H.F. 85 DIVISION I 1 BENEFIT CORPORATIONS 2 Section 1. NEW SECTION . 490.1801 Definitions. 3 As used in this subchapter: 4 1. “Benefit corporation” means a for-profit corporation 5 intended to operate in a responsible and sustainable manner, to 6 produce a public benefit or benefits as set forth in a public 7 benefit provision, and to otherwise operate in a manner that 8 considers the best interests of those materially affected by 9 its conduct. 10 2. “Public benefit” means a positive effect, or reduction 11 of a negative effect, on the environment or on one or more 12 communities or categories of persons or entities, other than 13 shareholders in their capacity as shareholders, of an artistic, 14 charitable, economic, educational, cultural, literary, 15 religious, social, ecological, or scientific nature. 16 3. “Public benefit provision” means a provision in the 17 articles of incorporation that establishes one or more public 18 benefits to be promoted by the corporation. 19 Sec. 2. NEW SECTION . 490.1802 Name. 20 1. The name of a benefit corporation shall contain the 21 words “benefit corporation”, or the abbreviation “B.C.”, or the 22 designation “BC”, any of which shall be deemed to satisfy the 23 requirements of section 490.401, subsection 1. 24 2. Notwithstanding subsection 1, the corporate name of a 25 benefit corporation that is also a professional corporation 26 or foreign professional corporation under chapter 496C shall 27 contain the words “professional benefit corporation” or the 28 abbreviation “P.B.C.” or “PBC”, any of which shall be deemed to 29 satisfy the requirements of section 490.401, subsection 1. 30 Sec. 3. NEW SECTION . 490.1803 Certain amendments, mergers, 31 and share exchanges —— votes required. 32 1. Notwithstanding any other provisions of this chapter, 33 a corporation that is not a benefit corporation shall not, 34 without the approval of at least ninety percent of the voting 35 -1- LSB 1460YH (1) 89 da/jh 1/ 8

H.F. 85 power of each class and series of the outstanding shares of the 1 corporation, in each case whether voting or nonvoting, do any 2 of the following: 3 a. Amend its articles of incorporation in accordance with 4 section 490.1003 to include a public benefit provision. 5 b. Merge with or into or enter into a share exchange 6 with another entity if, as a result of such merger or share 7 exchange, the shares in such corporation would become, or be 8 converted into or exchanged for the right to receive, shares in 9 a domestic benefit corporation, foreign benefit corporation, 10 or similar corporation. 11 2. Notwithstanding any other provisions of this chapter, a 12 benefit corporation shall not, without the approval of at least 13 two-thirds of the outstanding shares entitled to vote thereon, 14 do any of the following: 15 a. Amend or eliminate its public benefit provisions in 16 accordance with section 490.1003. 17 b. Merge with or into or agree to any share exchange with 18 any entity, unless no vote of shareholders of the corporation 19 would be required pursuant to section 490.1104, subsection 7. 20 c. Become an unincorporated entity by conversion. 21 Sec. 4. NEW SECTION . 490.1804 Stock certificates. 22 Any stock certificate issued by a benefit corporation 23 shall note conspicuously that the corporation is a benefit 24 corporation. 25 Sec. 5. NEW SECTION . 490.1805 Duties of directors. 26 1. In managing or directing the management of the 27 business and affairs of the benefit corporation, directors 28 shall consider the public benefit or benefits specified in 29 its articles of incorporation, the best interests of those 30 materially affected by the conduct of the corporation, and the 31 pecuniary interests of the corporation and its shareholders. 32 2. Directors of a benefit corporation shall not have any 33 duty to a person on account of any interest of such person in 34 the public benefit or public benefits specified in the articles 35 -2- LSB 1460YH (1) 89 da/jh 2/ 8

H.F. 85 of incorporation or on account of any interest materially 1 affected by the conduct of the corporation in such person’s 2 capacity as such a beneficiary. 3 3. Unless otherwise provided in the articles of 4 incorporation, any failure to consider the interests of those 5 materially affected by the conduct of the corporation, the 6 public benefit or benefits, or the pecuniary interests of the 7 shareholders shall not constitute an intentional infliction of 8 harm on the corporation or the shareholders for the purposes of 9 section 490.202, subsection 2, paragraph “d” , subparagraph (1), 10 subparagraph division (b), or section 490.202, subsection 2, 11 paragraph “e” , subparagraph (2). 12 Sec. 6. NEW SECTION . 490.1806 Periodic statements and 13 reports. 14 1. A benefit corporation shall include in every notice of a 15 meeting of shareholders a statement to the effect that it is 16 a benefit corporation. 17 2. A benefit corporation shall, no less than biennially, 18 provide its shareholders with a report addressing the public 19 benefit or benefits specified in the articles of incorporation, 20 and the interests of those materially affected by its conduct. 21 The report shall include all of the following: 22 a. The objectives the board of directors has established to 23 address such public benefit or public benefits and interests. 24 b. The standards the board of directors has adopted to 25 measure the corporation’s progress in addressing such public 26 benefit or public benefits and interests. 27 c. Factual information based on those standards regarding 28 the corporation’s success in meeting the objectives for 29 addressing such public benefit or public benefits and 30 interests. 31 d. An assessment of the corporation’s success in meeting 32 the objectives and addressing such public benefit or public 33 benefits and interests. 34 3. The articles of incorporation of a benefit corporation 35 -3- LSB 1460YH (1) 89 da/jh 3/ 8

H.F. 85 may require that the corporation do any of the following: 1 a. Provide its report more frequently than biennially. 2 b. Make the report described in subsection 2 available to 3 the public. 4 c. Use a third-party standard in connection with or 5 attain a periodic third-party certification addressing the 6 public benefit or public benefits identified in the public 7 benefit provision in the articles of incorporation or the best 8 interests of those materially affected by the corporation’s 9 conduct. 10 Sec. 7. NEW SECTION . 490.1807 Derivative suits. 11 1. In any derivative suit instituted by a shareholder of a 12 benefit corporation to enforce the public benefit requirements 13 set forth in section 490.1805, subsection 1, the complaint must 14 state all of the following: 15 a. Each plaintiff was a shareholder of the corporation at 16 the time the complaint states the directors failed to properly 17 perform their obligations, or that such plaintiff’s stock 18 thereafter devolved upon such plaintiff by operation of law, 19 and thereafter remained a shareholder of the corporation until 20 the lawsuit was commenced. 21 b. At the time the lawsuit was commenced, the plaintiff 22 individually or the plaintiffs collectively owned at least five 23 percent of any class of the corporation’s shares. 24 2. The complaint shall also allege with particularity the 25 efforts, if any, made by the plaintiff to obtain the action the 26 plaintiff desires from the directors or comparable authority 27 and the reasons for the plaintiff’s failure to obtain the 28 action or for not making the effort. 29 3. No such derivative suit may be maintained by any 30 plaintiff who fails to continue as a shareholder during the 31 pendency thereof or if the plaintiff individually or the 32 plaintiffs collectively fail to continue to own at least five 33 percent of any class of the corporation’s shares. 34 Sec. 8. NEW SECTION . 490.1808 Other business corporations 35 -4- LSB 1460YH (1) 89 da/jh 4/ 8

H.F. 85 —— application and effect of subchapter. 1 The existence of a provision in this subchapter shall not 2 of itself create an implication that a contrary or different 3 rule of law is applicable to a corporation that is not a 4 benefit corporation. Unless expressly stated otherwise, this 5 subchapter shall not affect a statute or rule of law that is 6 applicable to a corporation that is not a benefit corporation. 7 DIVISION II 8 CONFORMING CHANGES 9 Sec. 9. Section 490.401, Code 2021, is amended by adding the 10 following new subsection: 11 NEW SUBSECTION . 1A. Notwithstanding subsection 1, 12 the corporate name of a corporation that is also a benefit 13 corporation under subchapter XVIII, shall comply with section 14 490.1802. 15 Sec. 10. Section 490.1302, subsection 1, Code 2021, is 16 amended by adding the following new paragraph: 17 NEW PARAGRAPH . h. Consummation of a transaction requiring 18 at least a ninety percent vote under section 490.1803. 19 Sec. 11. Section 496C.5, Code 2021, is amended to read as 20 follows: 21 496C.5 Corporate name. 22 1. The corporate name of a professional corporation, the 23 corporate name of a foreign professional corporation or its 24 name as modified for use in this state, and any fictitious name 25 or trade name adopted by a professional corporation or foreign 26 professional corporation shall contain the words “professional 27 corporation” or the abbreviation “P. C.” or “PC” , and except 28 for the addition of such words or abbreviation, shall be a name 29 which could lawfully be used by a licensed individual or by a 30 partnership of licensed individuals in the practice in this 31 state of a profession which the corporation is authorized to 32 practice. 33 1A. Notwithstanding subsection 1, the corporate name of a 34 professional corporation that is also a benefit corporation 35 -5- LSB 1460YH (1) 89 da/jh 5/ 8

H.F. 85 under chapter 490, subchapter XVIII, shall comply with section 1 490.1802. 2 2. Each regulating board may by rule or regulation 3 adopt additional requirements as to the corporate names and 4 fictitious or trade names of professional corporations and 5 foreign professional corporations which are authorized to 6 practice a profession which is within the jurisdiction of the 7 regulating board. 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 GENERAL. This bill amends the “Iowa Business Corporation 12 Act” codified in Code chapter 490, by creating new subchapter 13 XVIII governing benefit corporations. The bill allows a 14 new for-profit business to either incorporate as a benefit 15 corporation or as an existing for-profit corporation to become 16 a benefit corporation. The purpose of a benefit corporation 17 is to operate in a responsible and sustainable manner, that 18 promotes one or more public benefits, and in a manner that 19 considers the best interests of persons materially affected 20 by its conduct (new Code section 490.1801(1)). A public 21 benefit may be of an artistic, charitable, cultural, economic, 22 educational, cultural, literary, religious, social, ecological, 23 or scientific nature (new Code section 490.1801(2)). Both 24 existing Code chapter 490 and the bill’s amendments in part 25 creating new subchapter XVIII are based on model legislation 26 prepared by the American bar association. 27 DECLARATION. In order to be regarded as a benefit 28 corporation, the corporation’s articles of incorporation 29 (articles) must include a public benefit provision that 30 expressly describes the corporation’s public benefit (new 31 Code section 490.1801(3)). Moreover, the corporation’s 32 benefit status must be identified in its corporate name (new 33 Code section 490.1802 and amended Code section 490.401). 34 Consequently, a professional corporation which is a benefit 35 -6- LSB 1460YH (1) 89 da/jh 6/ 8

H.F. 85 corporation must also identify itself as a form of benefit 1 corporation (new Code section 490.1802 and amended Code section 2 496C.5). In addition, stock issued by the benefit corporation 3 must state its benefit status (new Code section 490.1804), as 4 must any shareholder meeting notice (Code section 490.1806(1)). 5 CHOICE TO FORM AS OR BECOME A BENEFIT ENTITY. A new business 6 may choose to form as a benefit corporation at the time of 7 incorporation by declaring so in its articles of incorporation 8 filed with the secretary of state (new Code section 490.1801(3) 9 referring to Code section 490.202). An existing corporation 10 may choose to become a benefit corporation by amending its 11 filed articles (new Code section 490.1803(1) referring to Code 12 section 490.1003)). An existing corporation may also choose 13 to become a benefit corporation by combining through merger or 14 share exchange with a benefit corporation or similar foreign 15 public benefit entity (new Code section 490.1803(1) referring 16 to Code section 490.1104(7)). In any case, at least 90 percent 17 of the corporation’s outstanding voting and nonvoting shares 18 of each class and series must approve the choice. Dissenting 19 shareholders are entitled to exercise ordinary appraisal rights 20 (amended Code section 490.1302(1)). However, the approval of 21 at least two-thirds (66 2/3 percent) of a benefit corporation’s 22 outstanding shares entitled to vote on the question is required 23 to amend or eliminate a public benefit provision from its 24 articles, or to merge with or agree to a share exchange with a 25 nonbenefit entity (new Code section 490.1803(2) referring to 26 Code sections 490.1003 and 490.1104(7)). 27 MANAGEMENT. When making a decision affecting the business 28 affairs of a benefit corporation, its board of directors 29 must balance three criteria: its public benefit provision, 30 the best interests of persons materially affected by the 31 benefit corporation’s conduct, and the traditional factor 32 of its stockholders’ pecuniary interests (new Code section 33 490.1805(1)). A director does not have a duty to account for a 34 business decision that impacts a shareholder as a beneficiary 35 -7- LSB 1460YH (1) 89 da/jh 7/ 8

H.F. 85 of a corporation’s public benefit provision (new Code section 1 490.1805(2)). A director’s failure to consider a factor 2 does not constitute an intentional infliction of harm on the 3 corporation or the shareholders, unless otherwise provided in 4 the corporation’s articles (new Code section 490.1805(3)). 5 However, at least 5 percent of the corporation’s shareholders 6 in any class may institute a derivative suit to enforce 7 compliance with the corporation’s public benefit provision, in 8 part by alleging that the directors failed to properly perform 9 their duties (new Code section 490.1807). See Code chapter 10 490, subchapter VII, part D. 11 REPORT. A benefit corporation must prepare and deliver 12 a report to shareholders that addresses how its public 13 benefit provision is being promoted and persons materially 14 affected by the benefit corporation’s conduct (new Code 15 section 490.1806(2)). The benefit corporation’s directors 16 are responsible for the report’s preparation. The benefit 17 corporation’s articles may require the involvement by a 18 third party, responsible for certifying how the corporation 19 addressed the public benefit or the best interests of those 20 materially affected by the corporation’s conduct. The report 21 is not required to be disclosed to the public, or delivered 22 more frequently than once every two years, unless otherwise 23 specified in the benefit corporation’s articles (new Code 24 section 490.1806(3)). 25 APPLICATION. The special designation of a corporation as a 26 benefit corporation does not by itself create an implication 27 that different rules apply to nonbenefit corporations. A 28 specific provision governing a benefit corporation also does 29 not affect any other provision that applies to a nonbenefit 30 corporation unless otherwise expressly stated (new Code section 31 490.1808). 32 -8- LSB 1460YH (1) 89 da/jh 8/ 8