S.F. 221 Section 1. Section 490.1302, subsection 1, Code 2017, is 1 amended by adding the following new paragraph: 2 NEW PARAGRAPH . g. Consummation of a transaction requiring 3 at least a ninety percent vote under section 490.1803. 4 Sec. 2. NEW SECTION . 490.1801 Definitions. 5 As used in this division: 6 1. “Benefit corporation” means a for-profit corporation 7 intended to operate in a responsible and sustainable manner, to 8 produce a public benefit or benefits as set forth in a public 9 benefit provision, and to otherwise operate in a manner that 10 considers the best interests of those materially affected by 11 its conduct. 12 2. “Public benefit” means a positive effect, or reduction 13 of a negative effect, on the environment or on one or more 14 communities or categories of persons or entities, other than 15 shareholders in their capacity as shareholders, of an artistic, 16 charitable, economic, educational, cultural, literary, 17 religious, social, ecological, or scientific nature. 18 3. “Public benefit provision” means a provision in the 19 articles of incorporation that establishes one or more public 20 benefits to be promoted by the corporation. 21 Sec. 3. NEW SECTION . 490.1802 Name. 22 1. The name of a benefit corporation shall contain the 23 words “benefit corporation”, or the abbreviation “B.C.”, or the 24 designation “BC”, any of which shall be deemed to satisfy the 25 requirements of section 490.401, subsection 1. 26 2. Notwithstanding subsection 1, the corporate name of a 27 benefit corporation that is also a professional corporation 28 or foreign professional corporation under chapter 496C shall 29 contain the words “professional benefit corporation” or the 30 abbreviation “P.B.C.” or “PBC”, any of which shall be deemed to 31 satisfy the requirements of section 490.401, subsection 1. 32 Sec. 4. NEW SECTION . 490.1803 Certain amendments, mergers, 33 and share exchanges —— votes required. 34 1. Notwithstanding any other provisions of this chapter, 35 -1- LSB 1346XS (2) 87 da/nh 1/ 8

S.F. 221 a corporation that is not a benefit corporation shall not, 1 without the approval of at least ninety percent of the voting 2 power of each class and series of the outstanding shares of the 3 corporation, in each case whether voting or nonvoting, do any 4 of the following: 5 a. Amend its articles of incorporation in accordance with 6 section 490.1003 to include a public benefit provision. 7 b. Merge with or into or enter into a share exchange 8 with another entity if, as a result of such merger or share 9 exchange, the shares in such corporation would become, or be 10 converted into or exchanged for the right to receive, shares in 11 a domestic benefit corporation, foreign benefit corporation, 12 or similar corporation. 13 2. Notwithstanding any other provisions of this chapter, a 14 benefit corporation shall not, without the approval of at least 15 two-thirds of the outstanding shares entitled to vote thereon, 16 do any of the following: 17 a. Amend or eliminate its public benefit provisions in 18 accordance with section 490.1003. 19 b. Merge with or into or agree to any share exchange with 20 any entity, unless no vote of shareholders of the corporation 21 would be required pursuant to section 490.1104, subsection 7. 22 c. Become an unincorporated entity by conversion. 23 Sec. 5. NEW SECTION . 490.1804 Stock certificates. 24 Any stock certificate issued by a benefit corporation 25 shall note conspicuously that the corporation is a benefit 26 corporation. 27 Sec. 6. NEW SECTION . 490.1805 Duties of directors. 28 1. In managing or directing the management of the 29 business and affairs of the benefit corporation, directors 30 shall consider the public benefit or benefits specified in 31 its articles of incorporation, the best interests of those 32 materially affected by the conduct of the corporation, and the 33 pecuniary interests of the corporation and its shareholders. 34 2. Directors of a benefit corporation shall not have any 35 -2- LSB 1346XS (2) 87 da/nh 2/ 8

S.F. 221 duty to a person on account of any interest of such person in 1 the public benefit or public benefits specified in the articles 2 of incorporation or on account of any interest materially 3 affected by the conduct of the corporation in such person’s 4 capacity as such a beneficiary. 5 3. Unless otherwise provided in the articles of 6 incorporation, any failure to consider the interests of those 7 materially affected by the conduct of the corporation, the 8 public benefit or benefits, or the pecuniary interests of the 9 shareholders shall not constitute an intentional infliction of 10 harm on the corporation or the shareholders for the purposes of 11 section 490.202, subsection 2, paragraph “d” , subparagraph (1), 12 subparagraph division (b), or section 490.202, subsection 2, 13 paragraph “e” , subparagraph (2). 14 Sec. 7. NEW SECTION . 490.1806 Periodic statements and 15 reports. 16 1. A benefit corporation shall include in every notice of a 17 meeting of shareholders a statement to the effect that it is 18 a benefit corporation. 19 2. A benefit corporation shall, no less than biennially, 20 provide its shareholders with a report addressing the public 21 benefit or benefits specified in the articles of incorporation, 22 and the interests of those materially affected by its conduct. 23 The report shall include all of the following: 24 a. The objectives the board of directors has established to 25 address such public benefit or public benefits and interests. 26 b. The standards the board of directors has adopted to 27 measure the corporation’s progress in addressing such public 28 benefit or public benefits and interests. 29 c. Factual information based on those standards regarding 30 the corporation’s success in meeting the objectives for 31 addressing such public benefit or public benefits and 32 interests. 33 d. An assessment of the corporation’s success in meeting 34 the objectives and addressing such public benefit or public 35 -3- LSB 1346XS (2) 87 da/nh 3/ 8

S.F. 221 benefits and interests. 1 3. The articles of incorporation of a benefit corporation 2 may require that the corporation do any of the following: 3 a. Provide its report more frequently than biennially. 4 b. Make the report described in subsection 2 available to 5 the public. 6 c. Use a third-party standard in connection with or 7 attain a periodic third-party certification addressing the 8 public benefit or public benefits identified in the public 9 benefit provision in the articles of incorporation or the best 10 interests of those materially affected by the corporation’s 11 conduct. 12 Sec. 8. NEW SECTION . 490.1807 Derivative suits. 13 1. In any derivative suit instituted by a shareholder of a 14 benefit corporation to enforce the public benefit requirements 15 set forth in section 490.1805, subsection 1, the complaint must 16 state all of the following: 17 a. Each plaintiff was a shareholder of the corporation at 18 the time the complaint states the directors failed to properly 19 perform their obligations, or that such plaintiff’s stock 20 thereafter devolved upon such plaintiff by operation of law, 21 and thereafter remained a shareholder of the corporation until 22 the lawsuit was commenced. 23 b. At the time the lawsuit was commenced, the plaintiff 24 individually or the plaintiffs collectively owned at least five 25 percent of any class of the corporation’s shares. 26 2. The complaint shall also allege with particularity the 27 efforts, if any, made by the plaintiff to obtain the action the 28 plaintiff desires from the directors or comparable authority 29 and the reasons for the plaintiff’s failure to obtain the 30 action or for not making the effort. 31 3. No such derivative suit may be maintained by any 32 plaintiff who fails to continue as a shareholder during the 33 pendency thereof or if the plaintiff individually or the 34 plaintiffs collectively fail to continue to own at least five 35 -4- LSB 1346XS (2) 87 da/nh 4/ 8

S.F. 221 percent of any class of the corporation’s shares. 1 Sec. 9. NEW SECTION . 490.1808 Other business corporations 2 —— application and effect of division. 3 The existence of a provision in this division shall not of 4 itself create an implication that a contrary or different rule 5 of law is applicable to a corporation that is not a benefit 6 corporation. Unless expressly stated otherwise, this division 7 shall not affect a statute or rule of law that is applicable to 8 a corporation that is not a benefit corporation. 9 Sec. 10. Section 496C.5, Code 2017, is amended to read as 10 follows: 11 496C.5 Corporate name. 12 1. The corporate name of a professional corporation, the 13 corporate name of a foreign professional corporation or its 14 name as modified for use in this state, and any fictitious name 15 or trade name adopted by a professional corporation or foreign 16 professional corporation shall contain the words “professional 17 corporation” or the abbreviation “P. C.” or “PC” , and except 18 for the addition of such words or abbreviation, shall be a name 19 which could lawfully be used by a licensed individual or by a 20 partnership of licensed individuals in the practice in this 21 state of a profession which the corporation is authorized to 22 practice. 23 1A. Notwithstanding subsection 1, the corporate name of a 24 professional corporation that is also a benefit corporation 25 under chapter 490, division VIII, shall comply with section 26 490.1802. 27 2. Each regulating board may by rule or regulation 28 adopt additional requirements as to the corporate names and 29 fictitious or trade names of professional corporations and 30 foreign professional corporations which are authorized to 31 practice a profession which is within the jurisdiction of the 32 regulating board. 33 EXPLANATION 34 The inclusion of this explanation does not constitute agreement with 35 -5- LSB 1346XS (2) 87 da/nh 5/ 8

S.F. 221 the explanation’s substance by the members of the general assembly. 1 GENERAL. This bill amends the “Iowa Business Corporation 2 Act” codified in Code chapter 490, by allowing a for-profit 3 corporation to either incorporate as or become a benefit 4 corporation with the purpose of operating in a responsible and 5 sustainable manner, that promotes one or more public benefits, 6 and that operates in a manner that considers the best interests 7 of persons materially affected by its conduct (new Code 8 section 490.1801(1)). A public benefit may be of an artistic, 9 charitable, cultural, economic, educational, cultural, 10 literary, religious, social, ecological, or scientific nature 11 (new Code section 490.1801(2)). Both the Code chapter and the 12 bill’s amendments creating new division XVIII are based on 13 model legislation prepared by the American bar association. 14 DECLARATION. In order to be regarded as a benefit 15 corporation, the corporation’s articles of incorporation 16 (articles) must include a public benefit provision that 17 expressly describes the corporation’s public benefit (new Code 18 section 490.1801(3)). Moreover, the corporation’s benefit 19 status must be identified in its corporate name (new Code 20 section 490.1802). Consequently, a professional corporation 21 which is also a benefit corporation must also identify itself 22 as a form of benefit corporation (amended Code section 496C.5). 23 In addition, stock issued by the benefit corporation must state 24 its benefit status (new Code section 490.1804), as must any 25 shareholder meeting notice (Code section 490.1806(1)). 26 CHOICE TO FORM AS OR BECOME A BENEFIT ENTITY. A new 27 corporation may choose to form as a benefit corporation at 28 the time of incorporation by filing its articles with the 29 secretary of state, and an existing corporation may choose to 30 become a benefit corporation by amending its filed articles. 31 An existing corporation may also choose to become a benefit 32 corporation by combining through merger or share exchange 33 with a benefit corporation or similar foreign public benefit 34 entity (new Code section 490.1803(1)). In any case, at least 35 -6- LSB 1346XS (2) 87 da/nh 6/ 8

S.F. 221 90 percent of the existing corporation’s outstanding voting 1 and nonvoting shares of each class and series must approve 2 the choice. Dissenting shareholders are entitled to exercise 3 ordinary appraisal rights (amended Code section 490.1302(1)). 4 However, the approval of at least two-thirds (66 2/3 percent) 5 of a benefit corporation’s outstanding shares entitled to vote 6 on the question is required to amend or eliminate a public 7 benefit provision from its articles, or to merge with or agree 8 to a share exchange with a nonbenefit entity (new Code section 9 490.1803(2)). 10 MANAGEMENT. When making a decision affecting the business 11 affairs of a benefit corporation, its board of directors 12 must balance three criteria: its public benefit provision, 13 the best interests of persons materially affected by the 14 benefit corporation’s conduct, and the traditional factor 15 of its stockholders’ pecuniary interests (new Code section 16 490.1805(1)). A director does not have a duty to account for 17 a business decision (new Code section 490.1805(2)), and a 18 director’s failure to consider a factor does not constitute 19 an intentional infliction of harm on the corporation or the 20 shareholders, unless otherwise provided in the corporation’s 21 articles (new Code section 490.1805(3)). However, at least 22 5 percent of the corporation’s shareholders may institute a 23 derivative suit to enforce compliance with the corporation’s 24 public benefit provision, in part by alleging that the 25 directors failed to properly perform their duties (new Code 26 section 490.1807). 27 REPORT. The benefit corporation must prepare and deliver a 28 report to shareholders that addresses how its public benefit 29 provision is being promoted and persons materially affected 30 by the corporation’s conduct (new Code section 490.1806(2)). 31 The benefit corporation’s directors are responsible for the 32 report’s preparation. The corporation’s articles may require 33 the involvement by a third party, who may be responsible for 34 certifying how the corporation addressed the public benefit 35 -7- LSB 1346XS (2) 87 da/nh 7/ 8

S.F. 221 or the best interests of those materially affected by the 1 corporation’s conduct. The report is not required to be 2 disclosed to the public, or delivered more frequently than once 3 every two years, unless otherwise specified in the benefit 4 corporation’s articles (new Code section 490.1806(3)). 5 APPLICATION. The special designation of a corporation as a 6 benefit corporation does not by itself create an implication 7 that different rules apply to nonbenefit corporations. 8 However, a specific provision governing a benefit corporation 9 also does not affect any other provision that applies to a 10 nonbenefit corporation unless otherwise expressly stated (new 11 Code section 490.1808). 12 -8- LSB 1346XS (2) 87 da/nh 8/ 8