SB2358 98TH GENERAL ASSEMBLY

LRB098 06644 JLS 36688 b

98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
SB2358

Introduced 2/15/2013, by Sen. Heather A. Steans

SYNOPSIS AS INTRODUCED:

New Act

Creates the Benefit Limited Liability Company Act. Provides that a limited liability company may become a benefit limited liability company for public benefit and other purposes. Defines key terms and contains accountability and transparency provisions.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning business.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Article 1.

General Provisions

Section 1-1. Short title. This Act may be cited as the Benefit Limited Liability Company Act.

Section 1-5. Application and effect of the Act.

(a) This Act applies to all benefit liability companies.

(b) The existence of a provision of this Act shall not of itself create an implication that a contrary or different rule of law is applicable to a limited liability company that is not a benefit limited liability company. This Act shall not affect a statute or rule of law that is applicable to a limited liability company that is not a benefit limited liability company.

(c) The Limited Liability Company Act applies to benefit limited liability companies, including their organization, and they shall enjoy the powers and privileges and be subject to the duties, restrictions, and liabilities of other limited liability companies, except so far as provided by this Act. If any provision of this Act conflicts with the Limited Liability Company Act, this Act takes precedence.

(d) A provision of the articles of organization or operating agreement of a benefit limited liability company may not relax, be inconsistent with, or supersede a provision of this Act.

Section 1-10. Definitions. As used in this Act, unless the context otherwise requires, the words and phrases defined in this Section shall have the meanings set forth herein.

"Benefit limited liability company" means a limited liability company organized under the Limited Liability Company Act:

(1) that has elected to become subject to this Act; and

(2) whose status as a benefit limited liability company has not been terminated under Section 2-10.

"Benefit enforcement proceeding" means a claim or action for:

(1) the failure of a benefit limited liability company to pursue or create general public benefit or a specific public benefit set forth in its articles of organization; or

(2) a violation of an obligation, duty, or standard of conduct under this Act.

"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 limited liability company.

"Minimum status vote" means that, in addition to any (i) other approval, vote, or consent required by the statutory law that principally governs the internal affairs of the limited liability company, (ii) provision of the publicly filed record or document required to form the limited liability company, or (iii) agreement binding on some or all of the holders of equity interests in the limited liability company, the holders of every class or series of equity interest in the limited liability company that are entitled to receive a distribution of any kind from the limited liability company 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 and the action must be approved by a vote or consent of at least two-thirds of those holders.

"Specific public benefit" means:

(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; or

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

"Subsidiary" of a person means an entity in which the person owns beneficially or of record 50% or more of the outstanding equity interests. For the 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 have been exercised.

"Third-party standard" means a standard for defining, reporting, and assessing overall corporate, social, and environmental performance that:

(1) is a comprehensive assessment of the impact of the business and the business' operations upon the considerations listed in subdivisions (a)(1)(B) through (a)(1)(E) of Section 4-1;

(2) is developed by an entity that has no material financial relationship with the benefit corporation or any of its subsidiaries;

(3) is developed by an entity that is not materially financed by any of the following organizations and not more than one-third of the members of the governing body of the entity are representatives of:

(A) associations of businesses operating in a specific industry, the performance of whose members is measured by the standard;

(B) businesses from a specific industry or an association of businesses in that industry; or

(C) businesses whose performance is assessed against the standard;

(4) is developed by an entity that:

(A) accesses necessary and appropriate expertise to assess overall corporate social and environmental performance; and

(B) uses a balanced multi-stakeholder approach, including a public comment period of at least 30 days to develop the standard; and

(5) makes the following information regarding the standard publicly available:

(A) the factors considered when measuring the overall social and environmental performance of a business and the relative weight, if any, given to each of those factors;

(B) the identity of the directors, officers, any material owners, and the governing body of the entity that developed, and controls revisions to, the standard, and the process by which revisions to the standard and changes to the membership of the governing body are made; and

(C) 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.

Section 1-15. Application to low-profit limited liability companies. Nothing contained in this Act prohibits a benefit limited liability company from also being or becoming a low-profit limited liability company while remaining a benefit limited liability company if the benefit limited liability company satisfies the requirements for low-profit limited liability companies under the Limited Liability Company Act.

Article 2.

Formation of Benefit Limited Liability Companies

Section 2-1. Formation of benefit limited liability companies. A benefit limited liability company must be formed in accordance with Article 5 of the Limited Liability Company Act. In addition to the formation requirements of that Act, the articles of organization of a benefit limited liability company must state that it is a benefit limited liability company in accordance with the provisions of this Article.

Section 2-5. Election of status.

(a) A limited liability company may become a benefit limited liability company under this Act by amending its articles of organization so that they contain a statement that the limited liability company is a benefit limited liability company. In order to be effective, the amendment must be adopted by at least the minimum status vote.

(b) For any entity that is a party to a merger or consolidation or is the exchanging entity in a share exchange, where the surviving, new, or resulting entity in the merger, consolidation, or share exchange is intended to be a benefit limited liability company, the plan of merger, consolidation, or share exchange must be adopted by at least the minimum status vote in order to be effective.

Section 2-10. Termination of status.

(a) A benefit limited liability company may terminate its status as such and cease to be subject to this Act by amending its articles of organization to remove the statement that the limited liability company is a benefit limited liability company. In order to be effective, the amendment must be adopted by at least the minimum status vote.

(b) If a plan of merger, conversion, or share exchange would have the effect of terminating the status of a limited liability company as a benefit limited liability company, in order to be effective, the plan must be adopted by at least the minimum status vote.

(c) A sale, lease, exchange, or other disposition of all or substantially all of the assets of a benefit limited liability company, unless the transaction is in the usual and ordinary course of business, shall not be effective unless the transaction is adopted by at least the minimum status vote.

Article 3.

Benefit Limited Liability Company Purposes

Section 3-1. Benefit limited liability company purposes.

(a) A benefit limited liability company shall have a purpose of creating general public benefit. This purpose is in addition to its purposes under Section 1-25 of the Limited Liability Company Act and any specific purpose set forth in its articles of organization in accordance with subsection (b).

(b) The articles of organization of a benefit limited liability company may identify one or more specific public benefits the creation of which is a purpose of the benefit corporation in addition to its purposes under Section 1-25 of the limited Liability Company and subsection (a). The identification of a specific public benefit under this subsection does not limit the obligation of a benefit limited liability company under subsection (a).

(c) The creation of general public benefit and specific public benefit under subsections (a) and (b) is in the best interests of the benefit limited liability company.

(d) A benefit limited liability company may amend its articles of organization to add, change, or remove a specific public benefit. In order to be effective, the amendment must be adopted by at least the minimum status vote.

Article 4.

Accountability

Section 4-1. Standard of conduct for members and managers.

(a) Without regard to whether the benefit limited liability company is subject to Section 15-15 of the Limited Liability Company Act, in discharging the duties of their respective positions, the members and managers of a benefit limited liability company in considering the best interests of the benefit limited liability company:

(1) shall consider the effects of any action upon:

(A) the members of the benefit limited liability company;

(B) the employees and work force of the benefit limited liability company, its subsidiaries, and its suppliers;

(C) the interests of customers as beneficiaries of the general public benefit or specific public benefit purposes of the benefit limited liability company;

(D) community and societal considerations, including those of each community in which offices or facilities of the benefit limited liability company, its subsidiaries or its suppliers are located;

(E) the local and global environment;

(F) the short-term and long-term interests of the benefit limited liability company, including benefits that may accrue to the benefit limited liability company from its long-term plans and the possibility that these interests may be best served by the continued independence of the benefit limited liability company; and

(G) the ability of the benefit limited liability company to accomplish its general public benefit purpose and any specific public benefit purpose; and

(2) may consider:

(A) considerations listed in Section 15-5 of the Limited Liability Company Act; and

(B) any other pertinent factors or the interests of any other group that they deem appropriate; but

(3) need not give priority to the interests of a particular person or group referred to in paragraphs (1) or (2) over the interests of another person or group unless the benefit limited liability company has stated in its articles of organization its intention to give priority to certain interests related to its accomplishment of its general public benefit purpose or a specific public benefit purpose identified in its articles of organization.

(b) The consideration of interests and factors in the manner required by subsection (a) is in addition to the ability of members and managers to consider interests and factors as provided in Section 15-15 of the Limited Liability Company Act.

(c) A member or manager is not personally liable for monetary damages for:

(1) any action taken as a member or manager if the member or manager performed the duties of office in compliance with Article 15 of the Limited Liability Company Act and this Section; or

(2) a failure of the benefit limited liability company to pursue or create general public benefit or a specific public benefit.

(d) A member or manager does not have a duty to a person that is a beneficiary of the general public benefit purpose or a specific public benefit purpose of a benefit limited liability company arising from the status of the person as a beneficiary.

Section 4-5. Right of action; benefit enforcement proceeding.

(a) No person may bring an action or assert a claim against a benefit limited liability company or its members or managers with respect to failure to pursue or create general public benefit or a specific public benefit set forth in its articles of organization or violation of a duty or standard of conduct under this Act except in a benefit enforcement proceeding.

(b) A benefit enforcement proceeding may be commenced or maintained only:

(1) directly by the benefit limited liability company; or

(2) derivatively by:

(A) a member;

(B) a manager;

(C) a person or group of persons that owns beneficially or of record 5% or more of the equity interests in an entity of which the benefit limited liability company is a subsidiary; or

(D) other persons as specified in the articles of organization or management agreement of the benefit limited liability company.

(c) A benefit limited liability company shall not be liable for monetary damages under this Act for any failure of the benefit limited liability company to pursue or create general public benefit or a specific public benefit.

Article 5.

Transparency

Section 5-1. Annual benefit report.

(a) A benefit limited liability company shall prepare an annual benefit report including all of the following:

(1) A narrative description of:

(A) the process and rationale for selecting the third party standard used to prepare the benefit report;

(B) the ways in which the benefit limited liability company pursued general public benefit during the year and the extent to which general public benefit was created;

(C) the ways in which the benefit limited liability company pursued a specific public benefit that the articles of organization state it is the purpose of the benefit limited liability company to create and the extent to which that specific public benefit was created; and

(D) any circumstances that have hindered the pursuit by the benefit limited liability company of its general public benefit purpose and any specific public benefit purpose or the creation by the benefit limited liability company of general public benefit and any specific public benefit.

(2) An assessment of the overall social and environmental performance of the benefit limited liability company against a third-party standard:

(A) applied consistently with any application of that standard in prior benefit reports; or

(B) accompanied by an explanation of the reasons for any inconsistent application.

(3) The compensation paid by the benefit limited liability company during the year to each manager in the capacity of a manager.

(4) The name of each person that owns 5% or more of the outstanding shares of the benefit limited liability company either:

(A) beneficially, to the extent known to the benefit limited liability company without independent investigation; or

(B) of record.

(5) A statement of any connection between the organization that established the third-party standard, or its directors, officers, or material owners, and the benefit limited liability company or its members or managers, including any financial or governance relationship that might materially affect the credibility of the use of the third-party standard.

(b) The benefit limited liability company shall send a benefit report annually to each member:

(1) within 120 days following the end of the fiscal year of the benefit limited liability company; or

(2) at the same time that the benefit limited liability company delivers any other annual report to its members.

(c) A benefit limited liability company shall post all of its benefit reports on the public portion of its Internet website, if any, but the compensation paid to managers and financial or proprietary information included in the benefit reports may be omitted from the benefit reports as posted.

(d) If a benefit limited liability company does not have an Internet website, the benefit limited liability company shall provide a copy of its most recent benefit report, without charge, to any person that requests a copy.