26 (4) A person or a group of persons as may be specified in 27 the articles or bylaws of the benefit corporation. 28 SUBCHAPTER IV 29 TRANSPARENCY 30 Sec. 14. NEW SECTION . 490B.401 Annual benefit report. 31 1. General rule. Each year, a benefit corporation shall 32 deliver to each shareholder an annual benefit report. For each 33 reporting year the benefit report shall include all of the 34 following: 35 -11- LSB 5373YH (4) 84 da/nh 11/ 15

H.F. 2154 a. A narrative description of all of the following: 1 (1) The ways in which the benefit corporation pursued a 2 general public benefit stated its articles of incorporation 3 as provided in section 490B.201 and the extent to which the 4 general public benefit was created. 5 (2) The ways in which the benefit corporation pursued or 6 created any specific public benefit stated in its articles of 7 incorporation as provided in section 490B.201 and the extent to 8 which that specific public benefit was created. 9 b. Any circumstances that hindered the creation by the 10 benefit corporation of a general public benefit or specific 11 public benefit during the reporting year as stated in its 12 articles of incorporation as provided in section 490B.201. 13 c. An assessment of the social or environmental performance 14 of the benefit corporation, prepared in accordance with a 15 third-party standard applied consistently with any application 16 of that standard in prior benefit reports or accompanied by an 17 explanation of the reasons for any inconsistent application. 18 d. The name of the benefit director and the name of 19 the benefit officer, if any, and the address to which 20 correspondence to each of them may be directed. 21 e. The compensation paid by the benefit corporation during 22 the year to each director acting in that capacity. 23 f. The name of each person who owns five percent or more 24 of the outstanding shares of the benefit corporation either 25 beneficially, to the extent known to the benefit corporation 26 without independent investigation, or of record. 27 g. A compliance verification statement prepared by the 28 benefit director as provided in section 490B.302. 29 2. Timing of report. The benefit report shall be delivered 30 annually to each shareholder within one hundred twenty days 31 following the end of the fiscal year of the benefit corporation 32 or at the same time that the benefit corporation delivers any 33 other annual report to its shareholders. 34 3. Internet posting. A benefit corporation shall post the 35 -12- LSB 5373YH (4) 84 da/nh 12/ 15

H.F. 2154 corporation’s most recent benefit report on the public portion 1 of the corporation’s internet site, if any. However, the 2 benefit corporation may omit compensation paid to directors 3 and any financial or proprietary information included in the 4 benefit report as posted. 5 4. Filing of report. Concurrently with the delivery of the 6 benefit report to shareholders pursuant to subsection 2, the 7 benefit corporation must deliver a copy of the benefit report 8 to the secretary of state for filing. However, the benefit 9 corporation may omit compensation paid to directors of the 10 board of directors and any financial or proprietary information 11 included in the benefit report filed under this section. The 12 secretary of state shall charge a fee of seventy dollars for 13 filing a benefit report. 14 5. Failure to file report. If a benefit corporation does 15 not deliver a benefit report to the secretary of state for a 16 period of two years, the secretary of state may prepare and 17 file a statement that the corporation has forfeited its status 18 as a benefit corporation and is no longer subject to this 19 chapter. If the corporation subsequently delivers a benefit 20 report to the secretary of state for filing, the status of the 21 corporation as a benefit corporation shall be automatically 22 reinstated upon the filing of the benefit report by the 23 secretary and the corporation shall again be subject to this 24 chapter. 25 EXPLANATION 26 GENERAL. This bill allows a business corporation to 27 incorporate and operate as a new but related business entity 28 referred to as a benefit corporation, generally subject to the 29 Iowa business corporation Act (Code chapter 490) except as 30 provided in the bill’s new Code chapter (Code chapter 490B). 31 The bill provides that a benefit corporation must have a 32 corporate purpose of creating a public benefit which provides 33 some material positive impact on society or the environment 34 as assessed against a third-party standard. Its board of 35 -13- LSB 5373YH (4) 84 da/nh 13/ 15

H.F. 2154 directors, in addition to its fiduciary duty to make decisions 1 based on financial interests, must also consider factors 2 associated with furthering a public benefit. The bill also 3 requires the board to provide and publish an annual report 4 to its shareholders explaining how it furthered that public 5 benefit. 6 ARTICLES OF INCORPORATION. The bill provides that a benefit 7 corporation’s articles of incorporation may list one or more 8 specific public purposes, including providing low-income or 9 underserved individuals or communities with beneficial products 10 or services, promoting economic opportunity beyond the creation 11 of jobs in the normal course of business, preserving the 12 environment, improving human health, promoting the arts or 13 sciences, or increasing the flow of capital to entities with a 14 public benefit purpose. 15 ELECTION TO ATTAIN OR TERMINATE BENEFIT CORPORATE STATUS. 16 A business corporation attains or terminates its status as a 17 benefit corporation by shareholder election. The election 18 must be by an affirmative vote of at least two-thirds of each 19 of the corporation’s classes of shareholders, or a higher 20 vote threshold if required in its articles of incorporation 21 (referred to as a “minimum status vote”). 22 BOARD ACTION. The bill requires the board of directors to 23 consider the effects of its actions upon its shareholders, 24 employees, and workforce; subsidiaries and suppliers; customers 25 as beneficiaries of the general or specific public benefit 26 purposes; the impacts upon the community; the local and global 27 environment; and the short-term and long-term interests of the 28 benefit corporation. In addition, the directors may consider 29 resources, intent, and conduct of any person seeking to acquire 30 control of the corporation and other pertinent factors or 31 the interests of any other group that the directors deem 32 appropriate. 33 LIABILITY. The bill provides that a director is not liable 34 for any failure of the benefit corporation to accomplish a 35 -14- LSB 5373YH (4) 84 da/nh 14/ 15

H.F. 2154 general or specific public benefit purpose. 1 LEGAL ACTIONS. This bill prohibits a person from bringing an 2 action against a benefit corporation or its directors, except 3 in a benefit enforcement proceeding. A benefit enforcement 4 proceeding can only be commenced by the corporation, a 5 shareholder, a director, a person that holds 10 percent or 6 more of the equity interests in an entity of which the benefit 7 corporation is a subsidiary, or other person specified in the 8 benefit corporation’s articles of incorporation or bylaws. 9 ANNUAL REPORT. The bill requires that a benefit corporation 10 prepare an annual benefit report which must be delivered to 11 its shareholders not later than 120 days after the close of 12 its fiscal year or the same time as it delivers any other 13 annual report to its shareholders, and to post the report 14 on its internet site. The report must include the process 15 and rationale for selecting the third-party standard used to 16 prepare the benefit report, the ways in which the benefit 17 corporation pursued its general and specific public benefits, 18 any circumstances that hindered the creation of a general or 19 specific public benefit, an assessment of the overall social 20 and environmental performance of the benefit corporation 21 (prepared in accordance with a third-party standard), and 22 a statement prepared by a specially designated director 23 indicating whether the benefit corporation failed to pursue its 24 general or any specific public benefit purpose. The bill also 25 requires the benefit corporation to file the benefit report 26 with the secretary of state and pay the secretary of state a 27 filing fee. 28 -15- LSB 5373YH (4) 84 da/nh 15/ 15