Code Section Group

Corporations Code - CORP

TITLE 1. CORPORATIONS [100 - 14631]

  ( Title 1 enacted by Stats. 1947, Ch. 1038. )

DIVISION 3. CORPORATIONS FOR SPECIFIC PURPOSES [12000 - 14631]

  ( Division 3 enacted by Stats. 1947, Ch. 1038. )

PART 13. BENEFIT CORPORATIONS [14600 - 14631]

  ( Part 13 added by Stats. 2011, Ch. 728, Sec. 1. )

CHAPTER 1. Preliminary Provisions [14600 - 14604]
  ( Chapter 1 added by Stats. 2011, Ch. 728, Sec. 1. )

14600.
  

(a) This part shall be applicable to all benefit corporations.

(b) The existence of a provision of this part shall not of itself create any implication that a contrary or different rule of law is or would be applicable to a business corporation that is not a benefit corporation. This part shall not affect any statute or rule of law that is or would be applicable to a corporation that is not a benefit corporation.

(c) The provisions of the General Corporation Law (Division 1 (commencing with Section 100)) shall apply to benefit corporations, except where those provisions are in conflict with or inconsistent with the provisions of this part.

(Added by Stats. 2011, Ch. 728, Sec. 1. Effective January 1, 2012.)

14601.
  

As used in this part:

(a) “Benefit corporation” means a corporation organized under the General Corporation Law that has elected to become subject to this part and whose status as a benefit corporation has not been terminated as provided in this part.

(b) “Benefit enforcement proceeding” means a claim or action relating to any of the following:

(1) Failure to pursue the general public benefit purpose of the benefit corporation or any specific public benefit purpose set forth in its articles.

(2) Violation of a duty or standard of conduct imposed on a director pursuant to this part.

(3)  Failure of the benefit corporation to deliver or post an annual benefit report as required by Section 14630.

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

(d) “Minimum status vote” means that:

(1) In the case of a corporation, in addition to any other approval or vote required by Division 1 (commencing with Section 100) or the articles of incorporation, both of the following shall apply:

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

(B) The corporate action shall be approved by the outstanding shares of each class or series by at least two-thirds of the votes, or greater vote if required in the articles of incorporation, that all shareholders of the class or series are entitled to cast on that action.

(2) In the case of a domestic other business entity (Section 167.7), both of the following shall apply in addition to any other approval, vote, or consent required by the statutory law, if any, that principally governs the internal affairs of the entity or any provision of the publicly filed record or document required to form the entity, if any, or of any agreement binding some or all of the holders of equity interests in the entity:

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

(B) The action shall be approved by the vote or consent of the holders described in subparagraph (A) by at least two-thirds of the votes or consents, or greater vote or consent if required in the articles of incorporation, of those holders.

(e) “Specific public benefit” includes all of the following:

(1) Providing low-income or underserved individuals or communities with beneficial products or services.

(2) Promoting economic opportunity for individuals or communities beyond the creation of jobs in the ordinary course of business.

(3) Preserving the environment.

(4) Improving human health.

(5) Promoting the arts, sciences, or advancement of knowledge.

(6) Increasing the flow of capital to entities with a public benefit purpose.

(7) The accomplishment of any other particular benefit for society or the environment.

(f) “Subsidiary” of a person means an entity in which the person owns beneficially or of record 50 percent or more of the outstanding equity interests. For purposes of this definition, a percentage of ownership in an entity shall be calculated as if all outstanding rights to acquire equity interests in the entity had been exercised.

(g) “Third-party standard” means a standard for defining, reporting, and assessing overall corporate social and environmental performance to which all of the following apply:

(1) The standard is a comprehensive assessment of the impact of the business and the business’s operations upon the considerations listed in paragraphs (2) to (5), inclusive, of subdivision (b) of Section 14620.

(2) The standard is developed by an entity that has no material financial relationship with the benefit corporation or any of its subsidiaries and that satisfies both of the following requirements:

(A) Not more than one-third of the members of the governing body of the entity are representatives of any of the following:

(i) Associations of businesses operating in a specific industry, the performance of whose members is measured by the standard.

(ii) Businesses from a specific industry or an association of businesses in that industry.

(iii) Businesses whose performance is assessed against the standard.

(B) The entity is not materially financed by an association or business described in subparagraph (A).

(3) The standard is developed by an entity that does both of the following:

(A) Accesses necessary and appropriate expertise to assess overall corporate social and environmental performance.

(B) Uses a balanced multistakeholder approach, including a public comment period of at least 30 days to develop the standard.

(4) All of the following information regarding the standard is publicly available:

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

(B) The relative weightings assigned to the criteria described in subparagraph (A).

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

(D) The process by which revisions to the standard and changes to the membership of the governing body described in subparagraph (C) are made.

(E) An accounting of the 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.

(Added by Stats. 2011, Ch. 728, Sec. 1. Effective January 1, 2012.)

14602.
  

A benefit corporation shall be formed in accordance with Chapter 2 (commencing with Section 200) of Division 1 except that the articles shall also state that the corporation is a benefit corporation and shall identify any specific public benefit adopted pursuant to Section 14610.

(Added by Stats. 2011, Ch. 728, Sec. 1. Effective January 1, 2012.)

14603.
  

(a) A corporation may become a benefit corporation under this part by amending the corporation’s articles so that the articles contain a statement that the corporation is a benefit corporation. The amendment shall not be effective unless it is adopted by at least the minimum status vote. If the amendment is adopted, a shareholder of the corporation may, by complying with Chapter 13 (commencing with Section 1300) of Division 1, require the corporation to purchase at their fair market value the shares owned by the shareholder which are dissenting shares as defined in subdivision (b) of Section 1300 in accordance with the procedures in that chapter, as if the adoption of the amendment were a reorganization to which that chapter applies.

(b) If a corporation that is not a benefit corporation is a constituent corporation in a merger reorganization or is the acquired corporation in an exchange reorganization, and the surviving corporation in the merger reorganization is to be a benefit corporation or the articles of the acquired corporation are to be amended in the exchange reorganization to provide that it will be a benefit corporation, then the reorganization shall not be effective unless the reorganization is approved by the corporation or domestic other business entity by at least the minimum status vote.

(c) If a domestic other business entity is a party to a merger reorganization and the surviving corporation in the reorganization is to be a benefit corporation, then the reorganization shall not be effective unless the reorganization is approved by the domestic other business entity by at least the minimum status vote.

(d) If a domestic other business entity is the converting entity (subdivision (d) of Section 1150) in a conversion in which the converted corporation (subdivision (a) of Section 1150) is a benefit corporation, the conversion shall not be effective unless the conversion is approved by the domestic other business entity by at least the minimum status vote.

(Added by Stats. 2011, Ch. 728, Sec. 1. Effective January 1, 2012.)

14604.
  

(a) A benefit corporation may terminate its status as a benefit corporation and cease to be subject to this part by amending the corporation’s articles to delete the provision required by Section 14602. The amendment shall not be effective unless the amendment is adopted by at least the minimum status vote. If the amendment is adopted, a shareholder of the corporation may, by complying with Chapter 13 (commencing with Section 1300) of Division 1, require the corporation to purchase at their fair market value the shares owned by the shareholder which are dissenting shares as defined in subdivision (b) of Section 1300 in accordance with the procedures in that chapter.

(b) If a reorganization (Section 181) would have the effect of terminating the status of a corporation as a benefit corporation, the reorganization shall not be effective unless the reorganization is approved by at least the minimum status vote.

(c) If a benefit corporation is the converting corporation (Section 1150) in a conversion (Section 161.9), the conversion shall not be effective unless the conversion is approved by at least the minimum status vote.

(d) A sale, lease, conveyance, exchange, transfer, or other disposition of all or substantially all of the assets of a benefit corporation, unless the transaction is in the usual and ordinary course of business of the benefit corporation, shall not be effective unless the transaction is approved by at least the minimum status vote. If the transaction is approved, a shareholder of the corporation may, by complying with Chapter 13 (commencing with Section 1300) of Division 1, require the corporation to purchase at their fair market value the shares owned by the shareholder which are dissenting shares as defined in subdivision (b) of Section 1300 in accordance with the procedures in that chapter, as if the transaction were a reorganization to which that chapter applies.

(Added by Stats. 2011, Ch. 728, Sec. 1. Effective January 1, 2012.)

CORPCorporations Code - CORP