TITLE 7
Corporations, Associations, and Partnerships

CHAPTER 7-5.3
Benefit Corporations

SECTION 7-5.3-2


§ 7-5.3-2 Definitions.

As used in this chapter:

(1) "Benefit corporation" means a corporation for profit with purposes set forth in § 7-5.3-6 that is subject to this chapter.

(2) "Benefit director" means either:

(i) The director designated as the benefit director of a benefit corporation under § 7-5.3-8; or

(ii) A person with one or more of the powers, duties or rights of a benefit director to the extent provided in the bylaws under subsection 7-5.3-8(f).

(3) "Benefit enforcement proceeding" means any claim or action or proceeding for:

(i) Failure of a benefit corporation to pursue or create general public benefit or a specific public benefit purpose set forth in its articles; or

(ii) Violation of any obligation, duty, or standard of conduct under this chapter.

(4) "Benefit officer" means the individual, if any, designated as the benefit officer of a benefit corporation under § 7-5.3-10.

(5) "General public benefit" means a material positive impact on society and the environment, taken as a whole, assessed against a third-party standard, from the business and operations of a benefit corporation.

(6) "Independent" means having no material relationship with a benefit corporation or a subsidiary of the benefit corporation. Serving as benefit director or benefit officer does not make an individual not independent. A material relationship between an individual and a benefit corporation or any of its subsidiaries will be conclusively presumed to exist if any of the following apply:

(i) The individual is, or has been within the last three (3) years, an employee other than a benefit officer of the benefit corporation or a subsidiary.

(ii) An immediate family member of the individual is, or has been within the last three (3) years, an executive officer other than a benefit officer of the benefit corporation or a subsidiary.

(iii) There is beneficial or record ownership of five percent (5%) or more of the outstanding shares of the benefit corporation, calculated as if all outstanding rights to acquire equity interests in the benefit corporation had been exercised, by:

(A) The individual; or

(B) An entity:

(I) Of which the individual is a director, an officer, or a manager; or

(II) In which the individual owns beneficially or of record five percent (5%) or more of the outstanding equity interests, calculated as if all outstanding rights to acquire equity interests in the entity had been exercised.

(7) "Minimum status vote" means:

(i) In the case of a corporation, in addition to any other required approval or vote, the satisfaction of the following conditions:

(A) The shareholders of every class or series shall be entitled to vote as a class on the corporate action regardless of a limitation stated in the articles of incorporation or bylaws on the voting rights of any class or series.

(B) The corporate action must be approved by vote of the shareholders of each class or series entitled to cast at least two-thirds (2/3) of the votes that all shareholders of the class or series are entitled to cast on the action.

(ii) In the case of a domestic entity other than a corporation, in addition to any other required approval, vote, or consent, the satisfaction of the following conditions:

(A) The holders of every class or series of equity interest in the entity that are entitled to receive a distribution of any kind from the entity shall be entitled to vote on or consent to the action regardless of any otherwise applicable limitation on the voting or consent rights of any class or series.

(B) The action must be approved by vote or consent of the holders described in subparagraph (A) entitled to cast at least two-thirds (2/3) of the votes or consents that all of those holders are entitled to cast on the action.

(8) "Publicly traded corporation" means a corporation that has shares listed on a national securities exchange or traded in a market maintained by one or more members of a national securities association.

(9) "Specific public benefit" includes:

(i) Providing low-income or underserved individuals or communities with beneficial products or services;

(ii) Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;

(iii) Protecting or restoring the environment;

(iv) Improving human health;

(v) Promoting the arts, sciences, or advancement of knowledge;

(vi) Increasing the flow of capital to entities with a purpose to benefit society or the environment; and

(vii) Conferring any other particular benefit on society or the environment.

(10) "Subsidiary" means, in relation to a person, an entity in which the person owns beneficially or of record fifty percent (50%) or more of the outstanding equity interests, calculated as if all outstanding rights to acquire equity interests in the entity had been exercised.

(11) "Third-party standard" means a recognized standard for defining, reporting, and assessing corporate social and environmental performance that is:

(i) Comprehensive because it assesses the effect of the business and its operations upon the interests listed in paragraphs 7-5.3-7(a)(1)(ii), (iii), (iv) and (v).

(ii) Developed by an entity that is not controlled by the benefit corporation.

(iii) Credible because it is developed by an entity that both:

(A) Has access to necessary expertise to assess overall corporate social and environmental performance; and

(B) Uses a balanced multi-stakeholder approach to develop the standard, including a reasonable public comment period.

(iv) Transparent because the following information is publicly available:

(A) About the standard:

(I) The criteria considered when measuring the overall social and environmental performance of a business.

(II) The relative weightings, if any, of those criteria.

(B) About the development and revision of the standard:

(I) The identity of the directors, officers, material owners, and the governing body of the entity that developed and controls revisions to the standard.

(II) The process by which revisions to the standard and changes to the membership of the governing body are made.

(III) An accounting of the revenue and sources of financial support for the entity, with sufficient detail to disclose any relationships that could reasonably be considered to present a potential conflict of interest.

History of Section.
(P.L. 2013, ch. 487, § 1; P.L. 2013, ch. 500, § 1.)