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House File 145 - IntroducedA Bill ForAn Act 1allowing the formation of certain for-profit
2corporations as benefit corporations authorized to do
3business in this state under certain conditions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 490.1801 Application of subchapter
2— definitions.
31. If a corporation elects to become a benefit corporation
4under this subchapter in the manner prescribed in this
5subchapter, it is subject in all respects to the provisions
6of this chapter, except to the extent this subchapter imposes
7additional or different requirements, in which case such
8requirements apply. The inclusion of a provision in this
9subchapter does not imply that a contrary or different rule of
10law applies to a corporation that is not a benefit corporation.
11This subchapter does not affect a statute or rule of law that
12applies to a corporation that is not a benefit corporation.
132. As used in this subchapter:
14a. “Benefit corporation” means a corporation that includes
15in its articles of incorporation a statement that the
16corporation is subject to this subchapter.
17b. “Public benefit” means a positive effect, or reduction of
18negative effects, on one or more communities or categories of
19persons or entities, other than shareholders solely in their
20capacity as shareholders, or on the environment, including
21effects of an artistic, charitable, economic, educational,
22cultural, literary, medical, religious, social, ecological, or
23scientific nature.
24c. “Public benefit provision” means a provision in the
25articles of incorporation which states that the corporation
26shall pursue one or more identified public benefits.
27d. “Responsible and sustainable manner” means a manner that
28does all of the following:
29(1) Pursues through the business of the corporation the
30creation of a positive effect on society and the environment,
31taken as a whole, that is material taking into consideration
32the corporation’s size and the nature of its business.
33(2) Considers, in addition to the interests of
34shareholders, the interests of stakeholders known to be
35affected by the conduct of the business of the corporation.
-1-1 Sec. 2. NEW SECTION. 490.1802 Name — share certificates.
21. The name of a benefit corporation may contain the
3words “benefit corporation”, the abbreviation “B.C.”, or the
4designation “BC”, any of which shall be deemed to satisfy the
5requirements of section 490.401, subsection 1, paragraph “a”.
62. Any share certificate issued by a benefit corporation,
7and any information statement delivered by a benefit
8corporation pursuant to section 490.626, subsection 2,
9must note conspicuously that the corporation is a benefit
10corporation subject to this subchapter.
11 Sec. 3. NEW SECTION. 490.1803 Certain amendments and
12transactions — votes required.
131. Unless the articles of incorporation or bylaws require
14a greater vote, the approval of at least two-thirds of the
15voting power of the outstanding shares of the corporation
16entitled to vote thereon, and, if any class or series of shares
17is entitled to vote as a separate group on any such amendment
18or transaction, the approval of at least two-thirds of the
19outstanding shares of each such separate voting group entitled
20to vote thereon, shall be required for a corporation that is
21not a benefit corporation to do any of the following:
22a. Amend its articles of incorporation to include a
23statement that it is subject to this subchapter.
24b. Merge with or into, or enter into a share exchange with,
25another entity, or effect a domestication or conversion, if,
26as a result of the merger, share exchange, domestication, or
27conversion, the shares of any voting group would become, or be
28converted into or exchanged for the right to receive, shares
29of a benefit corporation or shares or interests in an entity
30subject to provisions of organic law analogous to those in
31this subchapter; provided, however, that in the case of this
32paragraph “b”, if the shares of one or more, but not all,
33voting groups are so affected, then only the shares in the
34voting groups so affected shall be entitled to vote under this
35subsection.
-2- 12. Unless the articles of incorporation or bylaws require a
2greater vote, the approval of at least two-thirds of the voting
3power of the outstanding shares of the corporation entitled
4to vote thereon and, if any class or series of shares is
5entitled to vote as a separate group on any such amendment or
6transaction, the approval of at least two-thirds of the voting
7power of the outstanding shares of each such separate voting
8group, shall be required for a benefit corporation to do any
9of the following:
10a. Amend its articles of incorporation to eliminate a
11statement that the corporation is subject to this subchapter.
12b. Merge with or into, or enter into a share exchange with,
13another entity, or effect a domestication or conversion if,
14as a result of the merger, share exchange, domestication, or
15conversion, the shares of any voting group would become, or be
16converted into or exchanged for the right to receive, shares or
17interests in an entity that is neither a benefit corporation
18nor an entity subject to provisions of organic law analogous to
19those in this subchapter; provided, however, that in the case
20of this paragraph “b”, if the shares of one or more, but not
21all, voting groups are so affected, then only the shares in the
22voting groups so affected shall be entitled to vote under this
23subsection.
243. The vote required under subsections 1 and 2 is in
25addition to any vote otherwise required under this chapter.
26 Sec. 4. NEW SECTION. 490.1804 Duties of directors.
271. Each member of the board of directors of a benefit
28corporation, when discharging the duties of a director, shall
29act according to all of the following:
30a. In a responsible and sustainable manner.
31b. In a manner that pursues the public benefit or benefits
32identified in any public benefit provision.
332. In fulfilling the duties under subsection 1, a director
34shall consider, to the extent affected, in addition to the
35interests of shareholders generally, the separate interests
-3-1of stakeholders known to be affected by the business of the
2corporation including all of the following:
3a. The employees and workforces of the corporation, its
4subsidiaries, and its suppliers.
5b. Customers.
6c. Communities or society, including those of each community
7in which offices or facilities of the corporation, its
8subsidiaries, or its suppliers are located.
9d. The local and global environment.
103. A director of a benefit corporation shall not, by virtue
11of the duties imposed by subsections 1 and 2, owe any duty to a
12person other than the benefit corporation due to any interest
13of the person in the status of the corporation as a benefit
14corporation or in any public benefit provision.
154. Unless otherwise provided in the articles of
16incorporation, the violation by a director of the duties
17imposed by subsections 1 and 2 shall not constitute an
18intentional infliction of harm on the corporation or the
19shareholders for the purposes of sections 490.202, subsection
202, paragraphs “d” and “e”.
21 Sec. 5. NEW SECTION. 490.1805 Annual benefit report.
221. No less than annually, a benefit corporation shall
23prepare a benefit report addressing the efforts of the
24corporation during the preceding year to operate in a
25responsible and sustainable manner, to pursue any public
26benefit or benefits identified in any public benefit provision,
27and to consider the interests described in section 490.1804,
28subsection 2. The annual benefit report must include all of
29the following:
30a. The objectives that the board of directors has
31established for the corporation to operate in a responsible and
32sustainable manner, to pursue any public benefit or benefits
33identified in any public benefit provision, and to consider the
34interests described in section 490.1804, subsection 2.
35b. The standards the board of directors has adopted
-4-1to measure the corporation’s progress in operating in a
2responsible and sustainable manner, in pursuing the public
3benefit or benefits identified in any public benefit provision,
4and in considering the interests described in section 490.1804,
5subsection 2.
6c. If the articles of incorporation or bylaws require
7that the corporation use an independent third-party standard
8in reporting on the corporation’s progress in operating in a
9responsible and sustainable manner, in pursuing any public
10benefit or benefits identified in any public benefit provision,
11or in considering the interests described in section 490.1804,
12subsection 2, or if the board of directors has chosen to use
13such a standard, the applicable standard so required or chosen.
14d. An assessment of the corporation’s success in meeting
15the objectives and standards identified in paragraphs “a” and
16“b”, and, if applicable, paragraph “c”, and the basis for that
17assessment.
182. The benefit corporation shall deliver to each
19shareholder, or make available and provide written notice to
20each shareholder of the availability of, the annual benefit
21report required by subsection 1 on or before the earlier of the
22following:
23a. One hundred twenty days following the end of the fiscal
24year of the benefit corporation.
25b. The time that the benefit corporation delivers any
26other annual reports or annual financial statements to its
27shareholders.
283. Any shareholder that has not received or been given
29access to an annual benefit report within the time required by
30subsection 2 may make a written request that the corporation
31deliver or make available the annual benefit report to the
32shareholder. If a benefit corporation does not deliver or make
33available an annual benefit report to the shareholder within
34five business days of receiving such request, the requesting
35shareholder may apply to the district court of the county
-5-1where the corporation’s principal office or, if none in this
2state, its registered office, is located for an order requiring
3delivery of or access to the annual benefit report. The court
4shall dispose of an action under this subsection 3 on an
5expedited basis.
64. A benefit corporation shall post all of its annual
7benefit reports on the public portion of its internet site,
8if any. If a benefit corporation does not have an internet
9site, the benefit corporation shall provide a copy of its most
10recent annual benefit report, without charge, to any person
11that requests a copy in writing.
12 Sec. 6. NEW SECTION. 490.1806 Rights of action.
131. Except in a proceeding authorized under section
14490.1805, subsection 3, or this section, no person other
15than the corporation, or a shareholder in the right of the
16corporation pursuant to subsection 2, may bring an action
17or assert a claim with respect to the violation of any duty
18applicable to a benefit corporation or any of its directors
19under this subchapter.
202. Except for a proceeding brought under section 490.1805,
21subsection 3, a proceeding by a shareholder of a benefit
22corporation claiming violation of any duty applicable to
23a benefit corporation or any of its directors under this
24subchapter is subject to all of the following:
25a. The proceeding must be brought in a derivative proceeding
26pursuant to subchapter VII, part 4.
27b. The proceeding may be brought only by a shareholder
28of the benefit corporation that at the time of the act or
29omission complained of either individually, or together with
30other shareholders bringing such action collectively, owned
31directly or indirectly at least five percent of a class of
32the corporation’s outstanding shares or, in the case of a
33corporation with shares traded on an organized market as
34described in section 490.1302, subsection 2, paragraph “a”,
35subparagraph (2), either that percentage of shares or shares
-6-1with a market value of at least five million dollars at the
2time the proceeding is commenced.
33. A suit under subsection 2 shall not be maintained if,
4during the pendency of the suit, the shareholder individually
5fails, or the shareholders collectively fail, to continue to
6own directly or indirectly the lesser of the number of shares
7owned at the time the proceeding is commenced or five percent
8of a class of the corporation’s shares.
9EXPLANATION
10The inclusion of this explanation does not constitute agreement with
11the explanation’s substance by the members of the general assembly.
12This bill amends the “Iowa Business Corporation Act”
13codified in Code chapter 490 by creating a new subchapter
14allowing for the creation of benefit corporations. A benefit
15corporation is an entity formed as a corporation but requires
16directors to consider, in addition to shareholder interests,
17the social, environmental, and other effects of corporate
18activity, and allows business decisions to be based on such
19effects, even where those decisions may be contrary to the
20financial interests of shareholders (new Code sections 490.1801
21through 490.1806). In order to become or stop from being a
22benefit corporation, the articles of incorporation must be
23amended by a two-thirds vote of all outstanding shares of the
24corporation entitled to vote on the question (new Code section
25490.1803). A benefit corporation is required to prepare
26an annual benefit report that addresses the efforts of the
27corporation during the preceding year, which may be based on a
28third-party standard (new Code section 490.1805).
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2corporations as benefit corporations authorized to do
3business in this state under certain conditions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 490.1801 Application of subchapter
2— definitions.
31. If a corporation elects to become a benefit corporation
4under this subchapter in the manner prescribed in this
5subchapter, it is subject in all respects to the provisions
6of this chapter, except to the extent this subchapter imposes
7additional or different requirements, in which case such
8requirements apply. The inclusion of a provision in this
9subchapter does not imply that a contrary or different rule of
10law applies to a corporation that is not a benefit corporation.
11This subchapter does not affect a statute or rule of law that
12applies to a corporation that is not a benefit corporation.
132. As used in this subchapter:
14a. “Benefit corporation” means a corporation that includes
15in its articles of incorporation a statement that the
16corporation is subject to this subchapter.
17b. “Public benefit” means a positive effect, or reduction of
18negative effects, on one or more communities or categories of
19persons or entities, other than shareholders solely in their
20capacity as shareholders, or on the environment, including
21effects of an artistic, charitable, economic, educational,
22cultural, literary, medical, religious, social, ecological, or
23scientific nature.
24c. “Public benefit provision” means a provision in the
25articles of incorporation which states that the corporation
26shall pursue one or more identified public benefits.
27d. “Responsible and sustainable manner” means a manner that
28does all of the following:
29(1) Pursues through the business of the corporation the
30creation of a positive effect on society and the environment,
31taken as a whole, that is material taking into consideration
32the corporation’s size and the nature of its business.
33(2) Considers, in addition to the interests of
34shareholders, the interests of stakeholders known to be
35affected by the conduct of the business of the corporation.
-1-1 Sec. 2. NEW SECTION. 490.1802 Name — share certificates.
21. The name of a benefit corporation may contain the
3words “benefit corporation”, the abbreviation “B.C.”, or the
4designation “BC”, any of which shall be deemed to satisfy the
5requirements of section 490.401, subsection 1, paragraph “a”.
62. Any share certificate issued by a benefit corporation,
7and any information statement delivered by a benefit
8corporation pursuant to section 490.626, subsection 2,
9must note conspicuously that the corporation is a benefit
10corporation subject to this subchapter.
11 Sec. 3. NEW SECTION. 490.1803 Certain amendments and
12transactions — votes required.
131. Unless the articles of incorporation or bylaws require
14a greater vote, the approval of at least two-thirds of the
15voting power of the outstanding shares of the corporation
16entitled to vote thereon, and, if any class or series of shares
17is entitled to vote as a separate group on any such amendment
18or transaction, the approval of at least two-thirds of the
19outstanding shares of each such separate voting group entitled
20to vote thereon, shall be required for a corporation that is
21not a benefit corporation to do any of the following:
22a. Amend its articles of incorporation to include a
23statement that it is subject to this subchapter.
24b. Merge with or into, or enter into a share exchange with,
25another entity, or effect a domestication or conversion, if,
26as a result of the merger, share exchange, domestication, or
27conversion, the shares of any voting group would become, or be
28converted into or exchanged for the right to receive, shares
29of a benefit corporation or shares or interests in an entity
30subject to provisions of organic law analogous to those in
31this subchapter; provided, however, that in the case of this
32paragraph “b”, if the shares of one or more, but not all,
33voting groups are so affected, then only the shares in the
34voting groups so affected shall be entitled to vote under this
35subsection.
-2- 12. Unless the articles of incorporation or bylaws require a
2greater vote, the approval of at least two-thirds of the voting
3power of the outstanding shares of the corporation entitled
4to vote thereon and, if any class or series of shares is
5entitled to vote as a separate group on any such amendment or
6transaction, the approval of at least two-thirds of the voting
7power of the outstanding shares of each such separate voting
8group, shall be required for a benefit corporation to do any
9of the following:
10a. Amend its articles of incorporation to eliminate a
11statement that the corporation is subject to this subchapter.
12b. Merge with or into, or enter into a share exchange with,
13another entity, or effect a domestication or conversion if,
14as a result of the merger, share exchange, domestication, or
15conversion, the shares of any voting group would become, or be
16converted into or exchanged for the right to receive, shares or
17interests in an entity that is neither a benefit corporation
18nor an entity subject to provisions of organic law analogous to
19those in this subchapter; provided, however, that in the case
20of this paragraph “b”, if the shares of one or more, but not
21all, voting groups are so affected, then only the shares in the
22voting groups so affected shall be entitled to vote under this
23subsection.
243. The vote required under subsections 1 and 2 is in
25addition to any vote otherwise required under this chapter.
26 Sec. 4. NEW SECTION. 490.1804 Duties of directors.
271. Each member of the board of directors of a benefit
28corporation, when discharging the duties of a director, shall
29act according to all of the following:
30a. In a responsible and sustainable manner.
31b. In a manner that pursues the public benefit or benefits
32identified in any public benefit provision.
332. In fulfilling the duties under subsection 1, a director
34shall consider, to the extent affected, in addition to the
35interests of shareholders generally, the separate interests
-3-1of stakeholders known to be affected by the business of the
2corporation including all of the following:
3a. The employees and workforces of the corporation, its
4subsidiaries, and its suppliers.
5b. Customers.
6c. Communities or society, including those of each community
7in which offices or facilities of the corporation, its
8subsidiaries, or its suppliers are located.
9d. The local and global environment.
103. A director of a benefit corporation shall not, by virtue
11of the duties imposed by subsections 1 and 2, owe any duty to a
12person other than the benefit corporation due to any interest
13of the person in the status of the corporation as a benefit
14corporation or in any public benefit provision.
154. Unless otherwise provided in the articles of
16incorporation, the violation by a director of the duties
17imposed by subsections 1 and 2 shall not constitute an
18intentional infliction of harm on the corporation or the
19shareholders for the purposes of sections 490.202, subsection
202, paragraphs “d” and “e”.
21 Sec. 5. NEW SECTION. 490.1805 Annual benefit report.
221. No less than annually, a benefit corporation shall
23prepare a benefit report addressing the efforts of the
24corporation during the preceding year to operate in a
25responsible and sustainable manner, to pursue any public
26benefit or benefits identified in any public benefit provision,
27and to consider the interests described in section 490.1804,
28subsection 2. The annual benefit report must include all of
29the following:
30a. The objectives that the board of directors has
31established for the corporation to operate in a responsible and
32sustainable manner, to pursue any public benefit or benefits
33identified in any public benefit provision, and to consider the
34interests described in section 490.1804, subsection 2.
35b. The standards the board of directors has adopted
-4-1to measure the corporation’s progress in operating in a
2responsible and sustainable manner, in pursuing the public
3benefit or benefits identified in any public benefit provision,
4and in considering the interests described in section 490.1804,
5subsection 2.
6c. If the articles of incorporation or bylaws require
7that the corporation use an independent third-party standard
8in reporting on the corporation’s progress in operating in a
9responsible and sustainable manner, in pursuing any public
10benefit or benefits identified in any public benefit provision,
11or in considering the interests described in section 490.1804,
12subsection 2, or if the board of directors has chosen to use
13such a standard, the applicable standard so required or chosen.
14d. An assessment of the corporation’s success in meeting
15the objectives and standards identified in paragraphs “a” and
16“b”, and, if applicable, paragraph “c”, and the basis for that
17assessment.
182. The benefit corporation shall deliver to each
19shareholder, or make available and provide written notice to
20each shareholder of the availability of, the annual benefit
21report required by subsection 1 on or before the earlier of the
22following:
23a. One hundred twenty days following the end of the fiscal
24year of the benefit corporation.
25b. The time that the benefit corporation delivers any
26other annual reports or annual financial statements to its
27shareholders.
283. Any shareholder that has not received or been given
29access to an annual benefit report within the time required by
30subsection 2 may make a written request that the corporation
31deliver or make available the annual benefit report to the
32shareholder. If a benefit corporation does not deliver or make
33available an annual benefit report to the shareholder within
34five business days of receiving such request, the requesting
35shareholder may apply to the district court of the county
-5-1where the corporation’s principal office or, if none in this
2state, its registered office, is located for an order requiring
3delivery of or access to the annual benefit report. The court
4shall dispose of an action under this subsection 3 on an
5expedited basis.
64. A benefit corporation shall post all of its annual
7benefit reports on the public portion of its internet site,
8if any. If a benefit corporation does not have an internet
9site, the benefit corporation shall provide a copy of its most
10recent annual benefit report, without charge, to any person
11that requests a copy in writing.
12 Sec. 6. NEW SECTION. 490.1806 Rights of action.
131. Except in a proceeding authorized under section
14490.1805, subsection 3, or this section, no person other
15than the corporation, or a shareholder in the right of the
16corporation pursuant to subsection 2, may bring an action
17or assert a claim with respect to the violation of any duty
18applicable to a benefit corporation or any of its directors
19under this subchapter.
202. Except for a proceeding brought under section 490.1805,
21subsection 3, a proceeding by a shareholder of a benefit
22corporation claiming violation of any duty applicable to
23a benefit corporation or any of its directors under this
24subchapter is subject to all of the following:
25a. The proceeding must be brought in a derivative proceeding
26pursuant to subchapter VII, part 4.
27b. The proceeding may be brought only by a shareholder
28of the benefit corporation that at the time of the act or
29omission complained of either individually, or together with
30other shareholders bringing such action collectively, owned
31directly or indirectly at least five percent of a class of
32the corporation’s outstanding shares or, in the case of a
33corporation with shares traded on an organized market as
34described in section 490.1302, subsection 2, paragraph “a”,
35subparagraph (2), either that percentage of shares or shares
-6-1with a market value of at least five million dollars at the
2time the proceeding is commenced.
33. A suit under subsection 2 shall not be maintained if,
4during the pendency of the suit, the shareholder individually
5fails, or the shareholders collectively fail, to continue to
6own directly or indirectly the lesser of the number of shares
7owned at the time the proceeding is commenced or five percent
8of a class of the corporation’s shares.
9EXPLANATION
10The inclusion of this explanation does not constitute agreement with
11the explanation’s substance by the members of the general assembly.
12This bill amends the “Iowa Business Corporation Act”
13codified in Code chapter 490 by creating a new subchapter
14allowing for the creation of benefit corporations. A benefit
15corporation is an entity formed as a corporation but requires
16directors to consider, in addition to shareholder interests,
17the social, environmental, and other effects of corporate
18activity, and allows business decisions to be based on such
19effects, even where those decisions may be contrary to the
20financial interests of shareholders (new Code sections 490.1801
21through 490.1806). In order to become or stop from being a
22benefit corporation, the articles of incorporation must be
23amended by a two-thirds vote of all outstanding shares of the
24corporation entitled to vote on the question (new Code section
25490.1803). A benefit corporation is required to prepare
26an annual benefit report that addresses the efforts of the
27corporation during the preceding year, which may be based on a
28third-party standard (new Code section 490.1805).
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