H.F. 145 Section 1. NEW SECTION . 490.1801 Application of subchapter 1 —— definitions. 2 1. If a corporation elects to become a benefit corporation 3 under this subchapter in the manner prescribed in this 4 subchapter, it is subject in all respects to the provisions 5 of this chapter, except to the extent this subchapter imposes 6 additional or different requirements, in which case such 7 requirements apply. The inclusion of a provision in this 8 subchapter does not imply that a contrary or different rule of 9 law applies to a corporation that is not a benefit corporation. 10 This subchapter does not affect a statute or rule of law that 11 applies to a corporation that is not a benefit corporation. 12 2. As used in this subchapter: 13 a. “Benefit corporation” means a corporation that includes 14 in its articles of incorporation a statement that the 15 corporation is subject to this subchapter. 16 b. “Public benefit” means a positive effect, or reduction of 17 negative effects, on one or more communities or categories of 18 persons or entities, other than shareholders solely in their 19 capacity as shareholders, or on the environment, including 20 effects of an artistic, charitable, economic, educational, 21 cultural, literary, medical, religious, social, ecological, or 22 scientific nature. 23 c. “Public benefit provision” means a provision in the 24 articles of incorporation which states that the corporation 25 shall pursue one or more identified public benefits. 26 d. “Responsible and sustainable manner” means a manner that 27 does all of the following: 28 (1) Pursues through the business of the corporation the 29 creation of a positive effect on society and the environment, 30 taken as a whole, that is material taking into consideration 31 the corporation’s size and the nature of its business. 32 (2) Considers, in addition to the interests of 33 shareholders, the interests of stakeholders known to be 34 affected by the conduct of the business of the corporation. 35 -1- LSB 1224YH (5) 89 da/jh 1/ 7

H.F. 145 Sec. 2. NEW SECTION . 490.1802 Name —— share certificates. 1 1. The name of a benefit corporation may contain the 2 words “benefit corporation”, the abbreviation “B.C.”, or the 3 designation “BC”, any of which shall be deemed to satisfy the 4 requirements of section 490.401, subsection 1, paragraph “a” . 5 2. Any share certificate issued by a benefit corporation, 6 and any information statement delivered by a benefit 7 corporation pursuant to section 490.626, subsection 2, 8 must note conspicuously that the corporation is a benefit 9 corporation subject to this subchapter. 10 Sec. 3. NEW SECTION . 490.1803 Certain amendments and 11 transactions —— votes required. 12 1. Unless the articles of incorporation or bylaws require 13 a greater vote, the approval of at least two-thirds of the 14 voting power of the outstanding shares of the corporation 15 entitled to vote thereon, and, if any class or series of shares 16 is entitled to vote as a separate group on any such amendment 17 or transaction, the approval of at least two-thirds of the 18 outstanding shares of each such separate voting group entitled 19 to vote thereon, shall be required for a corporation that is 20 not a benefit corporation to do any of the following: 21 a. Amend its articles of incorporation to include a 22 statement that it is subject to this subchapter. 23 b. Merge with or into, or enter into a share exchange with, 24 another entity, or effect a domestication or conversion, if, 25 as a result of the merger, share exchange, domestication, or 26 conversion, the shares of any voting group would become, or be 27 converted into or exchanged for the right to receive, shares 28 of a benefit corporation or shares or interests in an entity 29 subject to provisions of organic law analogous to those in 30 this subchapter; provided, however, that in the case of this 31 paragraph “b” , if the shares of one or more, but not all, 32 voting groups are so affected, then only the shares in the 33 voting groups so affected shall be entitled to vote under this 34 subsection. 35 -2- LSB 1224YH (5) 89 da/jh 2/ 7

H.F. 145 2. Unless the articles of incorporation or bylaws require a 1 greater vote, the approval of at least two-thirds of the voting 2 power of the outstanding shares of the corporation entitled 3 to vote thereon and, if any class or series of shares is 4 entitled to vote as a separate group on any such amendment or 5 transaction, the approval of at least two-thirds of the voting 6 power of the outstanding shares of each such separate voting 7 group, shall be required for a benefit corporation to do any 8 of the following: 9 a. Amend its articles of incorporation to eliminate a 10 statement that the corporation is subject to this subchapter. 11 b. Merge with or into, or enter into a share exchange with, 12 another entity, or effect a domestication or conversion if, 13 as a result of the merger, share exchange, domestication, or 14 conversion, the shares of any voting group would become, or be 15 converted into or exchanged for the right to receive, shares or 16 interests in an entity that is neither a benefit corporation 17 nor an entity subject to provisions of organic law analogous to 18 those in this subchapter; provided, however, that in the case 19 of this paragraph “b” , if the shares of one or more, but not 20 all, voting groups are so affected, then only the shares in the 21 voting groups so affected shall be entitled to vote under this 22 subsection. 23 3. The vote required under subsections 1 and 2 is in 24 addition to any vote otherwise required under this chapter. 25 Sec. 4. NEW SECTION . 490.1804 Duties of directors. 26 1. Each member of the board of directors of a benefit 27 corporation, when discharging the duties of a director, shall 28 act according to all of the following: 29 a. In a responsible and sustainable manner. 30 b. In a manner that pursues the public benefit or benefits 31 identified in any public benefit provision. 32 2. In fulfilling the duties under subsection 1, a director 33 shall consider, to the extent affected, in addition to the 34 interests of shareholders generally, the separate interests 35 -3- LSB 1224YH (5) 89 da/jh 3/ 7

H.F. 145 of stakeholders known to be affected by the business of the 1 corporation including all of the following: 2 a. The employees and workforces of the corporation, its 3 subsidiaries, and its suppliers. 4 b. Customers. 5 c. Communities or society, including those of each community 6 in which offices or facilities of the corporation, its 7 subsidiaries, or its suppliers are located. 8 d. The local and global environment. 9 3. A director of a benefit corporation shall not, by virtue 10 of the duties imposed by subsections 1 and 2, owe any duty to a 11 person other than the benefit corporation due to any interest 12 of the person in the status of the corporation as a benefit 13 corporation or in any public benefit provision. 14 4. Unless otherwise provided in the articles of 15 incorporation, the violation by a director of the duties 16 imposed by subsections 1 and 2 shall not constitute an 17 intentional infliction of harm on the corporation or the 18 shareholders for the purposes of sections 490.202, subsection 19 2, paragraphs “d” and “e” . 20 Sec. 5. NEW SECTION . 490.1805 Annual benefit report. 21 1. No less than annually, a benefit corporation shall 22 prepare a benefit report addressing the efforts of the 23 corporation during the preceding year to operate in a 24 responsible and sustainable manner, to pursue any public 25 benefit or benefits identified in any public benefit provision, 26 and to consider the interests described in section 490.1804, 27 subsection 2. The annual benefit report must include all of 28 the following: 29 a. The objectives that the board of directors has 30 established for the corporation to operate in a responsible and 31 sustainable manner, to pursue any public benefit or benefits 32 identified in any public benefit provision, and to consider the 33 interests described in section 490.1804, subsection 2. 34 b. The standards the board of directors has adopted 35 -4- LSB 1224YH (5) 89 da/jh 4/ 7

H.F. 145 to measure the corporation’s progress in operating in a 1 responsible and sustainable manner, in pursuing the public 2 benefit or benefits identified in any public benefit provision, 3 and in considering the interests described in section 490.1804, 4 subsection 2. 5 c. If the articles of incorporation or bylaws require 6 that the corporation use an independent third-party standard 7 in reporting on the corporation’s progress in operating in a 8 responsible and sustainable manner, in pursuing any public 9 benefit or benefits identified in any public benefit provision, 10 or in considering the interests described in section 490.1804, 11 subsection 2, or if the board of directors has chosen to use 12 such a standard, the applicable standard so required or chosen. 13 d. An assessment of the corporation’s success in meeting 14 the objectives and standards identified in paragraphs “a” and 15 “b” , and, if applicable, paragraph “c” , and the basis for that 16 assessment. 17 2. The benefit corporation shall deliver to each 18 shareholder, or make available and provide written notice to 19 each shareholder of the availability of, the annual benefit 20 report required by subsection 1 on or before the earlier of the 21 following: 22 a. One hundred twenty days following the end of the fiscal 23 year of the benefit corporation. 24 b. The time that the benefit corporation delivers any 25 other annual reports or annual financial statements to its 26 shareholders. 27 3. Any shareholder that has not received or been given 28 access to an annual benefit report within the time required by 29 subsection 2 may make a written request that the corporation 30 deliver or make available the annual benefit report to the 31 shareholder. If a benefit corporation does not deliver or make 32 available an annual benefit report to the shareholder within 33 five business days of receiving such request, the requesting 34 shareholder may apply to the district court of the county 35 -5- LSB 1224YH (5) 89 da/jh 5/ 7

H.F. 145 where the corporation’s principal office or, if none in this 1 state, its registered office, is located for an order requiring 2 delivery of or access to the annual benefit report. The court 3 shall dispose of an action under this subsection 3 on an 4 expedited basis. 5 4. A benefit corporation shall post all of its annual 6 benefit reports on the public portion of its internet site, 7 if any. If a benefit corporation does not have an internet 8 site, the benefit corporation shall provide a copy of its most 9 recent annual benefit report, without charge, to any person 10 that requests a copy in writing. 11 Sec. 6. NEW SECTION . 490.1806 Rights of action. 12 1. Except in a proceeding authorized under section 13 490.1805, subsection 3, or this section, no person other 14 than the corporation, or a shareholder in the right of the 15 corporation pursuant to subsection 2, may bring an action 16 or assert a claim with respect to the violation of any duty 17 applicable to a benefit corporation or any of its directors 18 under this subchapter. 19 2. Except for a proceeding brought under section 490.1805, 20 subsection 3, a proceeding by a shareholder of a benefit 21 corporation claiming violation of any duty applicable to 22 a benefit corporation or any of its directors under this 23 subchapter is subject to all of the following: 24 a. The proceeding must be brought in a derivative proceeding 25 pursuant to subchapter VII, part 4. 26 b. The proceeding may be brought only by a shareholder 27 of the benefit corporation that at the time of the act or 28 omission complained of either individually, or together with 29 other shareholders bringing such action collectively, owned 30 directly or indirectly at least five percent of a class of 31 the corporation’s outstanding shares or, in the case of a 32 corporation with shares traded on an organized market as 33 described in section 490.1302, subsection 2, paragraph “a” , 34 subparagraph (2), either that percentage of shares or shares 35 -6- LSB 1224YH (5) 89 da/jh 6/ 7

H.F. 145 with a market value of at least five million dollars at the 1 time the proceeding is commenced. 2 3. A suit under subsection 2 shall not be maintained if, 3 during the pendency of the suit, the shareholder individually 4 fails, or the shareholders collectively fail, to continue to 5 own directly or indirectly the lesser of the number of shares 6 owned at the time the proceeding is commenced or five percent 7 of a class of the corporation’s shares. 8 EXPLANATION 9 The inclusion of this explanation does not constitute agreement with 10 the explanation’s substance by the members of the general assembly. 11 This bill amends the “Iowa Business Corporation Act” 12 codified in Code chapter 490 by creating a new subchapter 13 allowing for the creation of benefit corporations. A benefit 14 corporation is an entity formed as a corporation but requires 15 directors to consider, in addition to shareholder interests, 16 the social, environmental, and other effects of corporate 17 activity, and allows business decisions to be based on such 18 effects, even where those decisions may be contrary to the 19 financial interests of shareholders (new Code sections 490.1801 20 through 490.1806). In order to become or stop from being a 21 benefit corporation, the articles of incorporation must be 22 amended by a two-thirds vote of all outstanding shares of the 23 corporation entitled to vote on the question (new Code section 24 490.1803). A benefit corporation is required to prepare 25 an annual benefit report that addresses the efforts of the 26 corporation during the preceding year, which may be based on a 27 third-party standard (new Code section 490.1805). 28 -7- LSB 1224YH (5) 89 da/jh 7/ 7